Amidst the recent furor surrounding the IRS’ admission of heightened targeting of the Tea Party comes another accusation against the agency, this time from the nonprofit Billy Graham Evangelistic Association (BGEA). Its President, Franklin Graham said this today in his letter to President Barak Obama. In addition, Graham also believes the IRS action threatens to involve of nonprofit organizations.

An excerpt of the letter said, “Mr. President, the IRS has already publicly acknowledged it operated in a less than neutral and non-partisan way. We also now know that the target of their improper actions was much wider than political or Tea Party organizations. Will you take some immediate action to reassure Americans we are not in a new chapter of American history – repressive government rule?”

Graham’s letter claimed that the IRS also targeted the BGEA’s related international humanitarian organization, Samaritan’s Purse. According to Graham, the IRS notified both organizations in September last year that it was conducting a “review” of their activities for tax year 2010. Graham believes the review was part of an Obama administration effort of “targeting and attempting to intimidate us.”

Graham wrote in his letter, “While these audits not only wasted taxpayer money, they wasted money contributed by donors for ministry purposes as we had to spend precious resources servicing the IRS agents in our offices. I believe that someone in the administration was targeting and attempting to intimidate us. This is morally wrong and unethical – indeed some would call it ‘un-American.” In view of the IRS admission that it targeted Tea Party groups for added investigation, Graham said, “I do not believe that the IRS audit of our two organizations last year is a coincidence – or justifiable.”

The letter by Graham accuses the IRS of investigating the BGEA and Samaritan’s Purse because The Billy Graham Evangelistic Association urged voters to back “candidates who base their decisions on biblical principles and support the nation of Israel” during last year’s presidential race. The result of the audit was that the Graham organizations could keep their federal income tax exemptions but they were only informed of this after the November election last year.

The IRS review involving an IRS agent visiting the two agencies last October, came after the Billy Graham Evangelistic Association published newspaper ads in North Carolina backing a state constitutional amendment banning same-sex marriage. The amendment was passed in May.

If you have an offshore account containing money you have not declared to the IRS as income, the IRS is giving you a break in the form of 2 programs. The first is the Offshore Voluntary Disclosure Program (OVDP). The second is a less-known guideline called FAQ 17.

The OVDP is well-known by now. The IRS has conducted a few OVDPs that give taxpayers with offshore taxable assets the opportunity to step forward and declare their income and avoid criminal prosecution. So this program is for those who have neglected declaring any of their offshore assets over the years. But not everyone with offshore taxable income is supposed to participate in the OVDP. You should evaluate whether you would owe any more US tax than you already paid. If not, the OVDP may not be for you. Why might you not owe more?

Suppose you failed to report earnings on a foreign account but also paid tax there and didn’t claim a foreign tax credit. This is how you may not owe any more taxes than what you have already paid. So by making both corrections on an amended tax return, you may be current in your tax obligations. In other words, your tax returns are wrong, but even if they were right you wouldn’t owe additional taxes.

Now if you have been reporting your income from offshore sources, you do not have to participate in the OVDP but you may still need to comply with the guidelines of FAQ 17. This is because FAQ 17 concerns another requirement besides submission of tax returns namely submission of Report of Foreign Bank and Financial Accounts (FBARs).

If you failed to file FBARs but reported all your income from foreign accounts, then you would need to take advantage of the second break from the IRS namely FAQ 17. According to the guidelines in FAQ 17, the IRS stipulates that if you just file 6 FBARs with a letter explaining that you didn’t know about FBARs and don’t owe any taxes, you won’t be penalized.

In any case it is advisable to consult a qualified and experienced tax attorney to draft your letter to the IRS explaining your ignorance of the FBAR requirement and any other document necessary. Call us if you need legal advice in this or any other matter. You can reach us at (813) 229 7100 for a free consultation.

If you are one of the many taxpayers who cannot afford to pay your taxes in full, one option you can take is to make an offer in compromise to the IRS. An offer in compromise allows you to pay less than the sum total of your tax debts provided you meet certain conditions. Why would the IRS allow you to discharge your tax obligations by paying LESS than what you owe? Simple, it’s better for them to collect partial payment than no payment at all. But you can’t use the offer in compromise as a bargaining tool to absolve your tax responsibilities. It is a provision in the tax code to help those who genuinely cannot afford to pay up their taxes in full.

In essence, there are 3 types of offers in compromise. Each of them depends on the circumstances you are in. They are:

1. When you cannot pay up your taxes in full before the deadline

For example, if you owe $30,000 in taxes to be paid in 1 month, but your income is only $35,000 a year, then you should apply for an Offer in Compromise. You might be able to get the IRS to allow you to pay a portion of your total taxes and forgive you of the rest.

2. When the tax amount is wrongly calculated or not entirely your liability

This may happen due to a calculation error or mix-up in identity. Under such circumstances, the IRS will allow you to pay only what is your rightful portion of the taxes.

3. When you cannot afford your taxes due to financial problems

If financial hardship prevents you from settling your tax dues, you can make an offer in compromise. But you have to prove that paying your debt would result in your inability to buy basic essentials like food, clothing, medicine and accommodation. Under these circumstances, the IRS may allow you to pay less than what you owe. But not all types of needs would qualify. The IRS will approve only very basic economic needs. Anything other than that would not get you an offer in compromise. But if you reside in Florida you can include the cost of caring for elderly family members as part of your basic needs. That is one of the areas where the Florida tax law differs from most other states.

Another thing to bear in mind is the amount to offer. Obviously the IRS would not approve your offer if it is too low. Generally, the minimum amount the IRS would consider is a combination of the value of your assets and the amount of money the IRS could collect from your future earnings. For example, if the total value of your assets is $30,000 and your future income available to the IRS is $12,500, then the minimum offer in compromise the IRS would accept from you would be $42,500.

In the face of what the IRS calls a “substantial amount” of information on offshore accounts by individuals, companies and trusts, the agency has opened cases and begun investigation on these accounts. In fact, other countries namely the United Kingdom and Australia are collaborating with the US to analyze the data for potential tax-law violations. The countries disclosed their work today and said the data show how residents of countries around the world use offshore accounts in Singapore, the British Virgin Islands, the Cook Islands and the Cayman Islands to deposit their taxable assets and evade paying taxes.

Michael Danilack, a Deputy Commissioner for international issues at the IRS said in a telephone interview that, “(The data is) enough for us to move on in several cases at least. When we see information like that, we usually will pursue what we can on both the owner as well as any advisers that may be involved.” The cooperation of the three countries is also an announcement to tax agencies around the world that the US, UK and Australia have information they could use to detect tax evasion. So far, the Canadian government has asked for the information.

In a related development, banking giant HSBC has said it may face "significant" penalties from the US authorities with regard to an ongoing probe into suspected tax evasion by their US clients of its Indian branch, among other cases. This comes as increasing evidence rises to indicate American residents of Indian origin use of their accounts with HSBC India for possible tax evasion.

HSBC said in a regulatory filing last night that it is cooperating with the US Department of Justice and the Internal Revenue System (IRS) in their investigations. The IRS has issued a 'John Doe' summons in April 2011, directing HSBC to produce records with respect to US-based clients of one of their HSBC companies in India. A 'John Doe' summons is one issued by the Internal Revenue Service to a third party to provide information on an unnamed, unknown taxpayer with potential tax liability. The unnamed person is addressed as 'Jon Doe' in such summons.

The IRS’ most recent investigations was initiated by the case of Vaibhav Dahake who was charged by the IRS "with conspiracy to defraud the US by using undeclared accounts in the British Virgin Islands and at HSBC India to evade his income taxes".

IRS Form 433 A

If you cannot afford to pay all the taxes you owe, you need to do something about it because the IRS has many ways to collect their dues such as liens, levies and seizures. But if you genuinely cannot pay your taxes due to financial reasons beyond your control, you can make an appeal to the IRS for an offer in compromise. An offer in compromise, if approved, will allow you to clear your tax liability by paying less than the full amount that you owe. The process entails filling up IRS Form 433 A and other supporting documents. Form 433 A is also known as the “Collection Information Statement for Wage Earners and Self-Employed Individuals,” and is used by the IRS to review your budget and determine your ability to pay your taxes.

You will have to prove to the IRS that paying your taxes in full will cause you and your family undue hardship and financial burden. So in your Form 433 A, you should provide detailed information about total monthly income and expenses in Section 9, lines 24 through 45. The monthly budget, along with the Form 433-A Worksheet and ample documentation will go a long way in getting your offer in compromise approved.

When they receive your 433 A, the IRS will review the information provided on it to calculate the amount of offer in compromise they are willing to accept based on your situation. This is the highest amount you can pay without creating financial hardship for you and your family.

Form 433-A includes information on:

• Personal and/or business bank accounts (even if the balance is zero)
• Available credit from your credit card(s)
• Any properties you own or lease, the amounts of monthly payments, and amounts owed
• Personal vehicles like cars, trucks, RVs, boats etc that you own or lease
• Investments
• Business assets like machinery, equipment, or other supplies not covered in the personal assets sections
• Personal and business income
• Personal assets like valuable family heirlooms, jewelry, artwork, coin collections, etc
• Living expenses, including food, clothing, housekeeping supplies, and more

Here are some of the expenses the IRS allows in your offer in compromise:

• Food, clothing, housekeeping supplies, and personal care products
• Rent, mortgage payment, property taxes, renter's insurance, homeowner's insurance, HOA dues, electric and gas utilities, telephone utilities, water, fuel oil, and trash collection
• Car loan payments, lease payments, auto insurance, registration and license fees, maintenance, repair, gasoline, parking, tolls, or bus fare
• Health insurance premiums, co-payments for doctors and medicines, hospitalization, and other medical and health care expenses
• Taxes for federal income tax withholding, Social Security and Medicare payroll taxes, estimated tax payments, state income tax withholding, local income tax withholding
• Child support, alimony, and other court-ordered payments
• Life insurance premiums
• Other secured debt, such as loans secured by a 401k or certificate of deposit and
• Other expenses necessary for the health, welfare, and sustenance of the taxpayer