Are You a Tax Cheat? Beware the IRS Audit (Even If You’re Not)

Filed in CPA Blog by on August 12, 2016
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Are you a tax cheat? The phrasing itself is pretty inflammatory, as in our experience few people set out to pro-actively cheat the IRS. Instead, the maze of requirements, regulations, and paperwork can confound even the smartest tax payer or even many tax preparers, enrolled agents, and even CPAs. IRS Audit DefenseTaxes are complicated! You may have learned over the years about FBAR (Report of Foreign Bank and Financial Accounts), which in layman’s terms is the IRS effort to get folks who have overseas assets to come clean about those assets and income. We help many people in San Francisco and throughout the San Francisco Bay Area to become FBAR-compliant, as we are known as one of the best boutique CPA firms for international tax. According to the IRS website,

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).

Next, it came to our attention in Yahoo news, that some of the information being sent to the IRS then creates another opportunity for scrutiny. (You can read the article, here).  Says the article:

Since 2012, 30,000 Americans avoided stiff tax penalties by declaring they had innocent reasons for failing to disclose offshore holdings. But under the program they received no guarantees that they wouldn’t be prosecuted in the future. And now the Justice Department and the Internal Revenue Service are combing through thousands of secret records obtained from 80 Swiss banks to determine whether the taxpayers were truthful. We’re “taking all of that data and scrubbing it for leads,” Nanette Davis, a trial attorney in the Justice Department’s tax division, said at the New York University Tax Controversy Forum last week. The effort has been fruitful already, she said. With some taxpayers, “we say ‘we could indict this case tomorrow,”’ said Davis, who is overseeing the review.

Now, we’re going to leave politics aside, but it does seem more than a bit ironic that people who come forward and try to comply are then subjected to even more scrutiny. But so goes the IRS.  You had better know what you’re doing, and you had better have both a strategy and the records to justify what you’ve done. We work with many San Francisco Bay Area tax payers in terms of so-called IRS audit defense, which can be pretty nerve-wracking.

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