What are the most common reasons for an IRS tax audit?

The IRS typically audits returns that show unusually high deductions, complex transactions such as those involving foreign accounts or entities, and discrepancies between reported income and third-party information reports.

Can I negotiate with the IRS to reduce my tax debt?

Yes, through an Offer in Compromise program, you may be able to settle your tax debts for less than the full amount if certain criteria are met, such as proving payment in full would cause financial hardship.

What is the statute of limitations on IRS collections?

The IRS generally has ten years from the assessment date to collect taxes owed. However, this period can be extended if you file for bankruptcy or request an installment agreement and other circumstances that suspend the collection statute.

IRS Tax Defense

Navigating FBAR Willful Penalty Defense Strategies

When it comes to defending against the Foreign Bank Account Report (FBAR) willful penalty, understanding the intricacies of the law and how prosecutors approach these cases is crucial. The FBAR statute, under 31 USC 5322, mandates that individuals with financial interests in or signatory authority over foreign financial accounts must report such accounts annually to the Department of Treasury if the aggregate value of those accounts exceeds $10,000 at any point during the year. Failing to file these reports can result in severe penalties, particularly when the IRS determines that the violation was "willful," which is a subjective standard that includes reckless disregard or intentional ignorance. In my experience as a federal prosecutor, I've seen cases where clients have claimed they were unaware of their reporting obligations due to poor legal advice or complex financial arrangements. The key issue in these scenarios is whether the defendant's actions rise to the level of "willful," which requires proof beyond a reasonable doubt that the individual knew they had an obligation to file and intentionally failed to do so. Defense attorneys often focus on demonstrating that their clients lacked knowledge of the reporting requirements or acted with reasonable cause, thereby negating the willfulness element. This can involve presenting evidence of diligent efforts to understand tax obligations, reliance on financial institutions for compliance guidance, or unforeseen circumstances such as sudden travel abroad necessitating a short-term account.

Demonstrate Reasonable Cause
Establish that the client took reasonable steps to comply with FBAR regulations.

Challenge Willfulness Standard
Show that the client's actions did not meet the high bar for willful non-compliance.

Present Expert Testimony
Use financial experts to explain complex transactions and demonstrate lack of intent.

Former Federal Prosecutor Insight

As a prosecutor, I frequently encountered cases where the line between mere negligence and willful violation was blurred. The IRS often takes a hard stance on FBAR compliance, but it’s essential for defense attorneys to thoroughly investigate whether their clients were truly aware of the need to file or if they reasonably believed they were in compliance with other tax laws that implicitly covered foreign accounts.