Credit: Julia Overview of the Voluntary Disclosure Program The IRS Voluntary Disclosure Program (“VDP”) provides taxpayers who have willfully failed to report income, assets, or other tax-related information an avenue to resolve their noncompliance with the IRS. In order to be eligible, taxpayers must have willfully violated the tax law and must make a disclosure before the IRS initiates a civil or criminal examination. The program offers two key benefits: (1) Limiting criminal exposure related to past noncompliance: Taxpayers who enter into the VDP are rarely referred to IRS Criminal Investigation (“CI”). (2) Reduced penalty framework: Through the VDP, failure-to-file and...

Significant Relief for Taxpayers Reporting Foreign Gifts and Inheritances At the urging of the Taxpayer Advocate Service and practitioners, the IRS has ended its practice of automatically assessing penalties at the time of filing for late-filed Forms 3520 to report foreign gifts and inheritances. Also, by the end of the year, the IRS will begin reviewing any reasonable cause statements attached to late-filed Forms 3520 and 3520-A for the trust portion of the form BEFORE assessing any penalty. The IRS previous practice was to automatically assess penalties, even when a reasonable cause statement was attached. The burden was on the taxpayer...

Written by Jack Naranjo Understanding IRS Debt and Community Property Laws in Texas Are you engaged to someone with significant IRS debt? Learn how community property laws in Texas might affect your earnings and property, and explore options to protect your financial interests. When Your Fiancé/Fiancée Owes Money to the IRS. Assume that A is engaged to marry B. They live in Texas. B owes the IRS over $100,000. A has income from her personal earnings and income-producing property (e.g., rental property). Should a be concerned that the IRS could come after her income to satisfy B’s federal income tax liability?...

How We Successfully Defended Against IRS Worker Reclassification Claims The Wilson Firm's client was audited by the IRS regarding its payroll tax obligations from 2017 to 2021. The core issue was the classification of its workers: whether they should be considered employees or independent contractors. The Wilson Firm appealed the IRS's initial decision. After nearly a year of advocating for the client, IRS Appeals issued its ruling on May 16, 2024. Appeals determined that none of our client’s workers should be reclassified as employees. This decision not only saved our client over $1.1 million in potential payroll tax liabilities but also prevented the need...

How We Successfully Negotiated a Drastic Reduction in ESRP Penalties The Wilson Firm recently navigated a significant victory in Employer Shared Responsibility Payment (ESRP) penalty negotiation, dramatically reducing a client's ESRP penalty from $465,000 to just $9,000. In this case, The Wilson Firm adeptly demonstrated to the IRS that the company satisfied the "minimum essential coverage" and "minimum value" standards, thereby ensuring that Section 4980H(a) penalties were not applicable. Instead, only the stipulations of Section 4980H(b) were relevant to the client's situation. This strategic approach allowed The Wilson Firm to bypass the more complex and potentially costly "affordability" defense, which could...

Bankruptcy Basics Federal courts, in their exclusive jurisdiction over bankruptcy cases, give people and businesses a fresh start when they can no longer pay their debts. There are several chapters of bankruptcy under the United States Bankruptcy Code, but the most common ones for individuals and businesses are: Chapter 7: Involves liquidation, where non-exempt assets are sold to pay off creditors. Individuals or businesses with significant unsecured debts may opt for Chapter 7. Chapter 11: Primarily for businesses, it allows for reorganization and continuation of operations while developing a plan to repay creditors. It’s more complex and costly, often used by...

Over the past decade, the IRS has intensified scrutiny on foreign asset reporting, with non-compliance leading to severe tax penalty implications, including hefty fines and criminal charges for U.S. taxpayers. Though we have already discussed at length the FBAR and Form 8938, this article will take a deeper dive into one of the most common international information reporting forms - Form 3520. Who is Required to Report? U.S. taxpayers are obliged under tax law to report global income. "United States Persons" who must report include:U.S. citizens or residentsDomestic partnerships and corporationsU.S. estates (excluding foreign ones)Trusts under U.S. jurisdictionOthers not classified as...

Author: Phillip Mixon Even though culture and fads change from era to era, there is one thing that is possibly more American than apple pie and baseball combined: that is home ownership.  Home ownership is the cornerstone and foundation of why people can be convinced to toil from 9-5 all week: because they believe that one day, eventually, they will be able to achieve the ultimate goal of home ownership. In 2023, the pressure to keep and maintain a home has correspondingly increased as the cost of living increased. Aside from unusually high interest rates, there is the elephant in the room...

The IRS has recently issued a warning to taxpayers, cautioning them to be vigilant about scams promising tax refunds or claiming to "fix" tax-related issues. The IRS emphasizes that it never initiates contact with taxpayers through email, text, or social media regarding tax refunds or bills. They caution against clicking on links from questionable sources and encourage individuals to remain vigilant. These scams often focus on misleading promises regarding a third round of economic impact payments. The IRS has been inundated with complaints, receiving hundreds daily and thousands since the July 4th holiday, directed to their This email address is being protected from spambots. You need JavaScript enabled to view it. email account. The economic...

How We Helped Reduce Offshore Tax Penalties by 87% Client worked for an international oil and gas company based in Europe, where the employees had the equivalent of a European 401k. The client was given erroneous advice and never reported this foreign account when filing their tax returns. Before coming to The Wilson Firm, the client was looking at paying approximately $100k with the combined amounts of tax and penalties owed. This amount could have been increased by an additional $70k if the client’s actions were determined to be "willful," and they were assessed penalties for this. Instead, with the help...

For business owners, navigating the world of tax compliance can be extremely complicated. On top of the business itself, tax compliance represents a world of confusion for most business owners. The following tips are meant to provide simple, yet highly effective tips on how a business owner can make tax compliance easier. These tips are by no means all-inclusive; they are simply designed to point your business in the right direction. Work as you go. Every year the IRS selects random returns for audits, and those operating small businesses are at a greater risk of being picked up for these random...

How We Secured a $1.1 Million Property Tax Reduction for Our Client The Wilson Firm recently achieved a significant victory for its client, a subsidiary of a Fortune 100 company. The case involved a dispute with Montgomery Central Appraisal District over the value of approximately 30 acres of commercial property located in The Woodlands, Texas. The Wilson Firm sued Montgomery Central Appraisal District in September 2019 over the appraised value of the client’s property after attempting to resolve the matter with the Montgomery County Appraisal Review Board. While the lawsuit was pending, the Appraisal District continued to over-appraise the value of...

If you are reading this, I first want to wish you good luck because you are reading this article means you are either running a business or at least thinking of starting a business. When it comes to new business, you may find yourself involved in a variety of different industries, from freight to plumbing or even the restaurant business. However, most entrepreneurs don't realize that they also entered into the tax "industry." Starting a business comes with infinite tax rules to understand and comply with. Because tax is so certain, I think the Bible has a typo: it should say...

If there is one word that strikes fear in the hearts of every taxpayer, that word is “audit.”  Most people don’t truly understand what an audit actually entails, why they would be the victim of an audit, and what to do in case they find themselves on the wrong side (implying that there is a right side) of an IRS audit. An IRS audit is an examination of an organization's or individual's accounts and financial information to ensure that information is reported correctly according to tax laws and to verify the reported amount of tax is correct. Many people have the...

Yesterday The Wilson Firm organized the Spring Tax Mixer event at Del Frisco's Grille in The Woodlands. More than 20 tax professionals attended this fun networking event, where they were able to connect and exchange ideas, experiences, and opportunities. We had the pleasure of meeting new people, discussing interesting topics, and relaxing after a busy tax season.       We thank every attendee for carving out time for us and stopping by at the event. The Wilson Firm also extends its gratitude to the local businesses that provided generous gifts for door prizes:  VillaSport Athletic Club and Spa,  Black Rock Coffee Bar, Del...

Don’t Ignore your Tax Preparer’s Red Flags. Tax season is either the best of times or the worst of times. Either you’re eagerly waiting for the Internal Revenue Service (“IRS”) to issue you a juicy refund, or you’re searching and scraping for any deduction or tax strategy that can minimize your tax liability. As the April 18, 2023 deadline is approaching, people might find themselves in “panic mode” and susceptible to making poor decisions this tax season. While there is a temptation to rush your taxes or take “extra” deductions, it is important to understand that when dealing with the IRS,...

The Risks of Fraudulent Employee Retention Credit Claims A wise man once said, “Fool me once, shame on you; fool me twice, shame on me.” Whoever this so-called wise man was, he had never encountered the IRS. If he had, the corrected quote would be something like this: “Fool the IRS once, go straight to jail.” When it comes to trying to defraud the Internal Revenue Service, just don’t. At worse you end up in prison, at best, you end up looking over your shoulder for the rest of your life. As we get closer to the April 18, 2023 filing...

An Introduction to Form 5471 - Information Return of U.S. Persons With Respect to Certain Foreign Corporations   Purpose of Form Form 5471 is used to satisfy the reporting requirements of Internal Revenue Code (“IRC”) §§ 6038 (information reporting with respect to certain foreign corporations and partnerships) and 6046 (returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock). Likewise, Form 5471 is used to report amounts related to IRC § 965 (treatment of deferred foreign income upon transition to participation exemption system of taxation). Certain U.S. persons who are officers, directors, or shareholders in...

The Wilson Firm is pleased to announce that we recently awarded a $1000 scholarship to a deserving student, J.D. Candidate Nga Tran-Medina, at the Thurgood Marshall School of Law. As a leading law firm specializing in tax law, we are committed to supporting the next generation of legal professionals and helping to shape the future of the legal field. Our very own tax attorney, Jay Poynter, had the honor of presenting the scholarship at the Corporate and Tax Law Society Panel. During the panel, Jay spoke about the exciting opportunities and challenges that come with a career in tax controversy. We're...

--> What Cryptocurrency Holders Need to Know About IRS Compliance Notices The IRS started sending out letters mid-July to taxpayers who have participated in virtual currency transactions. The letters consist of three different versions: Letter 6174, Letter 6174-A, and Letter 6173. Each letter's intention, according to the IRS, is to "strive to help...