Is the IRS going after the big fish?

The Internal Revenue Service (IRS) has recently offered a program that will allow tax evaders in offshore accounts to come forward to disclose these accounts for a lesser penalty. The IRS has set October 15, 2009 as their deadline to voluntarily disclose any of their offshore accounts. However, most taxpayers with offshore accounts have been waiting until the last minute to see what happens. The IRS reports that an estimated $14.8 billion dollars of taxes goes underreported due to offshore accounts each year. The UBS estimates that approximately 52,000 foreign accounts go unreported each year. Recently, the UBS has disclosed over 4,500 accounts to the IRS. That means that approximately one out of every ten accounts will be disclosed. This has most taxpayers with offshore accounts worried because if they are within one of those reported accounts, the taxpayer could pay penalties that could amount to more than double what the taxpayer has in their accounts and possible criminal prosecution. Do you have the 10% chance of being discovered? Naturally, people think that the IRS only goes after the “big fishes” or taxpayers with bigger accounts. However, recent reports have indicated that the IRS is going after anyone in order to get their delinquent taxes back.

Recently, a Los Angeles man plead guilty for failing to file a FBAR pursuant to the Bank Secrecy Act 31 USC 5314. The amount of unpaid taxes he owed was between $200,000 and $400,000 over a 5 year period. Assuming he was in a 33% tax bracket rate, the Los Angeles man’s unreported income would have equaled about $120,000 per year. This man eventually agreed to a civil FBAR penalty equal to 50% of his highest year balance and in addition a 75% civil tax fraud penalty.

This goes to show that the IRS is targeting anyone, not just the bigger fish. In the end, it’s best to be honest with the IRS and disclose any information necessary. Otherwise, it can catch up to you and become disastrous. Contact a tax attorney today to discuss your individual tax case.

Looking for a Home? Now is the Time to Buy

According to the IRS, more than 1.4 million Americans have recently claimed the new tax credit for first-time home buyers. The credit allows home buyers to either save up to 10% of the price of the home or the maximum of $8,000. The credit is only available to anyone who has not owed a home for three consecutive years before the purchase and the individual must make less than $75,000. For couples that maximum amount is doubled to $150,000. The best thing about the tax credit is that you receive an automatic $8,000 check by the IRS even if you still owe taxes or not.

In order to claim the tax credit, the home buyer must close on the house by Dec. 1, 2009. However, most people still fear that housing market will turn down again after the credit program expires. They believe the credit program is just a quick stimulus like the recent “cash for clunkers” deal. Recent reports show that Californians have taken advantage of the credit program the most. Florida and Texas rounding out the top three respectively.

The IRS estimates that over 1.8 million people will take advantage of the tax credit and there has been a push to continue the stimulus plan. Currently, there are six bills in Congress to extend the program. Some of the proposals ask for an extension up until the following year December 2010.

However, the White House has shown no signs of supporting any of the bills and the program has already cost $14 billion dollars to fund. Extending the program would cost more, which would be difficult to fund.

However, the National Association of Realtors (NAR) agrees that extending the credit would be costly; however, generating home sales would continue to strengthen the economy because when people buy homes they put a lot of cash into circulation. When people buy homes they usually buy furniture, appliances, or remodel the homes.

As of now, we will just have to wait and see if the government decides to extend the deadline. In the meantime, if you have the funds and are looking for a house, I would strongly suggest you take advantage of the tax credit and buy a home before the December 1 deadline. Talk to a tax attorney to take advantage of tax credits and tax loopholes.

To E-file or not to E-file?

With the growing trend of emails, online banking, and everyone having access to a computer, the Internal Revenue Service (IRS) is encouraging taxpayers to e-file their taxes. Last year over 90 million people used e-file to do their taxes.

From the onset, there seems to be numerous advantages to e-filing. Some of the advantages include:
• a faster refund than using a tradition paper return (as quick as 10 days if you use direct deposit);
• electronic returns have fewer errors than the paper returns;
• you can file your taxes any hour of the day or night; and
• most importantly—you save paper.
As everyone knows or should know, the deadline to e-file a tax return or to e-file a tax extension is April 15. If you e-file a tax extension before April 15, then you are entitled to a tax extension deadline of October 15 for your tax returns. However, after October 15, you can prepare your tax return on efile.com but you must mail in your tax return. Therefore, October 15 is the last day to take advantage of e-file or the “Free File” program.
The “Free File” program is a fast, easy, and free way to prepare and e-file federal taxes online. The “Free File” program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.
Two free filing tax preparation and e-filing programs are available to individual taxpayers. “Traditional Free File” is available for taxpayers with adjusted gross incomes of $56,000 or less. On the other hand, “Free File Fillable Forms” can be used by people who earned more than $56,000.