Kamyar Mehdiyoun IRS and Tax Attorney

Tax attorney, Kamyar Mehdiyoun, has more than fifteen years of experience in the practice of law.

Tax & IRS Attorney,Kamyar Mehdiyoun
Firm Profile

As a solo practitioner, I understand the importance of establishing personal relationship with my clients. Creating and nurturing such personal relationships require a tax attorney’s undivided attention and an intimate understanding of the individual client’s unique needs.

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(240) 403-7934

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Practice Areas

Tax attorney, Kamyar Mehdiyoun, practices before the IRS in all 50 states including Maryland (MD), Washington, D.C. (DC) and Virginia (VA). His practice includes a broad range of tax controversy matters including those listed below. He regularly represents individual taxpayers and small businesses with a variety of IRS, state and local tax problems. To learn more about his tax problem resolution services, click on the links below or contact Mr. Mehdiyoun’s tax law firm to request a free consultation.

Abatement of Interest and Penalties

In order to encourage taxpayers to file their income tax returns or business tax returns and pay their taxes on time, the Internal Revenue Code (Tax Code) provides for penalties. A tax penalty is usually assessed for failure to file tax returns on time or altogether (unfiled tax returns). Similarly, a tax penalty is imposed for failure to timely pay taxes. These are called “failure to file penalty” or “failure to pay penalty”.

The IRS also penalizes taxpayers for inaccurately reporting their income (sometimes called IRS penalties for underpayment or understatement of income tax) and for committing tax fraud. The amount of the IRS tax penalty depends on the reason for, and the amount of, tax liability or tax underpayment.

IRS penalties for tax fraud are higher than those for negligence in paying or filing for taxes. For example, a tax audit may uncover evidence of delinquent tax returns, unreported or underreporting of income and failure to collect or remit payroll and employment taxes. These may qualify as criminal tax offenses and could lead to criminal investigation and criminal prosecution of the offender for tax evasion.

Similar to interest on late taxes, civil penalties for unpaid tax obligations accrue the longer the tax debts go unpaid. In some cases, the amount of the combined penalties and interest for delinquent tax liabilities exceeds the unpaid tax itself.

In order to reduce or eliminate tax underpayment penalties, the IRS or a state taxing authority should be convinced that the assessment of the tax or of the penalty was unfounded. The taxpayer must present the government with specific reasons as to why a particular income tax or business tax liability or penalty should be decreased, removed or abated altogether. The best results are achieved when the taxpayer points to a specific provision in the Tax Code or to similar facts in case law where a court found that assessed taxes or penalties should be reduced or eliminated.

The IRS frequently resorts to tax liens and tax levies for collection of tax debts or back taxes which frequently include interest and penalty. If you have recently received a tax bill including penalties and interest, or a notice of intent to lien or levy, contact Kamyar Mehdiyoun, tax debt relief lawyer in Rockville, Maryland. We are a tax law firm specializing in tax dispute matters. Abatement of tax, penalty and interest is best achieved by early intervention of experienced tax counsel. We have been successful in reducing or eliminating hundreds of thousands of dollars in tax liabilities, penalties and interest.

Embassy and Consulate Tax Issues

The Internal Revenue Code (Tax Code) provides for a special tax regime for employees of foreign governments and of international organizations. Under certain circumstances, such individuals are exempt from U.S. federal income taxes. Employees of foreign governments need not be diplomats or enjoy “diplomatic status” in order to qualify for tax exemption. Exemption from U.S. taxes, however, only applies to official compensation of foreign government employees. Therefore, the official salary of an employee of a foreign embassy in Washington, D.C. or of a consulate elsewhere may qualify for tax exemption.

The immigration status of an employee of a foreign government may affect his or her tax exemption status. For example, if a nonresident alien employee of a foreign government has adjusted his or her immigration status from an A-1, A-2 or A-3 diplomatic visa holder and has become a permanent resident by receiving a “green card”, he or she may no longer be eligible for tax exemption. A holder of a “green card”, however, may still enjoy exemption from U.S. taxes under certain circumstances.

In addition to the Tax Code, bilateral agreements, tax treaties or international conventions may also provide exemption from U.S. taxes to employees of foreign governments. As a general rule, members of the diplomatic staff, administrative staff, technical staff and service staff of most foreign missions to the U.S. are exempt from federal and state taxes. An embassy or consulate worker does not need to be a diplomat or enjoy “diplomatic status” in order to be immune from U.S. taxes under such bilateral or international agreements.

If you are employed by a foreign embassy in Washington, D.C. or a consulate elsewhere, and the IRS has sent you notices regarding any tax debt or tax delinquency, contact Kamyar Mehdiyoun, tax and IRS attorney in Rockville, Maryland. We have extensive experience representing embassy and consulate employees and foreign government workers before the IRS and state taxing agencies.

Report of Foreign Bank and Financial Accounts (FBAR)

Many U.S. taxpayers are not aware that their ownership of bank accounts or certain other financial accounts in a foreign country subjects them to strict IRS reporting requirements. Generally, U.S. citizens, residents (Green Card holders) and also other individuals and entities defined under the U.S. tax code as “United State Persons” should report to the IRS on a yearly basis their financial interest in, or signature authority over, a financial account that is held with a financial institution such as a bank located in a foreign country if, for any tax year, the total value of all foreign accounts exceeded $10,000. “Foreign financial accounts” are defined as bank accounts, securities or brokerage accounts, mutual funds, debit and prepaid debit cards, and some types of pension accounts and retirement plans. The reporting requirements also apply if the U.S. taxpayer has an interest in certain types of partnerships. Fulfilling the IRS reporting requirements is accomplished by filing Form TD F 90- 22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”).

Recently, the IRS has intensified its FBAR enforcement efforts which has resulted in a record number of civil and criminal convictions for failure to comply with the IRS FBAR rules and regulations. Civil and criminal penalties for such violations can be severe. Willful violation of FBAR rules can subject the offender to the greater of $100,000 or 50% of the total balance of the foreign account per violation. Inadvertent or negligent violations may result in a $10,000 penalty for each violation. Criminal penalties may subject the offender to five years in jail and a fine of up to $250,000. Violating the IRS FBAR rules may also result in a prison term of up to ten years and criminal penalties of up to $500,000.

In order to provide an incentive to delinquent taxpayers who have advertently or negligently failed to comply with the FBAR rules, the IRS has announced voluntary disclosure programs. The most recent such program which went into effect in 2012 is by no means an “amnesty” program because it involves paying hefty penalties in order to come into compliance. However, certain criminal and civil penalties are waived.

If you are interested in learning about the IRS FBAR rules and regulations or about the Offshore Voluntary Disclosure Program (OVDP), contact Kamyar Mehdiyoun, tax and IRS lawyer in Rockville, Maryland. Our law firm has successfully guided many U.S. taxpayers through the complicated FBAR rules and has achieved favorable outcomes for them through confidential and effective representation before the IRS.

Foreign Government Employees Tax Issues

The Internal Revenue Code (Tax Code) provides for a special tax regime for employees of foreign governments and of international organizations. Under certain circumstances, such individuals are exempt from U.S. federal income taxes. Employees of foreign governments need not be diplomats or enjoy “diplomatic status” in order to qualify for tax exemption. Exemption from U.S. taxes, however, only applies to official compensation of foreign government employees. Therefore, the official salary of an employee of a foreign embassy in Washington, D.C. or of a consulate elsewhere may qualify for tax exemption.

The immigration status of an employee of a foreign government may affect his or her tax exemption status. For example, if a nonresident alien employee of a foreign government has adjusted his or her immigration status from an A-1, A-2 or A-3 diplomatic visa holder and has become a permanent resident by receiving a “green card”, he or she may no longer be eligible for tax exemption. A holder of a “green card”, however, may still enjoy exemption from U.S. taxes under certain circumstances.

In addition to the Tax Code, bilateral agreements, tax treaties or international conventions may also provide exemption from U.S. taxes to employees of foreign governments. As a general rule, members of the diplomatic staff, administrative staff, technical staff and service staff of most foreign missions to the U.S. are exempt from federal and state taxes. An embassy or consulate worker does not need to be a diplomat or enjoy “diplomatic status” in order to be immune from U.S. taxes under such bilateral or international agreements.

If you are employed by a foreign embassy in Washington, D.C. or a consulate elsewhere, and the IRS has sent you notices regarding any tax debt or tax delinquency, contact Kamyar Mehdiyoun, tax and IRS lawyer in Rockville, Maryland. We have extensive experience representing employees of foreign governments before the IRS and state taxing agencies.

Innocent Spouse Relief

In order to take advantage of tax savings, married couples usually file joint tax returns. Occasionally, the joint income tax return is prepared by either the husband or the wife and the other spouse just signs the tax return. Sometimes, the spouse who prepared the joint return, intentionally hides important financial facts from the other spouse and as a result the joint tax return understates the couple’s income or is otherwise inaccurate. Because each spouse signs the joint tax return, husband and wife are both responsible for any taxes owed on the joint return. Occasionally, years later and usually when the couple has already divorced, the spouse who was not involved in the preparation of the joint tax return receives a tax bill and learns from the IRS that he or she owes taxes relating to the joint tax return. All the usual tax debt collection tools at the disposal of the IRS including tax lien, tax levy or seizure and garnishment of wage, salary or bank account may be used by the IRS to collect on this tax debt.

The Internal Revenue Code (Tax Code) contains a provision known as the “innocent spouse” rule which provides relief to the spouse who was not involved in the preparation of the joint return and who did not know about the tax irregularity or any unreported income. This provision in the Tax Code is sometimes referred to as the “6015(b) relief” or “innocent spouse protection rule”. Proving to the IRS that you qualify for the innocent spouse relief is no easy matter. The Tax Code provides for specific conditions that must be satisfied before the IRS can provide liability relief under the “innocent spouse” rule.

If you have recently received an IRS notice of tax delinquency and believe that you may qualify as an “innocent spouse”, contact Kamyar Mehdiyoun, tax dispute attorney in Rockville, Maryland. We are a tax law firm specializing in tax controversy. We will negotiate with the IRS on your behalf and will help you reduce or eliminate your tax liability.

IRS Installment Agreements

Entering into an Installment Plan Agreement with the IRS or with a state taxing authority is one way to pay off your back taxes. Before entering into an installment agreement, however, the pros and cons of such an agreement should be carefully weighed. For example, while the installment agreement is in effect, the interest and penalties on your tax debts continue to accrue. In addition, an installment agreement would not prevent the IRS from placing a tax lien on your property in order to collect on the tax liability. The IRS, however, is obligated to send a Notice of Intent to Lien or Levy before placing a federal tax lien on your property and beginning the process of tax levy or tax seizure including a bank account levy.

Eligibility for an installment plan agreement depends on how much is owed in taxes and on the taxpayer’s financial resources. The IRS will also consider the taxpayer’s history of compliance with tax filing and tax payment obligations. Thus, if the taxpayer has a history of delinquent tax debts or unfiled tax returns, or if the terms of a previous installment agreement were violated, it is more difficult to negotiate a new and favorable installment agreement.

The successful negotiation of a favorable installment agreement with the IRS or with a state taxing authority depends on expert knowledge of the procedures and regulations of these government agencies. If you have recently received an IRS notice of tax delinquency or a tax bill demanding full payment of your tax debt, contact Kamyar Mehdiyoun, IRS tax lawyer in Rockville, Maryland. We are a tax law firm specializing in tax dispute matters and will help you negotiate a favorable installment agreement that allows you to pay the lowest periodic payments.

Offers in Compromise

Occasionally, the IRS concludes that a tax debt cannot be collected in full or there is a dispute as to what is owed. In order to resolve these tax collection and federal tax liability issues, the IRS will consider entering into an offer in compromise agreement with the taxpayer. An offer in compromise (OIC) is an alternative to concluding that a tax debt is not collectible or to a protracted installment plan agreement. Many cases handled by the IRS Appeals Division may be resolved through the offer in compromise process. If the IRS accepts the taxpayer’s offer in compromise, the tax debt would be reduced and the IRS would accept the partial payment as payment in full for the tax obligation or the IRS tax debt.

A successful offer in compromise requires extensive preparation and analysis of the IRS regulations and the specific circumstances of the taxpayer. A taxpayer who is considering entering into an offer in compromise must think about the pros and cons of making an offer, the eligibility requirements, the dollar amount of the offer, the statute of limitations on tax debt assessment and tax debt collection and how to best negotiate a successful compromise with the IRS. Even if he or she qualifies, entering into an offer in compromise is not always the taxpayer’s best option.

If you have recently received an IRS notice of tax delinquency or a tax bill and are considering settling your tax debts, contact Kamyar Mehdiyoun, tax dispute attorney in Rockville, Maryland. We are a taxation law firm specializing in tax dispute matters. We will help you find the best option for reducing your tax obligations.

Payroll and Employment Tax Issues

Entrepreneurs are an optimistic lot. Unfortunately, the present economic downturn has proven that such optimism is not always well-founded. Payroll tax problems usually start when cash-strapped small businesses delay payment of their payroll taxes and instead use the funds collected from their employees for general business purposes. A typical owner of such a small business hopes that as soon as the business improves, he or she will remit the payroll or employment taxes to the IRS. However, similar to other IRS tax obligations, the obligation to timely pay payroll taxes does not depend on business conditions. A small business owner or even a low-level employee of the business may be found to be personally responsible for withheld but unpaid payroll taxes. This is called the Trust Fund Recovery Penalty (TFRP) and is different from other tax penalties (such as the penalty for underpayment of personal income taxes) in that an individual may be held responsible for the unpaid payroll taxes of a business. The amount of the penalty equals the amount of unpaid or underpaid withholding tax liability related to payroll taxes. Additional tax penalties relating, for example, to failure to file (unfiled) payroll tax returns (Form 941) may be applied as well. Incorporation of the business or organizing the business as a limited liability company (LLC) would not prevent the IRS from targeting individuals within the business and holding them personally responsible for back taxes of the business and any 941 liability. The IRS assessment of the Trust Fund Recovery Penalty (TFRP) not only jeopardizes business prospects, but also threatens the financial survival of the individual who has been found by the IRS to be responsible for unpaid payroll taxes which include income taxes, Social Security taxes and Medicare taxes.

Small business owners should also ascertain that the IRS applies their payroll tax payments and deposits to the tax periods intended by such owners. The misapplication of tax deposits to tax periods different from those intended by the taxpayer frequently results in assessment of additional tax penalties and inflated tax bills.

If you have been contacted by the IRS as part of their investigation to determine the identity of the individuals to be held personally responsible for the Trust Fund Recovery Penalty, or if you have received a tax bill, a notice of intent to lien or levy or a notice of delinquency related to failure to pay trust fund taxes, contact Kamyar Mehdiyoun, tax dispute attorney in Rockville, Maryland. We are a tax law firm specializing in tax controversy. The IRS applies strict time limits in order to collect delinquent payroll tax obligations and a delay may result in aggressive IRS collection activities such as imposing tax liens, tax levies or property seizures including garnishment and seizure of personal or business bank accounts.

Real Estate or Real Property Tax Issues

Real estate or real property tax is one of the burdens of homeownership. Many home owners in Maryland, Washington, D.C. and Virginia justifiably feel that the government’s tax assessment overestimates the value of their real property and seek real property tax relief. One of the main reasons for the recent economic downturn was the sharp decline in house and property values. In many cases, real property tax assessments do not correctly reflect this abrupt decline in house or property values.

Our tax law firm helps property owners in the process of appealing their real estate tax bills. Although, the process of appealing real property taxes varies depending on the jurisdiction, home owners or real estate owners may appeal their real property tax bills on different occasions. Usually, property owners begin appealing their tax bills when they receive an assessment notice (called Notice of Assessment in Maryland) from the state government. But, for example, in Maryland they can also file an appeal when they purchase the property or by filing a petition for review. Strict time limits apply for filing such appeals. If the taxpayer fails to convince Maryland State Department of Taxation to lower the amount of the real property tax, the property owner may appeal to the Maryland Tax Court. Decisions of the Maryland Tax Court may be further appealed to higher courts.

Failure to pay real property taxes on a timely basis and the resulting real property tax delinquency may lead to imposition of tax liens, tax levies and tax seizures by state taxing authorities. Real property tax lien and tax levy disputes related to delinquent property tax obligations may be protracted and costly. If you have recently received an assessment notice or a notice of levy related to your real property taxes and you are seeking help in lowering your real estate taxes by filing an appeal, contact Kamyar Mehdiyoun, tax debt resolution attorney in Rockville, Maryland. We are a tax law firm specializing in IRS and tax problem resolution and will help you settle your current or back tax obligations.

Release of Liens, Levies and Property Seizures

State & IRS liens, levies and seizures are some of the strongest collection tools at the disposal of the government. For example, if you owe back taxes to the IRS (due to unreported income, accrued interest on unpaid taxes or income tax underpayment penalty), a tax lien automatically attaches to your personal property. This statutory tax lien is also called a “secret lien” since only the taxpayer and the IRS are aware of its existence. The IRS then sends you a tax bill or a notice of tax delinquency, which if not paid within 30 days allows the IRS to make the lien public by filing a notice in the public records. The filing of the Notice of Federal Tax Lien or Levy would severely damage your credit record and credit score which in turn would result in further financial hardship.

Under Section 6330(a) of the Tax Code, a taxpayer who receives a Notice of Lien or Levy has 30 days to request a Collection Due Process Hearing (CDP Hearing). The IRS informs the taxpayer about the Collection Due Process Hearing by sending the taxpayer a Notice of Right to CDP Hearing. The Collection Due Process Hearing is handled by the IRS Office of Appeals. During the hearing, the IRS Appeals Office will verify the taxpayer’s tax liability and other facts relevant to the impending imposition of the tax lien. At the CDP hearing, the taxpayer or an attorney who represents the taxpayer may raise any relevant issues and argue why the proposed lien or levy is unjustified.

If subsequent to the filing of the Notice of Federal Tax Lien or Levy you don’t request a CDP hearing or if you do, but the hearing officer upholds the proposed lien or levy and the tax goes unpaid, the IRS would remind you again of your tax debt and then will proceed to seize your property by initiating the tax levy process. By law, the IRS has the power to take your personal and real property. Your bank accounts may be seized (also known as bank levy or IRS bank account garnishment) and your wages may be seized or garnished.

If you have recently received a tax notice or tax bills from the IRS or from your state taxing agency, do not ignore them. These letters are only the first steps in the tax collection process, which may result in tax liens, tax levies (including a bank levy) and wage garnishments. We can assist you in responding to the IRS and state taxing authorities and preventing them from pursuing aggressive collection actions. If a lien has already been filed or the IRS is in the process of levying your property, we will work with you to obtain the release and removal of the tax lien or the tax levy. Early intervention by an experienced tax counsel is critical to preventing damage to your credit score and securing a favorable solution to your dispute with the IRS and state taxing agencies. Contact Kamyar Mehdiyoun, tax relief lawyer in Rockville, Maryland. We are a tax law firm specializing in IRS and tax problem resoltion. We will assist you in removing state and IRS tax liens, tax levies and tax seizures and will help secure a favorable resolution for your tax lien or tax levy issues.

Sales and Use Tax

Sales of goods and some services are subject to sales tax in many states. In addition to states, many cities collect sales tax as well. Some states like Maryland exempt specific items from sales tax. For example, sales of food by grocery stores or sales of medicine are exempt from sales tax in Maryland.

The following state agencies administer assessment and collection of sales and use taxes in Washington D.C. (DC), Maryland (MD), Virginia (VA), Massachusetts (MA) and New York (NY):

  • District of Columbia Office of Tax and Revenue (OTR)
  • Maryland State Department of Assessment and Taxation (SDAT)
  • Virginia Department of Taxation
  • Massachusetts Department of Revenue (DOR)
  • New York State Department of Taxation and Finance

 

As a rule, the vendor acts as the state’s agent and collects the required sales tax from the purchaser. Vendors including retail establishments in states such as Maryland are required to obtain a use and sales tax license.

Under most state laws every vendor or retailer who has made sales subject to tax must file a sales and use tax return and report the amount of sales tax collected to the state taxing authorities. Such sellers must also keep complete and accurate records of all taxable sales and the amount of tax collected. Failure to file sales and use tax return may result in imposition of civil or criminal penalties on the nonfiler. Out-of-state vendors need to determine whether they need to file a sales and use tax return. Such a filing is required when the out-of-state vendor has sufficient business dealings, or nexus, in the state where the purchaser is located. Usually a period of limitations applies to sales and use tax collection. For example in Maryland, subject to some exceptions, an action to recover sales and use tax may not be brought after 4 years from the date the tax is due.

Similar to civil and criminal penalties for unreported income or for under-reporting, underpayment or nonpayment of federal taxes, states charge penalty and interest for delinquent sales and use tax obligations or for late payment of such taxes. Many states criminally prosecute sales and use tax offenders if such underpayment or nonpayment of tax was willful.

State governments have strong tools at their disposal to collect back taxes. In the event of existence of sales and use tax liability or delinquency, states may impose tax liens and levies. In general, any unpaid tax (including sales and use tax), or unpaid interest and penalty, constitutes a lien on all property of the taxpayer. For example, a wage lien may be imposed for violation of sales and use tax rules after a notice of levy has been sent to the taxpayer. States may also levy or seize property of the taxpayer for nonpayment or underpayment of sales and use tax. State tax collectors may also file a proceeding in court against the delinquent sales and use taxpayer.

The focus of many tax audits of businesses is the proper collection and reporting of sales taxes and detection of any sales and use tax violation. If you are a small business owner and need help in understanding the application of sales tax rules in your state please contact Kamyar Mehdiyoun, sales tax attorney in Rockville, Maryland. We are a tax law firm specializing in tax debt relief and will assist you in your sales and use tax problem or dispute.

Statute of Limitations

Tax law is a dangerous trap for the unwary. The Internal Revenue Code (Tax Code) and the IRS Regulations provide numerous statute of limitations periods which require the IRS or taxpayers to take certain actions within certain time periods. Ignorance of these statutory or regulatory deadlines frequently leads to missed opportunities which could have saved taxpayers thousands and sometimes millions of dollars.

For example, Sections 6501 and 6502 of the Tax Code set out the statute of limitations periods for assessment and collection of taxes. As a general rule, the IRS has three years to make an assessment from the date the tax return was filed. There are certain exceptions to this general rule. For instance, under Section 6501(c)(1) of the Tax Code, if the tax return was “false or fraudulent”, the statute of limitations runs indefinitely. That is, in the case of false or fraudulent returns, nothing prevents the IRS from assessing taxes many years after the tax year in question. The same rule applies if no tax returns were filed [Section 6501(c)(3)]. Time for assessment can be extended by agreement between the taxpayer and the IRS. Within 60 days after making an assessment, the IRS should send a “notice and demand” to the taxpayer. After making an assessment and subject to certain exceptions, the IRS has 10 years to collect the tax.

Another statute of limitations period relates to taxpayer’s opportunity to demand a Collection Due Process Hearing or CDP Hearing. Under Section 6330(a) of the Tax Code a taxpayer who receives a Notice of Lien or Levy has 30 days to request a Collection Due Process Hearing (CDP Hearing).

Yet another statutory time limit is provided by Section 6213 of the Tax Code which requires the taxpayer to initiate a U.S. Tax Court law suit within 90 days after the Notice of Deficiency was issued to the taxpayer by the IRS.

If you need assistance understanding the particular statute of limitations period applicable to your case, contact Kamyar Mehdiyoun, IRS and tax litigation attorney in Rockville, Maryland. We are a tax law firm specializing in tax controversy and tax litigation. Ignorance of statute of limitations periods provided by the Tax Code means missed opportunities which may result in irreversible losses in tax savings.

Tax Audit Representation

Learning that you have been selected by the IRS or by a state taxing authority for a tax investigation or a tax audit can be understandably stressful. During a tax audit, a well-trained government employee will probe your financial affairs by examining your income tax returns, any corporate, partnership, sales, employment and payroll tax returns and other financial documents for any evidence of tax evasion. Small businesses and self-employed individuals are targeted for tax audits and investigations more frequently than other taxpayers. Once selected for an audit, the likelihood that you will be found to owe taxes at the end of the audit process is very high. Such a finding of delinquent tax obligations can also subject you to income tax underpayment penalty in addition to interest. Having investigated your financial records, an auditor may also find that you were guilty of tax fraud, which in addition to civil fines may subject you to criminal tax investigation and criminal penalties. Therefore, it is critical that you be well-prepared to handle the examination process.

In order to conduct a tax audit, a government agent may visit you at home (at-home audit) or at your business for a field audit. You may also be asked to appear at a local IRS or state government office for an office audit. In a correspondence audit, you will be contacted through the mail and will be asked to send supporting information or documents to the IRS or to the state taxing agency.

Section 7605 of the Internal Revenue Code (Tax Code) regulates the IRS conduct during an audit. For example, under Section 7605(b) “no taxpayer shall be subjected to unnecessary examination or investigations”. The taxpayer has also the right to appear with a representative to assist him or her during the IRS audit. The IRS regulations further elaborate on taxpayer rights during an audit.

A tax audit may uncover issues such as: unfiled tax returns (delinquent returns), unreported or underreported income, back taxes or tax liabilities for tax years other than the ones under audit, unreported transactions (for example real estate transactions) that generated taxable income and other tax violations. Any of these findings may subject you to additional tax, penalty and interest for failure to file or accurately report income.

Skillful representation is crucial in tax audit defense and in achieving favorable results after the process of tax investigation has been completed. If you have been selected for a state or IRS audit, contact Kamyar Mehdiyoun, tax audit attorney in Rockville, Maryland. We are a taxation law firm specializing in tax controversy and tax audits with experience in helping our clients during the examination process and beyond.

Tax Court Litigation

If you disagree with the IRS on how much you owe in taxes, one of your options (but not always the best) is litigation. You may litigate your tax dispute with the IRS by bringing suit in the United States Tax Court. U.S. Tax Court is a prepayment forum. In other words, you can only litigate your tax case in the U.S. Tax Court if you have not already paid your taxes. If you have already paid your taxes and want to bring a refund suit, U.S. Tax Court is not the proper forum.

Section 6212 of the Internal Revenue Code (Tax Code) authorizes the IRS to send a “Notice of Deficiency” to the taxpayer if the IRS determines that there is a tax underpayment. Usually, the taxpayer first tries to resolve any tax disputes with the IRS through the IRS Appeals Office. For example, taxpayer has the option of asking for a Collection Due Process (CDP) Hearing in order to settle the tax dispute within the IRS. A large number of tax controversy cases are settled during these administrative hearings. If the taxpayer and the Appeals Office disagree on the amount of the tax liability, taxpayer may petition the U.S. Tax Court. Under Section 6213 of the Tax Code, the deadline for bringing such a suit is 90 days after the statutory Notice of Deficiency (or the 90 Day Letter) was issued. The deadline is extended to 150 days if the Notice of Deficiency was sent to an address outside the United States.

If you need assistance disputing your tax liability or if you need representation before the U.S. Tax Court, contact Kamyar Mehdiyoun, tax litigation attorney in Rockville, Maryland. We are a taxation law firm specializing in tax controversy and tax litigation and have experience representing taxpayers before the U.S. Tax Court.

Tax Fraud, Tax Evasion and Tax Crimes

In addition to imposing civil tax penalties, the government is empowered to investigate and prosecute tax offenders criminally. Criminal tax conviction can lead to potentially disastrous consequences for the taxpayer. Criminal tax penalties include large monetary fines and incarceration in federal prisons.

Usually any voluntary and intentional conduct to evade tax the likely effect of which is to mislead the IRS or conceal assets is defined as a federal tax crime. The Internal Revenue Code (Tax Code) Section 7201 broadly defines a tax crime as any willful attempt to evade or defeat tax. Therefore, failure to file a required tax return (unfiled tax returns or delinquent returns), or any type of tax underpayment or underreporting of income can potentially result in criminal tax investigation by the IRS. Under Section 7202 of the Tax Code, any willful failure to truthfully “collect, account for, and pay over” the required tax is a felony which subjects the offender to criminal prosecution and criminal penalty for tax evasion. Accordingly, a business owner who fails to collect payroll taxes or having collected them, fails to timely remit them to the government may be subject to criminal sanctions. Although a civil trust fund recovery penalty or income tax underpayment penalty is usually imposed in similar cases, by law the IRS is free to pursue criminal sanctions if there is evidence that the failure to collect or pay over payroll taxes was intentional and qualified as criminal tax violation.

Similar to other criminal cases, the burden of proof that the taxpayer’s tax evasion was willful and qualified as tax fraud belongs to the government. To obtain criminal conviction in a tax case, the government needs to prove that the evidence of criminal tax fraud was beyond reasonable doubt.

If you are concerned that your attempts to minimize your taxes may have potentially exposed you to criminal tax investigation by the IRS or if you have received any communications from the IRS to that effect, contact Kamyar Mehdiyoun, tax litigation lawyer in Rockville, Maryland. We are a tax law firm specializing in tax controversy. Our experience in tax litigation defense and also in tax fraud and tax evasion defense can help you achieve a favorable conclusion to your tax controversy case.

Tax Investigations

Learning that you have been selected by the IRS or by a state taxing authority for a tax investigation or a tax audit can be understandably stressful. During a tax audit, a well-trained government employee will probe your financial affairs by examining your income tax returns, any corporate, partnership, sales, employment and payroll tax returns and other financial documents for any evidence of tax evasion. Small businesses and self-employed individuals are targeted for tax audits and investigations more frequently than other taxpayers. Once selected for an audit, the likelihood that you will be found to owe taxes at the end of the audit process is very high. Such a finding of delinquent tax obligations can also subject you to income tax underpayment penalty in addition to interest. Having investigated your financial records, an auditor may also find that you were guilty of tax fraud, which in addition to civil fines may subject you to criminal tax investigation and criminal penalties. Therefore, it is critical that you be well-prepared to handle the examination process.

In order to conduct a tax audit, a government agent may visit you at home (at-home audit) or at your business for a field audit. You may also be asked to appear at a local IRS or state government office for an office audit. In a correspondence audit, you will be contacted through the mail and will be asked to send supporting information or documents to the IRS or to the state taxing agency.

Section 7605 of the Internal Revenue Code (Tax Code) regulates the IRS conduct during an audit. For example, under Section 7605(b) “no taxpayer shall be subjected to unnecessary examination or investigations”. The taxpayer has also the right to appear with a representative to assist him or her during the IRS audit. The IRS regulations further elaborate on taxpayer rights during an audit.

A tax audit may uncover issues such as: unfiled tax returns (delinquent returns), unreported or underreported income, back taxes or tax liabilities for tax years other than the ones under audit, unreported transactions (for example real estate transactions) that generated taxable income and other tax violations. Any of these findings may subject you to additional tax, penalty and interest for failure to file or accurately report income.

Skillful representation is crucial in tax audit defense and in achieving favorable results after the process of tax investigation has been completed. If you have been selected for a state or IRS audit, contact Kamyar Mehdiyoun, tax audit lawyer in Rockville, Maryland. We are a taxation law firm specializing in tax audits and tax dispute matters with experience in helping our clients during the examination process and beyond.

Tax Settlements

To settle a tax debt, the IRS or a state taxing authority such as the Maryland State Department of Assessments and Taxation or the District of Columbia Office of Tax & Revenue require from the taxpayer to demonstrate that tax debt is not collectible or that the taxpayer is not liable for the tax. The IRS and the state taxing agencies are in the business of collecting taxes not forgiving them. Therefore, proving to the IRS or to a state tax authority that the tax should be settled for an amount smaller than the original assessment is no easy matter.

Sometimes, the best way is to argue that the taxpayer is not responsible for the tax liability. For example, the IRS occasionally holds business owners personally responsible for business taxes such as sales tax or payroll tax. A business owner may want to challenge the IRS by arguing that he is not personally liable for the tax debt of the business. This may be done by filing an offer in compromise based on doubt as to liability. In other cases, a taxpayer is not challenging the fact that he is in fact liable for the tax debt. Instead, his argument is that his financial situation limits his ability to pay the entire tax and asks the IRS to reduce his tax burden based on doubt as to collectability.

Negotiating tax debt settlements with the IRS or with state taxing authorities is a delicate matter and requires tax law expertise and intimate familiarity with the IRS’s rules and regulations. Investing in expert tax advice can save you both the stress of dealing with tax collectors and also result in large tax savings.

If you want to settle your tax debt, contact Kamyar Mehdiyoun, tax settlement lawyer in Rockville, Maryland. We can help you negotiate a favorable resolution to your tax debt problem.

Trust Fund Recovery Penalty

Entrepreneurs are an optimistic lot. Unfortunately, the present economic downturn has proven that such optimism is not always well-founded. Payroll tax problems usually start when cash-strapped small businesses delay payment of their payroll taxes and instead use the funds collected from their employees for general business purposes. A typical owner of such a small business hopes that as soon as the business improves, he or she will remit the payroll or employment taxes to the IRS. However, similar to other IRS tax obligations, the obligation to timely pay payroll taxes does not depend on business conditions. A small business owner or even a low-level employee of the business may be found to be personally responsible for withheld but unpaid payroll taxes. This is called the Trust Fund Recovery Penalty (TFRP) and is different from other tax penalties (such as the penalty for underpayment of personal income taxes) in that an individual may be held responsible for the unpaid payroll taxes of a business. The amount of the penalty equals the amount of unpaid or underpaid withholding tax liability related to payroll taxes. Additional tax penalties relating, for example, to failure to file (unfiled) payroll tax returns (Form 941) may be applied as well. Incorporation of the business or organizing the business as a limited liability company (LLC) would not prevent the IRS from targeting individuals within the business and holding them personally responsible for back taxes of the business and any 941 liability. The IRS assessment of the Trust Fund Recovery Penalty (TFRP) not only jeopardizes business prospects, but also threatens the financial survival of the individual who has been found by the IRS to be responsible for unpaid payroll taxes which include income taxes, Social Security taxes and Medicare taxes.

Small business owners should also ascertain that the IRS applies their payroll tax payments and deposits to the tax periods intended by such owners. The misapplication of tax deposits to tax periods different from those intended by the taxpayer frequently results in assessment of additional tax penalties and inflated tax bills.

If you have been contacted by the IRS as part of their investigation to determine the identity of the individuals to be held personally responsible for the Trust Fund Recovery Penalty, or if you have received a tax bill, a notice of intent to lien or levy or a notice of delinquency related to failure to pay trust fund taxes, contact Kamyar Mehdiyoun, tax controversy lawyer in Rockville, Maryland. We are a tax law firm specializing in tax dispute matters. The IRS applies strict time limits in order to collect delinquent payroll tax obligations and a delay may result in aggressive IRS collection activities such as imposing tax liens, tax levies or property seizures including garnishment and seizure of personal or business bank accounts.

Unfiled Tax Returns or Nonfiler Cases

In order to encourage taxpayers to file their income tax returns or business tax returns and pay their taxes on time, the Internal Revenue Code (Tax Code) provides for penalties. A tax penalty is usually assessed for failure to file tax returns on time or altogether (unfiled tax returns). Similarly, a tax penalty is imposed for failure to timely pay taxes. These are called “failure to file penalty” or “failure to pay penalty”.

The IRS also penalizes taxpayers for inaccurately reporting their income (sometimes called IRS penalties for underpayment or understatement of income tax) and for committing tax fraud. The amount of the IRS tax penalty depends on the reason for, and the amount of, tax liability or tax underpayment.

IRS penalties for tax fraud are higher than those for negligence in paying or filing for taxes. For example, a tax audit may uncover evidence of delinquent tax returns, unreported or underreporting of income and failure to collect or remit payroll and employment taxes. These may qualify as criminal tax offenses and could lead to criminal investigation and criminal prosecution of the offender for tax evasion.

Similar to interest on late taxes, civil penalties for unpaid tax obligations accrue the longer the tax debts go unpaid. In some cases, the amount of the combined penalties and interest for delinquent tax liabilities exceeds the unpaid tax itself.

In order to reduce or eliminate tax underpayment penalties, the IRS or a state taxing authority should be convinced that the assessment of the tax or of the penalty was unfounded. The taxpayer must present the government with specific reasons as to why a particular income tax or business tax liability or penalty should be decreased, removed or abated altogether. The best results are achieved when the taxpayer points to a specific provision in the Tax Code or to similar facts in case law where a court found that assessed taxes or penalties should be reduced or eliminated.

The IRS frequently resorts to tax liens and tax levies for collection of tax debts or back taxes which frequently include interest and penalty. If you have recently received a tax bill including penalties and interest, or a notice of intent to lien or levy, contact Kamyar Mehdiyoun, tax relief attorney in Rockville, Maryland. We are a tax law firm specializing in tax controversy. Abatement of tax, penalty and interest is best achieved by early intervention of experienced tax counsel. We have been successful in reducing or eliminating hundreds of thousands of dollars in tax liabilities, penalties and interest.

Wage Garnishments or Wage Levy

Wage garnishment or wage levy is one of the most frequent tax levy tools used by the IRS and state taxing authorities to collect back taxes or tax debts. IRS, however, uses wage garnishment or a levy on salary and wages only as a last resort and only when its other options are exhausted. Before instituting a wage or salary levy, the IRS is required to send taxpayer a Notice of Lien or Levy. Section 6331(e) of the Internal Revenue Code (Tax Code) provides that a wage levy is continuous from the date such levy is first made until the levy is released. Section 6331(h)(1) of the Tax Code limits the amount of such continuous wage or salary levies to a maximum of 15% of the amounts due to taxpayer. In addition, Section 6334(d)(2) of the Tax Code exempts a portion of weekly wages from the amounts withheld from an individual’s salary as wage garnishment. The amount of exemption is sum of standard deductions plus aggregate amount of the deductions for personal exemptions divided by 52.

Pension and retirement income are not exempt from wage lien or levy rules and the IRS may subject pension and retirement income to lien or levies.

It should be noted that during the period wage levy is in effect, the taxpayer continues to pay interest and penalty on the unpaid tax. To make an analogy, an individual who owes money to his credit card company but keeps paying the minimum amount due, is still paying interest on his total credit card debt. The interest rate on a tax debt is usually higher than the commercial rate. In addition, the taxpayer is assessed a tax penalty which sometimes can exceed the amount of the original tax. However, the real drawback for a taxpayer whose wages are garnished is that the employer’s knowledge of the fact that an employee is a delinquent taxpayer may result in negative employment consequences such as job loss.

IRS collection actions fall under Fair Tax Collection Practices which is the subject of Section 6304 of the Tax Code. For example, if the IRS knows that the taxpayer is represented by a lawyer, it cannot contact the taxpayer. In addition, the IRS is barred from engaging in conduct the natural consequence of which is to harass, oppress or abuse the taxpayer.

If you are the subject of IRS salary garnishment or part of your salary is withheld as wage levy, contact Kamyar Mehdiyoun, IRS and tax lawyer in Rockville, Maryland. We are a taxation law firm specializing in IRS and tax problem resolution and tax dispute matters and will help you in removing or minimizing the amounts withheld from your wages.

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We also handle all matters related to disputes with the following state tax authorities:

  • District of Columbia Office of Tax and Revenue (OTR)
  • Maryland State Department of Assessment and Taxation (SDAT)
  • Massachusetts Department of Revenue (DOR)
  • New York State Department of Taxation and Finance

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Our firm represents individuals and corporate clients before the IRS and state taxing agencies in Maryland, Washington, D.C. Virginia and in other states.