Anthony Sykes & Company

          IRS audits are the largest source of Criminal Tax cases. This is a part of the IRS that most people are unfamiliar with, and never want to see. The IRS Criminal Investigation Division handles these cases. If ever visited by one of these Special Agents (yes, that is their title), keep in mind that lying to them can result in a Felony. Always ask to see identification, ask for a business card, and consider what to say, if anything.           Often they may approach a person and say they are not the target of an investigation, just a witness. That might be true at the time. There is nothing to keep the answers given at the time, to be used against a person if/when the investigation changes. This is a situation when a Taxpayer needs to go find legal representation. It is their right to communicate with the Criminal Investigation Division through an attorney. Usually a qualified Tax Profes...

          It’s widely known that Federal Tax Law is complex. This is part of the reason for audits, the civil review of tax filings. How can those reviews turn into a criminal case? There is no simple answer.           One common area is income . Always report all of your income. Numbers that don’t make sense can start audits, and upon further review, it’s up to the discretion of the IRS Auditor where to go. Another contributing factor is statements made during the auditing process. A false statement given is a great way to prolong an audit. This is another area where a qualified Tax Professional will help a Taxpayer. They are a great representative for the Taxpayer to the IRS, and will be able to provide the documents being reviewed.           If the conduct displayed, or the information provided move past a certain threshold for the Auditor, the...

           The IRS just updated the information on how auditors will handle employment Tax exams. The key points will stay the same. Audits usually start off because of a risk area, or because of previous history with the employer. When the examination starts, they will look at the internal controls. That means they are looking to determine if the business keeps good written records and are in compliance with all applicable laws or obligations. If this can be proven, the audit tends to be quick, if not, the search will expand. Here are the consistent problems that are found in many cases.           Wrongly categorizing employees as independent contractors. When this is done, the proper taxes are not being paid. That will lead to the taxes, along with penalties being assessed. Our previous post described some of the points that the IRS uses to make this determination. Businesses need to us...

          The IRS wants all businesses and business owners to know the difference between an Employee and an Independent Contractor. One will have income tax, Social Security, and Medicare withheld from their pay, the other will not. This may seem like a small issue, but our next post will discuss why it matters.           Here are a couple of points to keep in mind to help make the distinction. How the business exerts behavioral control , such as determining what work should be accomplished and directing how it is done, that matters to the IRS. Financial control such as how the worker is paid and the extent they can make their services available to the market are also taken into consideration.           Apart from the aspect of control, how the relationship is defined plays a key role. This will include written contracts, the provision of a pensi...

One of the biggest problems in the area of Taxes and Accounting is business identity theft. This dishonesty is when a person or group creates, uses, or tries to use a business’s information to try and get tax benefits. The IRS is trying to deal with this growing problem, but they have a long way to go. In 2013, there were 133 tax returns that were suspected of having a share in business identity theft. From that group, 97 claimed refunds of over $2 million. The IRS is establishing procedures to look for patterns that come up in business tax filings that are based on fraudulent claims. They are also going to be proactive in reaching out to businesses that may have had their identities stolen. These patterns keep changing, so will their detection process. These stolen refunds end up effecting every taxpayer. This program would seem to be a step in the right direction to stop this problem. What do you think?

          When Tax Law is applied, there is a difference between Willful and Non-Willful conduct. To be considered Willful, a Taxpayer must choose to break the law or avoid a legal duty. This intent can lead to Criminal prosecutions and large Civil judgements. Some may try to claim that they had no prior knowledge that what they were involved in was illegal, and it was all just a simple mistake. However, the IRS often looks at a Taxpayer’s actions to determine intent.           There was a Taxpayer who opened 2 Swiss bank accounts in the early 1970’s and never reported them on his Tax Return. He first mentioned them to his accountant in this 1990’s. The accountant said that they should have been reported since they were opened, but not to do anything now. It would all be settled when the Taxpayer died. About 20 years later that accountant died. The new accountant prepared documents to report ...

         Why would a Taxpayer want to file an Amended Tax Return? It should not be for a simple math error. The IRS will fix those when processing the Tax Return and if they need specific documents, they will ask for them. If it’s something more than that, then filing an Amended Tax Return may be the best option.           Keep in mind that when fixing mistakes, this should not be done in a way that only adds to Tax Refunds and not Taxes owed. Making these sorts of changes will get the attention of IRS and make them take a closer look at the adjustments. It can be the easy way to get to an audit. Normally the statute of limitations for the IRS to take action on a Tax Return is 3 years. Amending the Tax Returns filed during this period of time can help a Taxpayer discover a refund that has been waiting for them, or a debt that needs to be paid. Either way, it can lead to big changes.