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Sacramento Tax Law Blog

The IRS Recognizes Small Business Landscapers and Gardeners with Federal Tax Help for Landscapers and Gardeners

In recognition of Small Business Week May 4-8, 2015, the IRS has highlighted special tax information regarding self-employed landscape and gardening professionals, including the webinar "Business Taxes for the Self-Employed: The Basics." Topics included are: 

Former CEO Sentenced to Prison for Failing to Pay Employment Taxes

On May 5, 2015, the Department of Justice Tax Division announced Kevin Bertram, former CEO of Distributive Networks LLC (a wireless technology company), was sentenced to serve 30 months in federal prison, followed by three years of supervised release, and ordered to pay restitution in the amount of $897,921 to the IRS for failing to pay nearly $1,000,000 in payroll taxes.

IRS Boosts Conviction Rate

On April 7, 2015, the IRS announced the release of its "IRS Criminal Investigation Annual Report,"documenting the significant accomplishments and enforcement actions taken during fiscal year 2014. For that year, the IRS Criminal Investigation ("CI") focused on international tax fraud, return preparer and questionable refund fraud, identity theft, public corruptions, bank secrecy act violations, money laundering, and terrorist financing. CI initiated 4,297 cases in the 2014 fiscal year.

TIGTA Recommends IRS Improvements

On March 18, 2015, the Treasury Inspector General for Tax Administration ("TIGTA") issued a report to the Large Business, International Business, and Small Business/Self-Employed Divisions of the Internal Revenue Service. The report was the result of a review of the IRS's partnership audit process, which revealed a lack of adequate performance measures. TIGTA noted that is has been more than 20 years since the IRS conducted a comprehensive compliance study on partnership, making it difficult to gauge the productivity and success of the IRS's partnership audit process.

The FTB Makes Privacy and Security Policy Changes

Effective April 13, 2015, the Franchise Tax Board ("FTB") will enforce an updated privacy and security policy. It is necessary for the FTB to lawfully collect relevant personal information in order to enforce and administer the California Revenue and Taxation Code and the FTB is committed to protecting taxpayers' privacy and security. Among other changes, the new policy incorporates the Information Practices Act (California Civil Code Sections 1798-1798.78) and adopts Information Privacy Principals for Individuals. To see a version of the new policy with the additions highlighted, please click here.

Uber and Lyft in the Crosshairs Regarding Worker Classification

When I left the California EDD's Legal Office over two years ago, I predicted that the "rideshare" software application companies, Uber and Lyft, would soon come under scrutiny for worker classification issues. My prediction was correct. For the past few months, developments have occurred in two federal wage and hour lawsuits involving these two companies, and centering on issues of worker classification.

In separate rulings from the same U.S. District , Judges Edward Chen and Vince Chhabria determined that juries would decide the status of each companies' drivers.

O'Connor v. Uber Technologies, Inc., No. 3:13-cv-03826-EMC (N.D. Cal. Mar. 11, 2015); and Cotter v. Lyft, Inc., No. 3:13-cv-04065-VC (N.D. Cal. Mar. 11, 2015.

Tackling Third-Party Payer Fraud

An estimated 40 percent of small businesses outsource payroll tasks to third-party payers, delegating the responsibility to withhold and pay over Federal employment taxes to the IRS. Unfortunately, some third-party payers withhold the tax through payroll, but instead of paying it to the IRS, they pay it to themselves! This scam may go undetected for a lengthy period of time before the employer becomes aware of the problem, particularly if the defrauding third party is sophisticated in presenting copies of documents that purport to prove the tax has been paid. Ultimately, when the IRS contacts the employer for the payment of tax, the employer suffers a great hardship because although the money was expended, the tax is still unpaid and due.

DOJ Update on Efforts Concerning Fraudulent Tax Professionals

The Department of Justice has released the results of its ongoing efforts to identify and extinguish the practices of fraudulent tax return preparers and tax scheme promotors. In the press release, the DOJ describes its most recent activities in stopping violations of federal tax laws by professionals along with an update on injunctions obtained against hundreds of tax-return preparers.Click here to read the results from the Department of Justice. 

One Billion Dollars Due to One Million Taxpayers

On March 11, 2015, the IRS reported that it has refunds totaling $1 Billion due to taxpayers who did not file a 2011 federal income tax return. California leads the nation with the most refunds due, with over 103,000 taxpayers failing to file their 2011 return.

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