Noted Miami fraud investigator Lewis B. Freeman has sued the Internal Revenue Service to challenge a $4.8 million civil penalty he says the agency wrongly assessed against him. The IRS imposed the penalty for Freeman's alleged involvement in promoting an abusive tax shelter involving pre-tax employee parking benefits.
The federal-court lawsuit by the veteran forensic accountant and lawyer asserts he had "no role" in any illegal scheme. In an interview with Forbes, Freeman said he sued because his administrative appeal within the IRS could not be completed before the quick deadline specified by federal law for bringing such lawsuits.
"This is like an episode from 'The Twilight Zone,'" he said. Freeman's firm, Lewis B. Freeman & Partners Inc., is frequently hired in fraud cases and often serves as a court-appointed receiver or trustee. The slogan on its Web site is "We make the numbers clear." Quick with a quip, Freeman himself is regularly quoted by journalists as an expert on fraud and white-collar crime. He readily agreed that the mere existence of the litigation was embarrassing to him.
The big question is whether it becomes a lot more than that. The IRS, which as a matter of policy declines media comment on litigation involving taxpayers, has not yet had time to answer Freeman's complaint in court.
As the story was told by Freeman's complaint in U.S. District Court, Miami, and by his lawyers, five years ago Freeman was one of four shareholders in an unnamed corporation that provided counseling to companies on employee benefits. One topic concerned so-called 132(f) plans, named after the tax code section that allows tax breaks for commuter mass transit and parking costs. That section permits employees to divert a portion of their pay for commuter-cost reimbursement; the employee gets the money tax-free and the employer does not have to pay the Social Security and Medicare taxes it would owe on regular salary.
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Wednesday, October 28, 2009
Thursday, October 15, 2009
IRS Urged To Create Federal Registry For Tax Preparers
Martin Vaughan Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- State tax officials urged the Internal Revenue Service Wednesday to create a national, public registry of tax preparers in an upcoming IRS proposal to more strictly regulate the profession.
IRS officials questioned the state regulators as to which types of preparers the registry should cover and what kinds of penalties might apply for violations of ethical or competency standards.
The Wednesday public meeting was to help the IRS gather input as it prepares to make recommendations to the Treasury Secretary by the end of the year on new standards for tax return preparers.
One question the agency faces regarding the standards is whether, in addition to registering with the IRS, tax preparers should be required to pass a test or meet continuing education requirements.
Karen Hawkins, director of the IRS Office of Professional Responsibility, which oversees tax preparers, said the answer might be yes, based on findings by government investigators of widespread incompetence and abuse.
"The data seem to encourage some kind of testing regime to ensure competency," she said. She was referring to a 2008 undercover investigation of 28 preparers by the Treasury Inspector General for Tax Administration, or TIGTA, which found substantial errors on a majority of returns prepared for TIGTA agents.
Hawkins also queried the state officials about what recourse states had to revoke licenses of tax preparers when they were found to have violated standards, even if no criminal conduct was suspected.
IRS Commissioner Doug Shulman probed state officials as to whether lawyers and certified public accountants should also be required to register, and to meet any other requirements imposed.
Jamie Woodward, acting commissioner of the New York Department of Taxation and Finance, said New York lawmakers exempted CPAs and lawyers from a year-old New York program to oversee return preparers.
Currently, taxpayers may be represented before the IRS by CPAs, lawyers, or enrolled agents - tax return preparers who have passed an exam and are licensed by the IRS. But there are no federal requirements governing who may prepare a tax return for someone else, leading to a huge industry of independent tax preparers who are not licensed by the IRS and may have no tax training.
Source
IRS officials questioned the state regulators as to which types of preparers the registry should cover and what kinds of penalties might apply for violations of ethical or competency standards.
The Wednesday public meeting was to help the IRS gather input as it prepares to make recommendations to the Treasury Secretary by the end of the year on new standards for tax return preparers.
One question the agency faces regarding the standards is whether, in addition to registering with the IRS, tax preparers should be required to pass a test or meet continuing education requirements.
Karen Hawkins, director of the IRS Office of Professional Responsibility, which oversees tax preparers, said the answer might be yes, based on findings by government investigators of widespread incompetence and abuse.
"The data seem to encourage some kind of testing regime to ensure competency," she said. She was referring to a 2008 undercover investigation of 28 preparers by the Treasury Inspector General for Tax Administration, or TIGTA, which found substantial errors on a majority of returns prepared for TIGTA agents.
Hawkins also queried the state officials about what recourse states had to revoke licenses of tax preparers when they were found to have violated standards, even if no criminal conduct was suspected.
IRS Commissioner Doug Shulman probed state officials as to whether lawyers and certified public accountants should also be required to register, and to meet any other requirements imposed.
Jamie Woodward, acting commissioner of the New York Department of Taxation and Finance, said New York lawmakers exempted CPAs and lawyers from a year-old New York program to oversee return preparers.
Currently, taxpayers may be represented before the IRS by CPAs, lawyers, or enrolled agents - tax return preparers who have passed an exam and are licensed by the IRS. But there are no federal requirements governing who may prepare a tax return for someone else, leading to a huge industry of independent tax preparers who are not licensed by the IRS and may have no tax training.
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