May 27, 2008

No Right To A Civil Proceeding Before Bringing A Criminal Trial For Tax Evasion

Defendant-Appellant James Ellett appealed from the judgment of the United States District Court for the Northern District of New York convicting him, after a jury trial, of four counts of income tax evasion and one count of failure to file an income tax return. The United States Court of Appeals for the Second Circuit held on May 23, 2008, that due process did not require that Ellett be given the opportunity to litigate his tax position civilly or administratively before being prosecuted for tax evasion.

To read the case, click here.

May 23, 2008

Innocent Spouse Relief Requires Joint Tax Return

The Ninth Circuit - which has jurisdiction over all of us taxpayers living in California - upheld the Tax Court's holding that innocent spouse relief under Internal Revenue Code §6105 is available only if you have filed a joint return for the year in question. Christensen v. Commissioner, No. 06-71881 (9th Cir. 4/21/08), affirming T.C. Memo. 2005-299:

Christensen argues that Code §6015(f) is available to spouses who face joint liability under community property laws but do not file a joint return. We disagree. In light of the plain language of § 6015 and the context of the statute, we conclude that § 6015(f) is available only to spouses who file a joint return.

Call a qualified California tax lawyer for help seeking innocent spouse relief - call Mitchell A. Port at 310.559.5259.

May 21, 2008

New IRS Publication On Innocent Spouse

Last month, the IRS released a revised Publication 971 for those seeking innocent spouse relief. Other articles in this blog on innocent spouse relief are: "Who Is An Innocent Spouse In California?", "Innocent Spouse Made Easier" and "California Taxpayers: Innocent Spouse Relief".

The revised IRS Publication provides this introduction:

When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. This is called joint and several liability. Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to income, deductions, or credits of your spouse or former spouse. You remain jointly and severally liable for the taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return.

Three types of relief are available to married persons who filed joint returns.

1. Innocent spouse relief.
2. Separation of liability relief.
3. Equitable relief.

Married persons who did not file joint returns, but who live in community property states [like California], may also qualify for relief. See Community Property Laws, later. This publication explains these types of relief, who may qualify for them, and how to get them. You can also use the Innocent Spouse Tax Relief Eligibility Explorer at to see if you qualify for innocent spouse relief.

If you have a tax problem and believe that you may be entitled to innocent spouse relief, and wish to have a California tax lawyer represent you please contact Mitchell A. Port.

May 14, 2008

Most Frequently Asked Questions: Economic Stimulus Payments

California taxpayers waiting and wondering about their tax stimulus payment from the IRS can visit the IRS website for answers to frequently asked questions by clicking here.

Other tax problems related to unpaid payroll taxes, unpaid income taxes or unfiled tax returns, call Los Angeles tax attorney Mitchell A. Port at (310) 559-5259.

May 7, 2008

Wesley Snipes Convicted

For his willfully failing to file an income tax return, Wesley Snipes was sentenced to three years in federal prison. He was charged with having failed to pay over $15,000,000 in taxes.

A jury acquitted Wesley Snipes of fraud and conspiracy charges and certain other tax charges even though they convicted him for failure to file his 1999, 2000, and 2001 tax returns.
According to the IRS, tax protestors Eddie Ray Kahn and Douglas P. Rosile (who themselves face 10 and 4-1/2 years' incarceration respectively) met Snipes in 1998 who followed their suggestion to (among other things) stop filing tax returns.

He also filed amended returns requesting payments from the government of millions of dollars in refunds from earlier years' filings.

Allegedly, Snipes doctored tax returns, and sent fake checks to the Treasury to evade paying his tax liabilities.

For what was technically a misdemeanor, Snipes was convicted and sentenced to time in prison.

According to Justice Department prosecutors, this represented a "singular opportunity….to deter tax crime nationwide." And "Snipes's long prison sentence should send a loud and crystal clear message to all tax defiers that if they engage in similar tax defier conduct, they face joining him and his co-defendants . . . as inmates in prison."

May 5, 2008

A Tax Morale Approach To Compliance

In an article this California tax lawyer thinks is worth reading, Marjorie E. Kornhauser (Arizona State) has published A Tax Morale Approach to Compliance: Recommendations for the IRS, 8 Fla. Tax Rev. 599 (2007).

Here is the introduction:

If people hate taxes so much why do they pay them? The common, seemingly obvious, answer—fear of being caught cheating—is only a partial answer. In fact, this “obvious” answer—based on the rational cost/benefit analysis of traditional economic theory— explains so little of tax compliance that the puzzle of tax compliance is why people pay taxes instead of evading them. The key to this puzzle is “tax morale,” the collective name for all the non-rational factors and motivations—such as social norms, personal values and various cognitive processes—that strongly affect an individual’s voluntary compliance with laws. Higher tax morale correlates with higher tax compliance. Although the exact components of tax morale are not yet fully delineated, Congress and the IRS should begin now to shape and administer income tax laws in accordance with tax morale findings. Delay can only increase the chance that voluntary compliance will deteriorate given the interaction of an individual’s tax morale with elements of the external environment, such as other people and institutions. The tax gap, for example, is more than a problem of lost revenue; it is a visible sign of non-compliance that can create a downward spiral. Non-compliance among other taxpayers can decrease an individual’s own tax morale and compliance. Once tax morale dips, it is hard to restore it to prior levels. Ironically, then, the more the tax gap is publicized, the greater this danger becomes. Consequently, Congress and the IRS should act now to narrow the tax gap and to foster compliance generally. This Report offers the IRS several concrete suggestions for improving individual taxpayer compliance based on the tax morale literature.

Part II discusses methodology and the limitations of empirical research.

Part III briefly describes the tax morale literature, focusing on the main findings regarding: 1) cognitive and affective processes; 2) personal and social values/norms, especially procedural justice, legitimacy, reciprocity, and trust; 3) external activation and suppression of tax morale; 4) demographic factors; and 5) a new tax morale model for tax administration.

Part IV contains recommendations for the IRS. It presents three major recommendations and several more specific suggestions for the IRS to improve individual taxpayers’ voluntary compliance. First, the IRS should establish a department devoted solely to exploring tax morale issues and implementing the findings. Second, the IRS should adopt a tax morale approach to tax compliance that incorporates the findings of the research and responds to—and strengthens—taxpayers’ internal motivations to comply. Third, using tax morale research, the IRS should implement ongoing educational (long - and short term) programs and media campaigns. Although sticks as well as carrots are needed to ensure compliance, this Report examines only the carrots.

Part V provides a short conclusion.

Solutions to tax problems and California tax help from a qualified tax attorney is available by calling Mitchell A. Port at (310) 559-5259.

May 2, 2008

California's Collection Procedures Manual

Income tax owed but unpaid in California may be collected by the Franchise Tax Board (FTB) using any number of collection methods described in California's Collection Procedures Manual. The Manual describes the desired culture and philosophy for the Collection Program.

California's Collection Procedures Manual contains the following topics:

Introduction Section

Responsibility Section

Case Administration Section

Case Processing Section

Debtor Asset Location Section

Voluntary Case Resolution Section

Involuntary Case Resolution Section

Case Servicing Section

Special Processes Section


If you have an income tax problem in California or with the IRS, call Mitchell A. Port for tax help at (310) 559.5259.