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Taylor Lohmeyer Law Firm Clients Face Potential IRS Audit | FBAR News

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On May 15, 2019, a Texas federal court ruled that the IRS can enforce a John Doe Summons for client information from Taylor Lohmeyer Law Firm because the firm failed to demonstrate that the attorney-client privilege protected this information. This is bad news for Taylor Lohmeyer Law Firm clients who now may have to face a potential IRS audit.

How and Why Taylor Lohmeyer Law Firm Clients Face IRS Pressure

This entire affair arose as a result of an IRS audit of an unnamed client of Taylor Lohmeyer law firm. During the audit, the IRS determined that this client owed more than $2 million in taxes with respect to about $5 million of undisclosed foreign income.

Moreover, the IRS agent who conducted the audit discovered that the taxpayer received an advice from Taylor Lohmeyer law firm with respect to evasion of US taxes on his foreign income. It appears that the IRS agent also received additional information confirming the involvement of the firm in illegal tax-avoidance schemes from a former partner of the firm.

As a result, the IRS agent was able to build the case that Taylor Lohmeyer law firm helped its clients build offshore trust structures and beneficial ownership schemes for the purpose of evading US taxes. The IRS then made the logical conclusion that other Taylor Lohmeyer law firm clients may have used the firm to hide their taxable income in foreign jurisdictions through foreign bank accounts and foreign entities.

Why the Court Approved the John Doe Summons for the Identities of Taylor Lohmeyer Law Firm Clients

Based on this information, the court ruled that the government had sufficient evidence to establish that the summons was made with the legitimate purpose of combating tax evasion. The court also said that the burden to show the government made a wrongful summons was on the Taylor Lohmeyer law firm, and the firm failed to satisfy its burden of proof.

It was not just the IRS work that convinced the court to approve the IRS summons for the names of the Taylor Lohmeyer Law Firm clients. Rather, it appears that the firm was overly confident and did not properly assert the attorney-client privilege to protect its clients. The court specifically objected to what it believed to be a “blanket assertions of privilege” for the firm’s clients. It wanted the firm to establish that the attorney-client privilege applied to each specific client and each specific document.

Will There Be an Appeal?

It is not clear if the firm will appeal the court’s decision, but it appears that such an appeal would be the least that the firm can do to protect its clients. From a broader perspective, it would be too dangerous to let the IRS further chip away at the attorney-client privilege.

What Should Taylor Lohmeyer Law Firm Clients Do?

The clients of the firm should not simply wait for what happens next in this case, whether the firm will appeal the decision or simply disclose their names. They are right now in a very dangerous situation and should immediately explore their voluntary disclosure options to limit their exposure to IRS criminal penalties, including FBAR criminal penalties. Moreover, a voluntary disclosure may allow them to reduce their exposure to civil penalties.

They must also prepare for the possibility that they may not be able to do a classic voluntary disclosure and prepare for an IRS audit. Even in a willful situation, it may be possible to significantly reduce the exposure to FBAR and other IRS penalties if the case is handled correctly.

In other words, whether their earlier noncompliance was willful or non-willful, the clients of this law firm should immediately contact an international tax attorney who specializes in offshore voluntary disclosures and IRS audits.

Taylor Lohmeyer Law Firm Clients Should Contact Sherayzen Law Office for Professional Help With Their Offshore Voluntary Disclosures and IRS Audits

If you are a client of Taylor Lohmeyer law firm, contact Sherayzen Law Office for professional advice with respect to your offshore voluntary disclosure options and IRS audit preparation. Sherayzen Law Office is a highly-experienced international tax law firm with respect to both of these subjects.

Our founder is an international tax attorney who possesses deep knowledge and understanding of US international tax law and its application in the context of an IRS audit and offshore voluntary disclosures. In fact, Mr. Eugene Sherayzen has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws through an offshore voluntary disclosure. Moreover, he has handled a great variety of IRS audits, including audits of undisclosed offshore assets.

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

Amending Tax Returns during An IRS Audit | IRS Audit Lawyer & Attorney

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One of the most interesting questions that arise during an IRS audit is whether a taxpayer (or his tax attorney) should amend his tax returns during an IRS audit. Amending tax returns during an IRS audit may offer great benefits as long as it is done properly, but this is not a strategy available in every case. In this article, I would like to discuss the benefits and dangers of amending tax returns during an IRS audit.

Potential Benefits of Amending Tax Returns During an IRS Audit

The main job of a tax attorney during an IRS audit is to protect his client as well as make it easy and convenient for the IRS agent to make a decision that will favor his client. One of the ways to accomplish this is to do the necessary audit groundwork for the IRS agent by amending all tax returns subject to audit before your initial meeting with the IRS agent.

In such cases, amending tax returns is likely to bring the taxpayer various benefits. I will concentrate here on the three main benefits. First, amending tax returns shows that the taxpayer is willing to cooperate with the IRS far and beyond his prescribed obligations.

Second, by amending tax returns and providing supporting documentation, the tax attorney is likely to “buy” a lot of goodwill from the agent, who will appreciate that the attorney is trying to reduce his workload and make all information easily accessible. In some situations, such extensive cooperation may convince the agent not to expand the audit beyond the already audited years.

Finally, depending on the situation, it may show a rift between past noncompliance and present compliance for reasonable cause purposes. This is especially relevant in situations where the original tax preparer can be held accountable for the taxpayer’s past noncompliance.

Potential Drawbacks of Amending Tax Returns During an IRS Audit

There are, however, various risks associated with this strategy. Again, I will concentrate on the three main drawbacks of the strategy. First, the amended tax returns have to be prepared correctly. If the amended returns are incorrect, then the taxpayer would be getting himself into even bigger troubles.

Second, in some situations, a taxpayer may not benefit from prolonging the case, especially where there are Statute of Limitations issues concerning unaudited years. By prematurely exposing the taxpayer’s mistakes on the original return, the taxpayer may give the IRS additional time to open up another year for audit. It is questionable whether this concern outweighs the benefits of amending tax returns; one really should look at the totality of circumstances of the specific case in question and make the decision based on this analysis.

Third, by shifting the workload from the IRS agent to the taxpayer’s tax attorney, the taxpayer is likely to incur substantially higher legal fees. Therefore, a cost-benefit analysis must be done by the attorney to make sure that the proposed strategy of amending tax returns is cost-effective and does not result in unduly high legal fees.

Procedural Concerns: Do NOT File Amended Tax Returns; Send Them to the IRS Agent

One of the biggest procedural mistakes with respect to the strategy of amending tax returns that I see in my practice is incorrect filing of amended tax returns. By “incorrect filing”, I mean here the filing of amended tax returns directly with the IRS bypassing the IRS agent in charge of the audit.

This is a big mistake, because it goes against the proper procedure of having all adjustments to the audited original returns done by the IRS agent in charge of the case. Moreover, the IRS agent will feel ignored and to some degree betrayed by the taxpayer, and the taxpayer will likely lose all goodwill that he has accumulated with the agent up to that point.

The proper procedure for amending tax returns during an IRS audit is to prepare the amended tax returns and send them to the IRS agent in charge of the audit with supporting documentation.

Contact Sherayzen Law Office for Amending Tax Returns During an IRS Audit

Amending tax returns may not a be a strategy that is available in all cases. If done properly, in many cases, it will offer great benefits to a taxpayer, while it may result in augmenting the already existing problems in other cases. This type of a decision should not be made by the taxpayer, but by an experienced IRS audit lawyer.

Contact the professional IRS audit team of Sherayzen Law Office. Headed by our highly-experienced tax attorney, Mr. Eugene Sherayzen, Sherayzen Law Office has helped US taxpayers around the world to deal with various types of IRS audits, including audits of offshore voluntary disclosures and high net-worth audits.

Contact Us Today to Schedule Your Confidential Consultation!

IRS Announces 2018 Pension Plan Limitations | Tax Lawyer Update

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On October 27, 2017, the IRS announced the cost of living adjustments affecting 2018 Pension Plan limitations.

2018 Pension Plan Limitations: Summary of Main Changes

1. The first main change in 2018 Pension Plan Limitations affects all employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. In 2018, employees can contribute up to $18,500 into these plans. This amount represents a $500 increase from the 2017 contribution limitation of $18,000.

2. The second major change in 2018 Pension Plan Limitations is the modification of income ranges concerning eligibility to make deductible contributions to traditional IRAs. Here are the new 2018 phase-out ranges:

Single Taxpayers (covered by a workplace retirement plan): $63,000 to $73,000 (up from the 2017 range of $62,000 to $72,000);
Married Filing Jointly (covered by a workplace retirement plan): $101,000 to $121,000 (up from the 2017 range of $99,000 to $119,000).
Taxpayer not covered by a workplace retirement plan, but who is married to someone who is covered: $189,000 and $199,000 (up from the 2017 range of $186,000 and $196,000).

No changes for a married individual filing a separate return, but who is covered by a workplace retirement plan. The phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

3. The third change in 2018 Pension Plan Limitations affects the modification of income ranges concerning eligibility to make contributions to Roth IRA. Here are the new 2018 phase-out ranges:

Single and Head of Household Taxpayers: $120,000 to $135,000 (up from the 2017 range of $118,000 to $133,000);
Married Couples Filing Jointly: $189,000 to $199,000 (up from the 2017 range of $186,000 to $196,000).

No change in the phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA. Such contributions are not subject to an annual cost-of-living adjustment and remain at the range of $0 to $10,000.

4. The fourth change in 2018 Pension Plan Limitations affects the modification of income range concerning eligibility for the Retirement Savings Contributions Credit. In 2018, the income limits will be:

Married Couple Filing Jointly: $63,000 (up from $62,000 in 2017);
Heads of Household: $47,250 (up from $46,500 in 2017);
Singles and Married Individuals Filing Separately: $31,500 (up from $31,000 in 2017).

2018 Pension Plan Limitations: Summary of Main Unchanged Limitations from 2017

1. IRA Annual Contribution Limit: remains unchanged at $5,500.

2. IRA additional catch-up contribution for individuals aged 50 and over: remains at $1,004.40 (not subject to annual cost-of-living adjustment).

3. 401(k), 403(b) and most 457 plans and the federal government’s Thrift Savings Plan catch up contribution limit for employees aged 50 and over: remains unchanged at $6,000.