Civil and Criminal Tax Defense
Mr. Feldman has experience in criminal tax cases involving special agents from the Internal Revenue Service Criminal Investigations (IRS-CI) and has represented taxpayers in civil and criminal tax investigations initiated by the Internal Revenue Service involving foreign bank accounts and FBAR under 31 U.S.C. Section 5314. Mr. Feldman also has experience defending individuals in civil tax cases and controversies, tax refund litigation in U.S. district court, IRS summons enforcement, and asset forfeiture matters involving the Internal Revenue Service (IRS). The Firm has also advised taxpayers with respect to the reporting of foreign financial assets and bank accounts and believes that educating each taxpayer about the individual voluntary disclosure options is critical to effective representation of the taxpayer.
The government wields an enormous amount of power and resources in any tax investigation, examination, or prosecution. Taxpayers may be subject to an IRS examination (audit), they may receive an IRS summons to appear before an official of the IRS, they may receive a grand jury subpoena, or their businesses may be subject to a full-blown search during which multiple, armed IRS agents may search for and seize property which is a disruptive and unnerving experience for any taxpayer and business owner. With this in mind, retaining a criminal tax attorney is critical.
Federal Tax Crimes
- Tax Evasion (26 U.S.C. § 7201): Tax evasion is not limited to failure to report income or wages and may include the truthful reporting of income but evasion of timely payment of taxes due and owing in those years.
- Failure to File (26 U.S.C. §7203)
- Failure to File Foreign Bank Account (FBAR) or FinCen Form 114.
- Failure to Report a foreign financial asset on Form 8938
- Failure to Report a foreign bank account or interest in a foreign bank account on Form 1040, Schedule B.
- Filing a False Tax Related Document (26 U.S.C. §7206),
- Fraudulent Tax Return, List, Account or Statement (26 U.S.C. §7207)
Civil Tax Controversies
An individual or business embroiled in a tax dispute with the IRS or local or state taxing agency faces significant challenges that generally begin with an audit, or request for documents, and can lead to extensive and protracted litigation in federal district court, U.S. Tax Court, or even the Federal Court of Claims. In any tax controversy, the primary goal is to obtain a fair result for the taxpayer and to ensure that the IRS has followed proper protocol in making any assessments, adjustments, or in recommending any penalties.
Deficiency Actions
After an audit or an administrative appeal before the IRS Office of Appeals, the IRS will send a deficiency notice to the taxpayer. At that time, the taxpayers has options but, generally, those options are to file a petition with the U.S. Tax Court or to pay the IRS a portion of the taxes owed (according to the IRS Revenue Agent Report) and then sue the IRS in federal district court where the taxpayer resides. Navigating these choices is no simple task and it is critical that, at the outset, strategic decisions are made which place the taxpayer in the best position possible to obtain the necessary relief.
Refund Actions: Not all cases where the taxpayer has received a notice of deficiency for a specific tax year or years end up in U.S. Tax Court. Indeed, for strategic reasons, a taxpayer may seek to proceed with an action against the IRS in federal district court after payment of taxes due and owing and after making a timely claim for refund to the IRS. Refund litigation is nuanced and requires working knowledge of the procedures, statutes of limitations, and the differences in discovery in federal civil cases and U.S. Tax Court cases. At times, however, refund litigation may be the best option for the taxpayer.
Penalty Cases. In recent years, the IRS Office of Chief Counsel and/or the Department of Justice Tax Division Civil Litigation Section have litigated cases against taxpayers where the central issue is whether the taxpayer has a defense to the assessment of the particular penalty and the amount of the penalty owed to the IRS. There are numerous defenses to penalties and penalties may range in their severity depending on whether a court determines that they were “willful” or not. Some of the penalties included in these cases are:
Accuracy Related Penalty: Underpayment of Taxes
Failure to File an FBAR or Report Foreign Financial Assets
Civil Fraud Penalty: A taxpayer may be subject to a notice of deficiency proceeding in U.S. Tax Court based on the civil fraud penalty. The IRS may develop and apply the civil fraud penalty where warranted because there is no applicable statute of limitations for assessing the civil fraud penalty under 26 U.S.C. Section 6333 and it is a powerful tool since it is equal to 75 percent of the underpayment attributable to the fraud claimed by the IRS. Fraud means an intentional wrongdoing on the part of the taxpayer motivated by a specific intent to avoid taxes owed or believed to be owed. The IRS must establish this penalty by clear and convincing evidence.
Failure to Report a Foreign Gift (Form 3520)
Trust Fund Recovery Penalty
Failure to File a Return
Failure to Pay Taxes
Summons Enforcement Actions: A taxpayer or a third party may receive an IRS summons to produce documents and to appear before an IRS official. Summonses may be issued to determine a taxpayer’s tax liability, to determine whether a tax return is correct, or to collect tax. Taxpayers may also receive an Information Document Request, a pre-summons letter, or a delinquency letter stating that the taxpayer has not yet produced the requested documents. In recent years, there has been an uptick in summons enforcement litigation. Sometimes summons enforcement can lead to a subsequent criminal tax referral.
Typically, a summons issued and when a taxpayer fails to produce the documents requested by the IRS, the Department of Justice Tax Division will file a petition to enforce the summons and an order to show cause will be issued by the district court. The Department wins in a stunning majority of these cases, nonetheless, there are numerous defenses which can be raised in the course of summons enforcement proceedings and it is incumbent upon the IRS and its agents to follow proper protocol.
Signs that You Might Consider Contacting a Tax Defense Attorney:
If IRS special agents have interviewed you or attempted to interview you at your home or at your office
If IRS CID has executed a search of your office or business
If you have received a grand jury subpoena to produce documents or appear for testimony
You receive an informal document request seeking an appointment (Form 4564) with an IRS agent or Revenue Agent
You receive an IRS Summons (Form 2039) requesting producing of documents and your appearance before an IRS Agent to provide testimony
You receive a letter from a foreign bank, including a Swiss Bank, a Liechtenstein bank, or any other foreign banking institution notifying you that your account has been closed or that your account will be closed.
You are under audit and maintain a largely cash based business
You have reason to believe you are the subject of an IRS investigation