Thursday, January 29, 2015

Prominent Michigan Cancer Doctor Pleads Guilty: ‘I Knew That It Was Medically Unnecessary

Dr. Farid Fata, a prominent cancer doctor in Michigan, admitted in court to intentionally and wrongfully diagnosing healthy people with cancer. Fata also admitted to giving them chemotherapy drugs for the purpose of making a profit. The cancer doctor’s guilty plea shocked many in the courtroom, according to The Detroit Free Press. Fata owned Michigan Hematology Oncology, which had multiple offices throughout Detroit’s suburbs. Fata’s reach included offices in Clarkston, Bloomfield Hills, Lapeer, Sterling Heights, Troy, and Oak Park, Michigan. The doctor stated his plea in the absence of a plea deal and with tearful eyes, according to CBS News.

“It is my choice,” Fata said on Tuesday of his guilty plea.
In the Detroit courtroom, the cancer doctor named numerous, dangerous drugs that he prescribed to his patients. With each admittance he stated, “I knew that it was medically unnecessary.”
U.S. Attorney Barbara McQuade will seek life in prison for what she called “the most egregious” health care fraud case she has ever seen. McQuade said that in addition to insurance fraud, which involved a $35-million Medicare fraud scheme from 2009 until the present, Fata also harmed, and in some cased subsequently killed, his patients with dangerous chemotherapy drugs they did not need. According to government records, Fata’s medical practice included 1,200 patients. The formerly prominent cancer doctor will be sentenced in February before U.S. District Judge Paul Borman. The doctor’s bond was set at $9 million.
“In this case, we had Dr. Fata administering chemotherapy to people who didn’t need it, essentially putting poison into their bodies and telling them that they had cancer when they didn’t have cancer,” the prosecutor told the Detroit Free Press. “The idea that a doctor would lie to a patient just to make money is shocking… Dr. Fata was unique in that he saw patients not as people to heal, but as commodities to exploit.”
The cancer doctor, 49, is a married father of three who resided in Oakland Township. Hoping it would help his case, Fata’s lawyers attempted to get the case moved from the Detroit area, according to CBS News this summer. Fata became a naturalized citizen of the U.S. in 2009 and is a native to Lebanon. Court documents from also 2013 allege a charge of “Unlawful Procurement of Naturalization” for stating that he had not committed a crime in the U.S. that he was not found guilty of yet. In all, he pleaded guilty to two counts of money laundering, 13 counts of health care fraud, and one count of conspiracy to pay and receive kickbacks.
“I’m numb,” Angela Swantek, a chemotherapy nurse and a whistleblower of the cancer-treatment doctor, told reporters. “I’m not surprised though; I wondered how his team was going to defend him. The charts don’t lie.”
“I left after an hour and half. I thought this is insane,” Swantek said about her short time in Fata’s office in 2010 where she noticed patients receiving chemotherapy incorrectly. She wrote a letter to the state suggesting an investigation that day. In 2011, the state informed her they found no proof of wrongdoing at Fata’s office.
“I handed them Dr. Fata on a platter in 2010 and they did absolutely nothing,” Swantek said, adding she was relieved when he was charged two years later. “I started crying. I thought about all of the patients he took care of and harmed.”
“At a time when they are most vulnerable and fearful, cancer patients put their lives in the hands of doctors and endure risky treatments at their recommendation,” Assistant Attorney General Caldwell stated. “Dr. Fata today admitted he put greed before the health and safety of his patients, putting them through unnecessary chemotherapy and other treatments just so that he could collect additional millions from Medicare. The mere thought of what he did is chilling.”
Some of Fata’s victims are disappointed that they didn’t get the opportunity to speak at a trial, according to Click On Detroit. Others are glad to hear him admit to his fraud.
“I don’t think there’s any justice. I lost my sister and her children lost a mother,” said Cindy Burt. “There’s just no justice for that.”
White Lake resident Karen Baldwin said her husband, Harrison, was treated for a diagnosis of brain cancer. She is unsatisfied with the guilty plea.
“To me true justice would be that Fata drops dead,” Baldwin said, adding, “And I go home and my husband’s at the table saying, ‘What’s for dinner? I’m hungry.'”
Dave Kroff was also put through years of unnecessary chemotherapy by Fata. Kroff says that the chemo suppressed his immune system so badly that he lost both of his legs.
“He’s one of several civil suits against Fata,” Donna MacKenzie, Kroff’s attorney, stated. “The feds have seized millions in Dr. Fata’s assets. Will any of these victims see any of it?”
Multiple civil suits have already been filed, according to Click On Detroit. For example, Donna Virkus, the daughter of one of Fata’s patients, says that her 78-year-old father, Donald, was referred to Fata by a concerned physician to rule out esophageal cancer.
“It’s unbelievable. I can’t believe we put our trust into a doctor that was supposed to take care of him and ended up killing him,” Virkus said.
Donna’s father never had the cancer, a review of Donald’s medical files showed. Yet, the prestigious cancer doctor ordered two years of chemo. The civil suit alleges that Donald developed a blood-related cancer as an effect of the chemotherapy treatments. Donald later died.
Civil suits filed against the Michigan doctor over fraudulent cancer treatments include other doctors and oncology nurses as well.


Wednesday, January 28, 2015


A former London, Kentucky, doctor pleaded guilty today to filing false tax returns on which he falsely reported millions in fictitious business expenses to reduce his taxable income.

Dr. Visa Haran Sivasubramaniam owned and operated Hematology Oncology Physicians East (HOPE), where he offered medical oncology and hematology services.  During a three year period, from 2007 through 2009, Sivasubramaniam earned more than $16 million in total income from HOPE, but he reported nearly $13 million worth of false and fictitious medical supply expenses to offset that income.  Sivasubramaniam admitted that for 2008 and 2009, he signed false corporate tax returns for HOPE and false personal tax returns, which reported limited taxable income and ficticious losses from HOPE when he in fact knew that his net income was millions of dollars more.  According to court documents, Sivasubramaniam owes more than $4.5 million in taxes.
Sivasubramaniam faces a statutory maximum sentence of six years in prison and a $500,000 fine.  His sentencing is set for July 7 before U.S. District Judge Amul R. Thapar for the Eastern District of Kentucky.

Tax Relief May Be The Best Option
Do you feel scared? Overwhelmed? That’s where we come in. We do this every single day, sending in our licensed professionals and problem solvers to make sure our clients are protected. We’ve got a two-phase tax relief program that beats anything else in the industry, where we (phase 1) put out any temporary fires, and (phase 2) prepare you for the best possible outcome. And guess what? We LOVE doing this. We’re real human beings, who enjoy helping other human beings when they need us the most. So if you’re scared, and don’t know what to do, check in with us.
ADVANCE TAX RELIEF LLC - We Solve Tax Problems

"I will recommend your service to anybody that I know will need tax help, thanks to the staff at Advance Tax Relief for helping me abate my tax penalties and resolve my IRS audit". Ivan Garcia, Houston, TX

"I was almost obligated to pay $35,641 as a result of Identity Theft tax fraud. Advance Tax Relief gave me my life back, Thank you guys so much" - Scott Cody, CA.    


As a general rule, count on IRS interest and penalties doubling the amount you owe every five years. Interest is only part of the cause; it is the penalties that really hurt.

Interest rates charged by the IRS are not unfair – the federal short-term rate plus 3%. This has left IRS interest hovering in the 5% range. Think about it – you owe the IRS money, they are now your bank, and they are charging you a reasonable rate of interest for a loan that they really never agreed to.
The penalties is where the hurt comes in. The IRS charges multiple penalties, mainly for penalizing you for not doing something when you should have. The most common penalties are for not paying on time and not filing on time. If you owe taxes to the IRS, chances are you also owe them at least one of these two penalties.
Here is how the penalties add up to make repaying the IRS difficult:
1. Not paying what you owe when you file your return. The late-payment penalty is one-half of one percent of the tax owed for each month it is unpaid. Every month you owe, the penalty amount increases by a half of a percent. So the first month the IRS will charge you a half percent of the tax due, the second month 1%, the third month 1.5%, etc. The late-payment penalty does max out at 25%. So if you have owed the IRS for more than 24 months, your late-filing penalty has hit its limit – 25% of the tax. (Note: the half percent rate increases to one percent (1%) if the IRS issues a final notice of intent to levy and the tax remains unpaid for 10 days thereafter.)
2. Not filing your return on time. The late-filing penalty is sort of like the late-payment penalty – it escalates every month, only quicker. The late-filing penalty starts out at five percent (5%) of the tax owed for each month your return is late. The penalty increase by 5% every month for a maximum of five months, hitting its limit at 25% in the fifth month your return is late.
When both penalties run concurrently, the late-filing penalty is reduced from 5% to 4 1/2% monthly. When both penalties apply, the late-filing penalty hits its max at 22.5%, with the late-payment still maxing out at 25%. The combined penalty for not paying on time and not filing on time: 47.5%.
By example, if you filed your return more than five months late, and owed $50,000 on the return, you could eventually owe an additional $23,750 in penalties. As for interest, as an estimate, let’s say it is running at 5% – say $2,500/year. In five years, you would have a minimum of $12.500 in interest (and that is without calculating interest on the penalties). That is $36,250 of interest and penalties on $50,000 of tax after five years. (Please note these numbers are for illustration only – you get the idea.)
In all fairness, don’t necessarily blame the IRS for these rules – they do not make the laws, Congress does. The IRS enforces the laws that Congress gives us. And Congress has made repaying credit cards look like a walk in the park compared to tax delinquencies.
Penalties can be abated for reasonable cause, we have had a lot of successfull tax penalty abatements but my experience is that the IRS is relatively stingy in granting equity to late-payers and late-filers.
Tax Relief May Be The Best Option
Do you feel scared? Overwhelmed? That’s where we come in. We do this every single day, sending in our licensed professionals and problem solvers to make sure our clients are protected. We’ve got a two-phase tax relief program that beats anything else in the industry, where we (phase 1) put out any temporary fires, and (phase 2) prepare you for the best possible outcome. And guess what? We LOVE doing this. We’re real human beings, who enjoy helping other human beings when they need us the most. So if you’re scared, and don’t know what to do, check in with us.
ADVANCE TAX RELIEF LLC - We Solve Tax Problems


"I will recommend your service to anybody that I know will need tax help, thanks to the staff at Advance Tax Relief for helping me abate my tax penalties and resolve my IRS audit". Ivan Garcia, Houston, TX

"I was almost obligated to pay $35,641 as a result of Identity Theft tax fraud. Advance Tax Relief gave me my life back, Thank you guys so much" - Scott Cody, CA.    

Monday, January 26, 2015



You can deduct your current years state and local property taxes on business real property as business expenses. However, if you prepay the next years property taxes, you may not deduct the prepaid amount until the following year.

Need help with your tax returns or owe the IRS?

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Ordinarily, you can't deduct the cost of obtaining a degree that leads to a professional license or certification - for example, a law degree, medical degree, or dental degree. 
However, it may be possible to deduct the cost of obtaining an MBA (A masters degree in business administration) because an MBA is a more general course of study that does not lead to a professional license or certification. The decisive factor is whether you were already established in your trade or business before you obtained the MBA. If so, it is deductible.
In one highly publicized case, for example, a registered nurse was allowed to deduct her $15,000 tuition cost of obtaining an MBA with a health care management specialization. The nurse worked for many years as a quality control coordinator at various hospitals. The court help that while the MBA may have improved her skill set, she was already performing the tasks and activities of her trade or business before commencing the MBA program, and continued to do so after receiving the degree (Lori A. Singleton-Clarke v. Comm'r T.C Summ. Op. 2009-182 (2009))
Need help with your tax return or owe the IRS?
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Saturday, January 17, 2015


A woman was sentenced today to serve 70 months in prison for her involvement in a stolen identity tax refund fraud (SIRF) scheme:

Sasha Webb was also ordered to serve three years of supervised release following her prison sentence and to pay $528,823 in restitution.
According to court documents and court proceedings in this and related cases, Webb worked as a medical records clerk at an Alabama Department of Corrections facility in Elmore County, Alabama, where she had access to the means of identification of inmates from databases maintained by the Alabama Department of Corrections.  On several occasions in 2009 and 2010, Webb stole identities from those databases and sold them to Harvey James and his sister, Jacqueline Slaton, for the purpose of filing false tax returns. 
Between 2010 and 2012, James and Slaton used those stolen identities to file false federal and state tax returns.  James and Slaton directed some of the false refunds to be sent to either prepaid debit cards or issued via check.  James’s brother-in-law, Gregory Slaton, recruited Vernon Harrison, a U.S. Postal Service employee, to the scheme.  James directed prepaid debit cards and state tax refund checks to be mailed to addresses that Harrison provided from his postal route.  Harrison collected the debit cards and checks and provided them to Gregory Slaton who in turn gave them to James and Jacqueline Slaton.  In total, James and Slaton filed more than 1,000 federal and state income tax returns that claimed more than $1 million in fraudulent tax refunds.
On Oct. 31, 2013, Harrison was sentenced to serve 111 months in prison. James was sentenced on April 29, 2014, to serve 110 months in prison and Jacqueline Slaton was sentenced on Oct. 23, 2012, to serve 70 months in prison.  Gregory Slaton was sentenced on Oct. 28, 2014, to serve 70 months in prison.
The case was investigated by special agents of the Internal Revenue Service - Criminal Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the U.S. Postal Service’s Office of the Inspector General.  Trial Attorneys Jason H. Poole and Michael C. Boteler of the Tax Division are prosecuting the case with the assistance of Assistant U.S. Attorney Todd Brown for the Middle District of Alabama.

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A tax preparer was indicted by a federal grand jury in the Eastern District of New York and charged with 30 counts of aiding in the preparation of false income tax returns, the Justice Department and Internal Revenue Service (IRS) announced following her Dec. 22 arrest and the unsealing of the indictment.
In this photo:Mark Goldberg can't contain his anger outside Manhattan federal court. The tax preparer was sentenced to nearly 5 years in prison for filing fraudulent returns and bilking his clients and the government out of more than $2.5 million. Photo: Shepard
Awilda Rosario owned and operated a Brooklyn-based tax preparation business called Edujas Multiservices Corporation, according to the indictment.  The indictment charges that Rosario prepared false individual income tax returns for taxpayer-clients for at least six years, spanning tax years 2008 through 2013.  Rosario allegedly attached false schedules that reported business losses the taxpayers did not incur and attached schedules that reported inflated or fictitious deductions.  Rosario also attached forms claiming fictitious education and fuel tax credits that the taxpayers were not entitled to receive.
The indictment further alleges that after the IRS revoked the electronic filing number for Edujas Multiservices Corporation, Rosario obtained at least two different e-file provider numbers and continued to prepare and submit false tax returns for her clients, listing a different paid tax return preparer and tax preparer firm to conceal her involvement.
If convicted, Rosario faces a statutory maximum sentence of three years in prison and a fine of up to $250,000 for each count.
The case was investigated by special agents of IRS-Criminal Investigation.  Assistant Chief Jorge Almonte and Trial Attorney Shawn T. Noud of the Justice Department’s Tax Division are prosecuting the case.
An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. 
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Thursday, January 15, 2015

CHILD SUPPORT (TAX ADVICE) (Advance Tax Relief LLC (800)790-8574)

Divorced or Separated parents may be ordered by a court to make payments for a child of the marriage. Even an unwed parent may be instructed to support his or her child. The recipient of child support payments, typically the parent with whom the child resides, is not taxed on these payments. (The parent making the payments cannot deduct them, but paying child support may entitle the parent to other tax write-offs)

Child support payments are not taxable to the child, nor to the parent who receives them on behalf of the child. There is no dollar limit to this benefit.

Payments for child support should be fixed. If they are set by a decree of divorce or separate maintenance or a separation agreement, they are considered to be fixed.
In addition, if payments made to a parent will be reduced or terminated upon contingency related to the child, then those payments are treated as being fixed for child support.
Contigencies for this purpose include:
1)Reaching the age majority (generally age 18 or 21, depending on the law in your state.
2)Leaving School
4)Entering Military Service
5)Moving out of the custodial parents home
6)Starting to work and/or attaining a set income level

If a parent is required to pay both alimony and child support but makes a single payment that is less than the total amount due, the first dollars are considered tax-free child support.

Ed owes his former spouse $1,000 each month to cover alimony of $600 and child support of $400. In March 2014, Ed pays only $500. Of this amount, $400 is treated as child support; $100 is treated as alimony.
1) The parent who makes child support payments cannot deduct them.
2) If you are due a refund of federal income taxes because you overpaid it through with holding or estimated taxes, you won't receive it if you are delinquent on your child support payments. The IRS is authorized is divert your refund to the parent owed the child support payments as long as the state provides notice to you and a procedure you can follow to contest this action.

Where to Claim the Exclusion
Child support payments received need not be reported on the return.

Let our experienced professionals prepare your current and past due tax returns in 2015.
Call us now (800)790-8574 for details.

"My husband lost his job and the IRS was garnishing my wages.
I called advance tax relief for help, my wage garnishment was released and we settled with the IRS for $1,200 on a $48k debt. Our family is very grateful" - Shirley W, Tampa FL.
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Friday, January 9, 2015


A federal court in Waco, Texas has permanently barred Patricia Foley aka Sissy Foley; Amanda Smith; April Leann Morgan aka April Leann Ercanbrack; Cassandra Egbert and Joshua Stifle, individually and doing business as Accounting System Services and doing business as A Kind Bookkeeping and Tax Service from preparing tax returns for others, the Justice Department announced today.  The five defendants agreed to the stipulated order of permanent injunction, which U.S. District Judge Walter S. Smith Jr. entered on Dec. 19.

The complaint alleges that the defendants prepared income tax returns for their customers that contained false, improper or inflated business expense deductions on Schedule F (Profit or Loss from Farming) on their returns.  These activities led to the defendants’ customers filing tax returns that unlawfully understated income and tax liabilities and overstated refunds, according to the suit.
The injunction requires the defendants to turn over to the United States a list of all persons for whom they prepared federal tax returns or claims for a refund for tax years 2009 through 2014.  The order granting the injunction further authorizes the United States to monitor the defendants’ compliance with the terms of the order.]
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2014.  The IRS has some tips on their website for choosing a tax preparer.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details
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A federal jury sitting in Los Angeles today convicted two California tax return preparers of one count of conspiracy to defraud the Internal Revenue Service (IRS) and two counts  of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR) announced Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department’s Tax Division, Acting U.S. Attorney Stephanie Yonekura for the Central District of California, and  Chief of the IRS-Criminal Investigation Rich Weber. 
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Accrding to the second superseding indictment and evidence introduced at trial, David Kalai and Nadav Kalai were principals of United Revenue Service Inc. (URS), a tax preparation business with 12 offices located throughout the United States.  David Kalai worked primarily at URS’s former headquarters in Newport Beach, California, and later at URS’s location in Costa Mesa, California.  Nadav Kalai, who is David Kalai’s son, worked out of URS’s headquarters in Bethesda, Maryland, as well as the URS locations in Newport Beach and Costa Mesa.  David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations. 

U.S. citizens, resident aliens and legal permanent residents have an obligation to report to the IRS on Schedule B of the U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “yes” or “no” in the appropriate box and identifying the country where the account is maintained.  They further have an obligation to report all income earned from the foreign financial account on the tax returns.  Separately, U.S. citizens, resident aliens and legal permanent residents with a foreign financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year must also file an FBAR with the U.S. Treasury disclosing such an account by June 30th of the following year. 
“As the defendants in this case have learned, hiding income and assets offshore is not tax planning; it’s tax fraud,” said Chief Richard Weber IRS-Criminal Investigation.  “There is no secret formula that can eliminate an individual’s tax obligations.  Today’s verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who implement off-shore tax schemes designed to evade the payment of taxes.”
The second superseding indictment and the evidence introduced at trial established that the co-conspirators prepared false individual income tax returns that did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts.  In order to conceal the clients’ ownership and control of assets and to conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B.  Bank A is a large financial institution headquartered in Tel -Aviv, Israel, with branches worldwide.  Bank B is a mid-size financial institution, also headquartered in Tel Aviv, with a presence on four continents.                                                                                                                       
As further proven at trial, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks.  The co-conspirators then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense.  The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in and authority over, the secret accounts and caused the clients to fail to file FBARs with the U.S. Treasury.  
“The Kalais created sham foreign corporate entities and used banks in Luxembourg and Israel as havens for hiding their U.S. clients’ money from the U.S. government,” said Acting Deputy Assistant Attorney General Wszalek.  “Today’s guilty verdict sends a clear message that those professionals who facilitate tax evasion through the use of offshore bank accounts will be held accountable for their criminal conduct.  The Tax Division will continue its vigorous tax enforcement efforts in prosecuting return preparers, bankers, and other facilitators who assist clients in concealing assets offshore.”
The evidence at trial established that David Kalai and Nadav Kalai each failed to file FBARs for calendar years 2008 and 2009 concerning a foreign account held at Bank A in Luxembourg.  The bank account was held in the name of a nominee corporation in Belize and held over $300,000. 
Sentencing is scheduled for March 16, 2015.                                    
This case was prosecuted by Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of Tax Division, with the assistance of Assistant U.S. Attorney Sandra R. Brown for the Central District of California, and was investigated with the assistance of the IRS.  

Thursday, January 8, 2015


If you own a business and needing a bodyguard is an ordinary and necessary expense of your business, it is deductible. However, If needing a bodyguard is an ordinary and necessary expense of your business, I would suggest you start a different business

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If you have been summoned for an audit by the IRS, you should know that the odds of escaping without owing additional taxes are slim. In general, the IRS does not spend its resources on conducting tax audits unless there is a good chance for significant revenue to be gained. 

What you may not be aware of is that, if you owe more, along with extra taxes, you will likely be assessed penalties of some type. The amount and severity of the tax audit penalties that you face are directly related to the type of deficiency the audit uncovered. But you also have the opportunity to soften the blow or perhaps even have the penalties removed. 

Accuracy Related Tax Penalties 

If an IRS audit finds that you filed a substantially inaccurate return, you could be facing accuracy related penalties of 20 percent of the amount you underpaid. In extreme cases, the penalty charged could be doubled to a whopping 40 percent of your total tax underpayment. The following list indicates the types of accuracy related penalties that may result from a tax audit. (About Money) 

  • Negligence or Disregard of Regulations. Failure to make a reasonable attempt to adhere to Federal tax code rules, such as failing to file a tax return at all 
  • Disregarding IRS Rules or Regulations. Positions taken on tax returns that are substantively inconsistent with IRS regulations 
  • Substantially Understating Your Taxes. Understating your income by $5,000 or 10 percent, whichever is greater. 
  • Substantially Misstating the Value of Property. Overvaluing of donated property or undervaluing of depreciating property by 200 percent carries a 20 percent penalty. Overvaluing donated property or undervaluing depreciating property by 400 percent carries a 40 percent penalty 
  • Substantially Overstating Pension Liabilities. Overstatement of pension liabilities by at least 200 percent carries a 20 percent penalty; overstatement of pension liabilities by 400 percent carries a 40 percent penalty. No penalty will be applied if the overstatement is $1,000 or less 
  • Substantially Understating a Gift or Estate. Erroneously stating the value of property claimed on a gift tax or estate tax return at 65 percent or less of its actual market value carries a 20 percent penalty. Erroneously stating the value of property claimed on a gift tax or estate tax return at 40 percent or less of its actual market value carries a 40 percent penalty. No penalty will result if the understatement results in a tax underpayment of $5,000 or less. 
  • Understatements Related to Reportable Transactions. 20 percent penalty for understating tax liabilities due to a tax shelter or tax avoidance transaction that are disclosed. Inadequately disclosed tax shelters or tax avoidance shelters that carry a 30 percent penalty. 
Penalties for Failure to File Returns and Pay Taxes 

If you are late in filing your tax return or paying your taxes, the penalty is 5 percent of the unpaid tax, charged each month, up to a maximum of 25 percent. A minimum penalty of $135 can be charged for returns filed more than 60 days late. 



Filing your return on time but paying late carries a lighter penalty of 0.5 percent of the tax you owe each month up to 25 percent. If you are charged for both penalties for the same month, the penalty for failure to file is reduced to 4.5 percent. ( 

If you fail to pay up on taxes owed after an audit, the IRS will assess a penalty of 0.5 percent for each month the tax is not paid. The clock starts ticking 21 days after the IRS issues the notice. If you pay the amount owed in full within 21 days, you will not be charged an additional penalty. 

To add insult to injury, if an audit results in accuracy related penalties, fraudulent failure to file a tax return or civil fraud, the IRS adds interest of 3 percent annually to the amount of your penalty. If the penalty is $100,000 or less, you have 21 days to pay in full before interest is added. If the penalty is more than $100,000, you only have 10 days to pay up before the IRS begins adding interest. 
Civil Fraud Penalty 

If an IRS audit results in a charge of civil fraud, you won’t wind up in jail. But the IRS slaps a hefty 75 percent penalty on any tax underpayment that resulted from fraudulent activity. 

There is one sliver of a silver lining to this financially dark cloud — accuracy related penalties cannot be applied to taxes owed as a result of civil fraud. In other words, you can’t be penalized on top of a penalty. 

Fraudulent Failure to File a Tax Return 
If you mistakenly believe that you were not obliged to file a tax return and the IRS catches up with you through an audit, you’ll be hit with penalties for failure to file and failure to pay, but you won’t be charged with fraudulent failure to file a tax return. 

Instead, fraudulent failure to file a tax return refers to a deliberate failure to file a return, and can be either a civil or misdemeanor criminal offense, although civil charges are much more common. If criminal charges are filed, you could be sentenced to up to a year in jail plus $25,000 in fines for each year that you fail to file. The statute of limitations for criminal charges is six years; there is no statute of limitation for civil charges. 

Willful Failure to Pay Estimated Taxes or Keep Records 
Willful failure to pay estimated taxes or maintain tax records is considered to be a misdemeanor by the IRS. Just as with fraudulent failure to file a tax return, civil rather than criminal penalties are applied most often for this type of infraction. If the IRS brings criminal charges against you, as the result of an audit or criminal investigation, you could face up to a year in jail and $25,000 in fines for each year for which you are charged. 

Filing a Fraudulent Return 
Many tax protesters, including actor Wesley Snipes and singer Lauryn Hill, have found themselves on the wrong side of the law because they filed frivolous returns based on claims that income taxes are unconstitutional. Filing a fraudulent tax return is considered a felony, but less serious than tax evasion. If you are convicted of filing a fraudulent return as a result of an audit or as a result of IRS investigation, you could face up to 3 years in prison and up to $100,000 in fines. ( 

Tax Evasion 
Tax evasion has snared some of the most notorious figures in history, including Chicago crime syndicate boss Al Capone. The IRS defines tax evasion as the willful concealment or misrepresentation of financial resources and assets to avoid paying taxes. If an IRS audit or criminal investigation results in a tax evasion conviction, you could be facing up to 5 years in prison and up to $100,000 in fines. 

Audit Reconsideration 
If worse comes to worse and you are nailed with more taxes and penalties as the result of an audit, but you disagree with the result, you can request an audit reconsideration. You must request it before you pay any taxes, penalties or interest that you intend to dispute, not after. If you have already paid the taxes, penalty and interest, you must request a refund. Submit the following documentation to the same office that conducted your audit. (Journal of Accountancy) 
  • Statement explaining your reasons for requesting an audit reconsideration 
  • Form 1099, cancelled checks, bank statements and similar new documentation 
  • Copies of previously supplied materials 
  • Copies of correspondence from the IRS 
The IRS is not obligated to grant your request. But if you can demonstrate any of the following circumstances, your request for audit reconsideration should be approved. 
  • You did not appear for the audit 
  • You moved and did not receive proper notice for the audit 
  • You submitted documentation that the IRS refused to consider that would reduce or eliminate the taxes, penalties or interest you owe 
  • You have new documentation to support your case 
  • You file a return that shows the correct tax to replace a return created by the IRS because you previously failed to file a return 
  • The IRS committed math or processing errors in calculating the tax you owe 
The IRS should respond to your request for an audit reconsideration within 30 days, although the wait could be longer. Bear in mind that penalties and interest continue to accumulate during that time. If you are suffering financial hardship due to delays in processing your audit return, you can ask for your request to be expedited. 

Offer in Compromise and Penalty Abatement 
If your request for audit reconsideration is denied, you may still be able to ease your burden. If you cannot pay the full amount of tax that you owe, you may request an Offer in Compromise, which settles your tax obligation for a fraction of what you actually owe. Be forewarned that the IRS accepts only a small percentage of Offers in Compromise. Obtaining expert advice from the experts at Advance Tax Relief will improve your odds. 

Under certain circumstances you may request a penalty abatement, which results in some or all the penalties you have been charged being waived. The IRS generally approves requests for penalty abatement based on reasonable cause or administrative waivers. To request a penalty abatement, file IRS Form 843 along with copies of any documentation you may have to support your request.




About the Author: Audrey Henderson is a Chicago-based writer with a JD from Northwestern University. Her focus is on tax-related issues including IRS audits, tax planning, and tax relief solutions.