March 23, 2024

Immigration Law And Small Businesses

Immigrants are more likely than those born in the US to start businesses, and no matter who owns them, many small businesses rely on immigrant labor to succeed. The US has long been the “land of opportunity” for those leaving their home countries. At the same time, there’s increasing political pressure to limit immigration, and that’s reflected in our immigration laws.

What Are Immigration Laws?

Immigration laws control the movement of people from other countries to the US. They cover who can enter, how long they can stay, and what they can do while they’re here. Immigration laws also regulate immigrants’ legal status in the US, including whether they can work. 

Should Small Business Owners Care About Immigration Laws?

If you’re an immigrant or you hire them, immigration laws should be a concern. These laws determine the visas necessary to work in the US legally, how long someone can stay, and the conditions they must meet to remain in the US legally. An employer failing to follow immigration law risks penalties, fines, and criminal prosecution. They may also lose immigrant employees if visas are not renewed or they can’t get the visas needed to work in the US.

What Are Common Visas Used By Small Business Employees And Owners?

There are many types of visas according to a business litigation lawyer. Here are some that enable people to work in the US.

  • H-1B visas

H-1B visas allow employers to hire foreign workers to fill specialty occupations. These visas are used to fill highly skilled engineering, technology, and science positions. The number of H-1B visas is limited, and the competition to obtain one is fierce.

  • TN visas

TN visas allow Canadian and Mexican citizens to work in the US. They’re available to those working in certain professions, including engineering, science, and accounting. 

  • E-2 visas

E-2 visas permit people from other countries to invest in and manage a US business. Small business owners use them to start a new business or buy an existing one. The individual must be a citizen of a qualifying country and make a substantial investment in the US business. 

The visa applicant should consult with an immigration attorney to improve their chances of getting one.

Employment Authorization And Verification

There are different steps a small business must take to ensure their workforce is employed legally as our friends at Focus Law LA can share.

  • Employment Authorization Documents (EADs)

The federal government issues EADs to foreign workers authorized to work in the US based on the applicable visa category. They state what work they’re authorized to perform in the US. Employers must verify their employees can legally work in the country and keep copies of EADs on file.

  • I-9 Forms and Verification 

Employers must complete an I-9 form for each worker to verify that employees can legally work in the US. Employers must review employees’ identification documents and attest they’re authorized to work in the US.

  • The Consequences of Non-Compliance 

Employers hiring unauthorized workers can be fined, pay penalties, and be criminally charged. Non-compliance can also lead to negative publicity, damage your reputation, result in legal costs, and cause a loss of business. 

Companies employing immigrant workers should retain an immigration law attorney to help them comply with these laws and regulations and keep them up to date as they change.

If you are looking for help with employee immigration status, contact a lawyer near you for help. 

March 21, 2024

The Role Of A Commercial Litigation Attorney

In the intricate realm of business dealings, disputes and conflicts are almost inevitable. When these issues escalate to the point of legal action, a commercial litigation attorney becomes an indispensable ally. These legal professionals specialize in handling disputes arising from commercial transactions, contracts, and other business-related matters, employing their expertise to navigate complex legal challenges and advocate for their clients’ interests.

Commercial litigation attorneys are adept at representing businesses, corporations, and individuals involved in disputes of a commercial nature. These disputes can encompass a wide range of issues, including breach of contract, fraud, employment disputes, intellectual property infringement, and shareholder disputes, among others. With a keen understanding of both the legal and business aspects of these disputes, these attorneys provide strategic counsel and advocacy to help their clients achieve favorable outcomes.

One of the key responsibilities of a commercial litigation attorney is to assess the merits of a case and develop a tailored legal strategy to achieve the client’s objectives. This often involves conducting thorough legal research, analyzing relevant statutes and case law, and collaborating with clients to understand their goals and priorities. By taking a proactive approach to case management, these attorneys ensure that their clients are well-positioned to navigate the complexities of the legal system effectively.

Commercial litigation attorneys from Eric Lindh Foster Law, LLC play a crucial role in representing their clients in negotiations, mediation, arbitration, and courtroom proceedings. Whether it’s negotiating a settlement agreement, presenting arguments before a judge or jury, or cross-examining witnesses, these attorneys leverage their advocacy skills and legal acumen to advance their clients’ interests. With a focus on achieving efficient and cost-effective resolutions, they work tirelessly to secure the best possible outcome for their clients.

Commercial litigation attorneys are skilled at analyzing and interpreting complex contractual provisions and legal documents. Whether it’s reviewing commercial agreements, lease agreements, or partnership agreements, these attorneys identify potential issues and vulnerabilities that may impact their clients’ legal rights and obligations. By providing thorough and insightful legal advice, they help clients make informed decisions and mitigate the risk of future disputes.

In addition to their litigation skills, commercial litigation attorneys often collaborate with other legal professionals, experts, and consultants to strengthen their clients’ cases. Whether it’s retaining forensic accountants to analyze financial records, hiring industry experts to provide expert testimony, or consulting with technical specialists to assess complex issues, these attorneys leverage their network of resources to build robust and persuasive arguments.

Commercial litigation attorneys are adept at navigating the complexities of alternative dispute resolution mechanisms, such as mediation and arbitration. By exploring these alternative avenues for resolving disputes, they help clients avoid the time, expense, and uncertainty associated with traditional litigation. Whether it’s facilitating negotiations between parties or advocating for their clients’ interests in arbitration proceedings, these attorneys strive to achieve efficient and favorable outcomes outside of the courtroom.

A commercial litigation attorney is a valuable asset for businesses and individuals navigating complex legal disputes. With their expertise in commercial law, litigation experience, and strategic advocacy skills, these attorneys provide essential guidance and support to clients facing a wide range of commercial disputes. By leveraging their knowledge and resources, they help clients achieve favorable outcomes and protect their legal rights and interests in the challenging landscape of commercial litigation.

March 16, 2024

Navigating The Landscape Of Building Disputes

In the world of construction, misunderstandings and disputes are not uncommon. Yet, numerous misconceptions cloud the judgment of many involved in these disagreements. It’s essential to dispel these myths to approach these situations with a clear mind and effective strategies.

Understanding The Complexity Of Disputes

A prevalent misconception is that construction disagreements are straightforward and can be resolved quickly. This oversimplification fails to acknowledge the complex nature of construction projects, which often involve multiple stakeholders, intricate contracts, and technical details. Each case is unique, requiring a tailored approach that considers the specific nuances of the project, the contractual obligations of the parties involved, and the applicable laws and regulations.

The Role Of Litigation

Another myth is that litigation is always the best way to resolve construction disputes. While litigation can be a necessary tool, it is often time-consuming, expensive, and can strain business relationships. Alternative dispute resolution methods, such as mediation and arbitration, can be more efficient and preserve professional ties by fostering a more collaborative environment to find a mutually acceptable solution.

Cost Implications Misunderstood

The costs associated with resolving construction disputes are frequently misunderstood. Many assume that taking a case to court will invariably lead to a windfall or, conversely, assume that avoiding litigation will always minimize expenses. However, the reality is more nuanced. The costs of litigation or alternative dispute resolution methods vary widely depending on the complexity of the case, the duration of the proceedings, and the efficiency of the legal representation. An early and realistic assessment of the case, considering potential legal fees, lost time, and the impact on future business opportunities, is crucial in making an informed decision.

Legal Expertise And Guidance

There’s a myth that legal advice in construction disputes is only necessary at the point of litigation. This misconception undervalues the importance of legal guidance throughout the construction process. Consulting with construction litigation legal professionals during contract drafting, negotiation, and throughout the project can help prevent disputes or position parties favorably should a disagreement arise. Proactive legal oversight can identify potential issues before they escalate, saving time and resources in the long run.

Misconceptions About Outcomes

Many parties involved in construction disputes hold onto the myth that success in litigation is guaranteed if they believe they are right. This belief fails to account for the unpredictability of legal proceedings, where outcomes depend on evidence, legal interpretations, and procedural nuances. The strength of a party’s position must be evaluated critically, considering the legal framework and the specific details of the case, rather than a general sense of right or wrong.

The Impact On Business Relationships

There’s a common belief that any form of dispute resolution inevitably damages business relationships beyond repair. While conflicts can strain partnerships, the approach to resolving them plays a significant role in determining the future of these relationships. Engaging in open, respectful communication and seeking amicable resolution methods can not only solve the immediate problem but also lay the groundwork for stronger, more collaborative relationships moving forward.

Understanding the complexities of construction disputes and debunking common myths are crucial steps in managing and resolving these issues effectively. It is important to recognize the value of trusted legal advice such as those found at Volpe Law LLC. They can assist you as you consider alternative dispute resolution methods, and approach disputes with a strategic, informed mindset that can prevent unnecessary costs, save time, and maintain important business relationships. By navigating the landscape of building disputes with clarity and pragmatism, parties can find resolutions that are not only satisfactory but also conducive to future success.

January 3, 2024

The IRS’ Employee Retention Credit Voluntary Disclosure Program and Effect on Businesses and Preparers

What Does the Employee Retention Credit – Voluntary Disclosure Program Mean for Future Enforcement Efforts by the Internal Revenue Service Against Businesses and Preparers?

By Brandon N. Mourges

This article is also available for download here.

Last month, the Internal Revenue Service (IRS) announced the Employee Retention Credit – Voluntary Disclosure Program (ERC VDP).1  This is the latest step taken by the agency to crack down on the perceived abuses by both taxpayers and promoters, which claimed billions of dollars in credits aimed at helping struggling businesses retain employees during the COVID-19 pandemic.2  The ERC VDP, which is open until March 22, 2024, allows countless numbers of ineligible businesses to address potential exposure to significant civil and criminal penalties.3  Furthermore, the ERC VCP is likely to be used by the IRS to gather information that will be used in future civil and criminal enforcement actions against some claiming the credits as well as many “promoters” who profited from the program.  Any business that claimed the credit, or anyone who advised on claiming the credit, should review their eligibility determinations and weigh available options in light of the potential for increased enforcement actions by the IRS.

How We Got Here

When the country was in the grips of the COVID-19 pandemic, Congress authorized several programs aimed at providing financial assistance to affected employers.  Although most of the initial publicity focused on the financial benefits of the Paycheck Protection Program (PPP), the last two years have seen an increasing focus on the benefits offered by the Employee Retention Credit (ERC) provisions within various pieces of legislation, including the CARES Act and American Recovery Plan Act.  Moreover, with legislation subsequent to the announcement of the PPP, eligibility for the ERC was greatly expanded and the financial incentives were greatly increased.  For 2021, many businesses were eligible to claim up to $21,000 per employee for the first three quarters of the year.  4

Seizing on the lack of guidance from the IRS and the subjective nature of eligibility under the “full or partial suspension” test, many businesses were targeted with solicitations by those that could “qualify” them for refunds in the hundreds of thousands if not millions of dollars.5  Those solicitations were honed by employment information publicly available as a result of the Paycheck Protection Program and from increasing word-of-mouth.6  Many businesses saw this as a win-win situation as, even though they contracted to pay a large percentage of the refund to these “advisors,” there was no upfront cost for seeking these refunds.  Many of those businesses were not familiar with the requirements of the ERC, placed a large amount of trust in advisors based on their credentials and professional backgrounds, and assumed the IRS would simply not issue refunds that they were not legally entitled to.

Unfortunately, the need to expeditiously issue refunds for COVID-19 relief – from the perspective of both businesses and the IRS – took precedence over ensuring the proper application of the ERC.7  Regardless of one’s interpretations of eligibility provisions under the ERC – which are significantly lacking and still yet to be scrutinized in either a court of law or the court of public opinion8 – many businesses received refunds that should never have been issued.  Worse yet, many advisors received large percentages of these refunds – which may run afoul of ethical rules9 and run counter to the purpose of the program – for businesses that may or may not have actually qualified for the credit in the first place.  For many unfortunate businesses, they may eventually not only be out the money paid to their advisors, but they will also be forced into an audit with the IRS ending with repayment of refunds and assessment of stiff penalties.

To that end, although likely too late, the IRS has increasingly sounded the alarm on those that might claim the ERC.  Those warnings increased in the summer of 2023 with adverse interpretations of the IRS regarding the suspension test.10  According to the IRS, many would-be applicants for the ERC were ineligible under that test because their suspension was not more than “nominal” and “supply chain” effects alone did not qualify a business for the ERC.  Those warnings increased in the past several months with the imposition of a moratorium on processing ERC claims and the announcement of a withdrawal procedure.11  While the force of the interpretations of the IRS are not yet tested and are likely to be challenged, it is clear that the IRS intends to scrutinize a large number of claims, regardless of whether they are pending or already paid.  The IRS has already announced training protocols and an increased focus on ERC audits.12  The increasing volume of these warnings has now become full-throat with the announcement of the ERC VDP.  This is a clear indication that the IRS intends to pursue heightened penalties and criminal sanctions against businesses and advisors that have intentionally abused the terms of the program. 

The Terms of the ERC VCP

Much like other voluntary disclosure initiatives of the IRS in the past – e.g., the Offshore Voluntary Disclosure Program and the Voluntary Disclosure Practice13 – the ERC VDP is designed to promote compliance in an area of perceived widespread abuse where the IRS does not have sufficient resources to pursue all violations.  These programs are generally used as information gathering tools and are a further indication that undisclosed violations should be subjected to greater civil penalties.

Importantly, the ERC VDP is not available to advisors – it is only applicable to businesses that received the ERC.  To qualify, a business must not already be under civil examination or criminal investigation, it must not have received a notice of noncompliance, and it must not have received a demand for repayment of the ERC.14  If those prerequisites are met, the business must complete a Form 15434 (Application for Employee Retention Credit (ERC) Voluntary Disclosure Program).  That application requires that the business calculate the amount to be repaid – 80% of the ERC – and that it identify and describe the advisor and the services provided with respect to the ERC.  Once accepted, the business must cooperate with the IRS in its review of the ERC claims.  This might include reviewing and verification the accuracy of returns, submitting to an interview, and providing details about relationships with advisors.  Assuming that a business fully cooperates, it will enter into a closing agreement with the IRS regarding repayment of the credit.  A few of the financial benefits include that the business will only be required to pay back 80% of the credit, it will not be required to pay interest on the overpayment of the refund, and it will not have to amend its income tax returns to reduce corresponding wage deductions.  Of further importance, the ERC VDP requires that a participant agree to repay 80% of the entire credit claimed for the period – that is, partial claims are not allowed in this process and each period is an all-or-nothing proposition.

One important difference between the ERC VDP and other voluntary disclosure practices is that it does not resolve potential criminal liability or penalties for fraud.  To that end, the IRS specifically indicates that “if you willfully filed an employment tax return that fraudulently claimed ERC, or if you assisted or conspired in such conduct, filing for ERC-VDP will not exempt you from potential criminal investigation and prosecution.”15 That is in stark contrast to other programs, such as the Voluntary Disclosure Practice, which provide that the IRS will generally not recommend prosecution.  Presumably, businesses and individuals with concerns about penalties for outright fraud should avail themselves of the Voluntary Disclosure Practice instead.16  Further, businesses with eligibility for some quarters or parts of quarters may be better-suited to addressing compliance outside of the ERC VDP.

What Does This Mean for Businesses

For businesses that claimed the Employee Retention Credit or are still considering claiming this credit, the announcement of the ERC VDP should serve as both a warning and a chance to make amends.  There are many taxpayers who needed, and clearly qualified for, the ERC.  But many others claimed significant refunds under auspicious interpretations of the rules – many involving the “full or partial suspension” test.  And like the Paycheck Protection Program before it, there are many others who simply claimed the credit without any valid basis in fact or law.

For businesses that incorrectly relied on the advice of a promoter, strong consideration should be given to the ERC VDP.  Whatever the mindset might have been in pursuing the credit, the chances of criminal liability resulting from these claims should be reduced greatly by participating in the ERC VDP – it is not in the interest of the IRS to make examples of those trying to make amends as that would deter other offenders from coming forward.  Furthermore, participants in the ERC VDP are likely to be subjected to a much more streamlined and focused examination.  On the other hand, those not entering the ERC VDP are likely to have more tax periods and tax returns scrutinized and other non-ERC issues could be developed by the IRS.  Furthermore, businesses that claimed the credit could be subject to various civil penalties including, but not limited to, failure to file penalties (up to 25%), failure to pay penalties (up to 25%), failure to deposit penalties (up to 15%), accuracy-related penalties (up to 20%), trust fund recovery penalties, and more.  While the ERC VDP requires repayment of 80% of the credit, this amount could theoretically be less than half the exposure a business would face if subjected to a combination of these penalties and corresponding interest.  Moreover, this required payment could be even less in comparison if other issues are identified in an audit.

To properly weigh this option, businesses should review their ERC claims and the underlying substantiation.  That review would include a review of the basis for their eligibility – e.g., by reviewing financial records if eligibility was based on a reduction in gross receipts or by reviewing relevant orders and business conditions that justified a claim of suspension.  It would also include a review of wages paid in each period, the intersection of the Paycheck Protection Program, payments made to owners and relatives, or any other documentation that would bear on the proper calculation of the credit.  Given the high stakes, the number of eligibility factors, and the probable conflict with prior advisors, businesses should strongly consider engaging with a new, independent legal advisor on this issue.  Businesses will also want to consider potential civil and criminal liability of their key personnel (to the extent they were involved in claiming the ERC) and potential options for recourse against promoters.  There are many other factual and legal considerations that factor into any decision to enter the ERC VDP and missteps can be costly. 

What Does This Mean for ERC Advisors

The ERC VCP was almost certainly a result of the perception of the IRS that certain advisors and preparers were profiting from pushing businesses into the ERC when they did not qualify.  Many unscrupulous advisors received significant commissions as a direct result of providing questionable advice regarding the ERC.  Their incentives were not necessarily to properly obtain needed funding for their clients.  Advisors that provided boilerplate advice, or outright incorrect advice, to “qualify” a business for the ERC are likely to face scrutiny and penalties.  The IRS has made examples of such promoters in the past17 and will likely do so here.

Advisors, like those businesses receiving the ERC, should review the accuracy of the advice and filings made on behalf of clients.  Supporting information should be gathered and organized in the event that they are audited or a former client implicates them in the ERC VDP or otherwise.  For some advisors, outside counsel should be sought as soon as possible as a prophylactic measure.  There may be legal options available to minimize the risk of civil liability to both the IRS or their prior clients.18  In that regard, it is unlikely that all participants in the ERC VDP are going to repay refunds without seeking repayment from, or potentially litigating against, their advisors.  There may also be legal options to minimize potential criminal exposure.19

Conclusion

If your business received the ERC, you should keep informed of developments regarding enforcement in this area and options available to mitigate risk.  Although many, if not most, ERC applicants are entitled to these refunds and will never be subjected to an audit, many others will be.  Any examination can be expensive, in both financial and non-financial terms.  Given the substantial amount of many ERC claims, an adverse determination – which might include repayment of the refunds, additional monetary penalties, and criminal liability – could threaten the viability of a business and the well-being of its owners.  At the very least, businesses should maintain complete and accurate records supporting their claims, be prepared in the event of an audit, and consider seeking independent advice to review the validity of their claims and corresponding options.  Likewise, advisors should ensure that their opinions and calculations are fully supported and they should prepare for perhaps even more intense scrutiny than the ERC claimants themselves.  Given the frequency of announcements and warnings from the IRS and the Department of Justice relating to COVID-19 related fraud, we are only seeing the beginning of this issue and it is likely to become front-and-center for tax enforcement over the next decade. 

CREPEAU MOURGES is a law firm focusing on complex, high-stakes civil and criminal tax controversies.  We represent individuals, businesses, and preparers in serious matters involving the Internal Revenue Service, Department of Justice, and many other federal and state agencies.  If you have a tax issue, contact us today for a free consultation at [email protected] or 667.900.9912.

[1] Employee Retention Credit – Voluntary Disclosure Program, available at: https://www.irs.gov/coronavirus/employee-retention-credit-voluntary-disclosure-program (last viewed Dec. 28, 2023).

[2] See, e.g., IRS Commissioner signals new phase of Employee Retention Credit work; with backlog eliminated, additional procedures will be put in place to deal with growing fraud risk, IR-2023-135, July 26, 2023, available at: https://www.irs.gov/newsroom/irs-commissioner-signals-new-phase-of-employee-retention-credit-work-with-backlog-eliminated-additional-procedures-will-be-put-in-place-to-deal-with-growing-fraud-risk; Red flags for Employee Retention Credit claims; IRS reminds businesses to watch out for warning signs of aggressive promotion that can mislead people into making improper ERC claims, IR-2023-170, Sept. 14, 2023, available at: https://www.irs.gov/newsroom/red-flags-for-employee-retention-credit-claims-irs-reminds-businesses-to-watch-out-for-warning-signs-of-aggressive-promotion-that-can-mislead-people-into-making-improper-erc-claims; IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true, IR-2023-49, March 20, 2023, available at: https://www.irs.gov/newsroom/irs-opens-2023-dirty-dozen-with-warning-about-employee-retention-credit-claims-increased-scrutiny-follows-aggressive-promoters-making-offers-too-good-to-be-true.

[3] Prior to the announcement of the ERC VDP, the IRS indicated that they were sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims.  See IRS expands work on aggressive Employee Retention Credit claims; 20,000 disallowance letters being mailed, more action and voluntary disclosure program coming, IR-2023-230, Dec. 6, 2023, available at: https://www.irs.gov/newsroom/irs-expands-work-on-aggressive-employee-retention-credit-claims-20000-disallowance-letters-being-mailed-more-action-and-voluntary-disclosure-program-coming.

[4] 26 U.S.C. § 3134(a) (credit equal to 70% of first $10,000 in eligible wages for first three quarters of 2021 for continuing business).

[5] The statutory language provides that a business may be eligible if “the operation of the trade or business…is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID-19)…”  26 U.S.C. § 3134(c)(2)(A)(ii)(I).  Although the IRS has released some notices regarding the interpretation of this section, there is very little legislative history regarding its interpretation and the IRS has not published any authoritative regulations.

[6] Online databases, such as ProPublica, allow any person to search for any recipient of funding from the PPP provided the loan exceeded a certain threshold.  As of December 28, 2023, that website alone listed information on more than 11.5 million loans and provided data such as the loan amount, the forgiveness amount, payroll, rent, jobs reported, industry, and location.

[7] See, e.g., U.S. Government Accountability Office, IRS Implemented Tax Relief for Employers Quickly, but Could Strengthen Its Compliance Efforts, May 2022, available at: https://www.gao.gov/assets/730/720547.pdf (last visited Dec. 28, 2023).

[8] Although the IRS has published guidance on its position, there does not appear to be any reported court case dealing with the interpretation of the ERC’s eligibility provisions.

[9] See, e.g., Treasury Circular 230 § 10.27 (regarding contingent fees).  In addition, the AICPA has issued guidance suggesting it would be unethical for accountants to charge contingent fees relating to ERC claims.

[10] See, e.g., IRS CCM AM 2023-05, Whether an Employer Experienced a Full or Partial Suspension…, June 30, 2023, available at: https://www.irs.gov/pub/lanoa/am-2023-005-508v.pdf.

[11] See To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros, IR-2023-169, Sept. 14, 2023, available at: https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros.  See also Withdraw an Employee Retention Credit (ERC) claim, available at: https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim (last visited Dec. 28, 2023).

[12] See, e.g., Employee Retention Credit positions and audits, available at: https://www.irs.gov/pub/irs-utl/2023ntf-14-employee-retention-credit-positions-and-audits.pdf (last visited Dec. 28, 2023).

[13] See IRS Criminal Investigation Voluntary Disclosure Practice, available at: https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice (last visited Dec. 28, 2023).

[14] See Frequently asked questions about the Employee Retention Credit Voluntary Disclosure Program, available at: https://www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit-voluntary-disclosure-program (last visited Dec. 28, 2023).

[15] Id.

[16] While the Voluntary Disclosure Practice would likely reduce or resolve potential criminal exposure, the financial cost would be much more severe, as all applicable tax, penalties, and interest would need to be paid for resolution.

[17] See, e.g., Department of Justice, New Jersey Tax Preparer Arrested for Fraudulently Seeking Over $124 Million in COVID-19 Employment Tax Credits, July 31, 2023, available at: https://www.justice.gov/opa/pr/new-jersey-tax-preparer-arrested-fraudulently-seeking-over-124-million-covid-19-employment; Department of Justice, Justice Department Announces Results of Nationwide COVID-19 Fraud Enforcement Action, August 23, 2023, available at: https://www.justice.gov/opa/pr/justice-department-announces-results-nationwide-covid-19-fraud-enforcement-action.

[18] Tax advisors providing faulty advice regarding the ERC may also be subject to penalties and licensure issues from other regulatory bodies.

[19] Although advisors may not be eligible for the ERC VDP, there may be other voluntary actions that can be taken to disclose prior tax violations and mitigate penalties.  Aside from civil penalties relating to understatements (26 U.S.C. § 6694 and 26 U.S.C. § 6695), many criminal statutes could be utilized by the IRS to pursue promoters.  See, e.g., 26 U.S.C. § 7201 (tax evasion), 26 U.S.C. § 7206 (filing a false return), 18 U.S.C. § 287 (false claims), 18 U.S.C. § 1001 (false statements).

December 27, 2023

The Role Of Legal Professionals In Mitigating Business Risks

In today’s dynamic business landscape, managing risk is a crucial aspect of any successful enterprise. Legal professionals play a pivotal role in this process, offering expertise that extends far beyond traditional legal advice. Their involvement is key in identifying, assessing, and mitigating potential risks that can have legal implications for a business.

Early Identification Of Potential Legal Issues

The first step in effective risk management is the early identification of potential legal challenges. Business lawyers like those at Kaplan Law Practice, LLC are trained to foresee legal hurdles that a business might encounter in its operations. This includes a wide range of issues such as regulatory compliance, contract vulnerabilities, employment law matters, and potential litigation risks. By identifying these issues early on, businesses can take proactive steps to mitigate them before they escalate into more significant problems.

Strategic Planning And Compliance

A critical aspect of risk management is ensuring compliance with the ever-changing legal and regulatory landscape. Business lawyers provide invaluable guidance in interpreting and navigating these complex regulations. They work closely with businesses to develop strategic plans that not only comply with legal requirements but also align with the company’s goals and objectives. This strategic planning is essential for businesses to avoid legal pitfalls and maintain a competitive edge in their respective industries.

Contract Management And Negotiation

Contracts are the lifeblood of any business, and managing them effectively is a key component of risk management. Business lawyers play a vital role in drafting, reviewing, and negotiating contracts to protect the interests of the business. They ensure that contracts are clear, enforceable, and aligned with the business’s overall risk strategy. This meticulous attention to detail in contract management helps prevent disputes and potential litigation, saving the business time and resources in the long run.

Crisis Management And Legal Representation

Despite the best preventive measures, businesses may occasionally face legal crises. In such situations, having a business lawyer by your side can be invaluable. They provide not only legal representation but also strategic advice on how to navigate the crisis while minimizing damage to the business’s reputation and finances. Whether it’s a lawsuit, a regulatory investigation, or a PR crisis, a business lawyer’s expertise in crisis management is indispensable.

Educating And Empowering Business Teams

An often overlooked aspect of a business lawyer’s role in risk management is educating and empowering the business’s internal teams. By providing training and resources on legal and compliance matters, lawyers help create a culture of risk awareness within the organization. This empowerment enables employees at all levels to make informed decisions and recognize potential risks, contributing to a more robust overall risk management strategy.

Building A Sustainable Future

Ultimately, the role of a business lawyer in risk management is about building a sustainable future for the business. By mitigating risks and navigating legal complexities, they help businesses not only survive but thrive in today’s competitive environment. Their expertise and strategic insights are invaluable assets in ensuring the long-term success and resilience of any business.

The role of business lawyers in risk management is multifaceted and integral to the success of any organization. Their ability to anticipate legal issues, ensure compliance, manage contracts, handle crises, educate teams, and contribute to strategic planning makes them indispensable partners in the journey of any business. In a world where legal and regulatory landscapes are constantly evolving, the guidance and expertise of a business lawyer are more important than ever.

August 11, 2023

Understanding IRS Tax Audits

When most people think about the IRS, their mind often jumps to tax audits. It’s an understandable connection to make, as IRS tax audits can be some of the most stressful situations individuals and businesses face. Whether it’s your first time dealing with an audit or you’ve experienced this process before, knowing what to expect and how to prepare is key to successfully navigating an audit.

An IRS tax audit is an examination of an individual’s or corporation’s tax return to verify that income and deductions are accurate. There are three main types of IRS audits: correspondence audits, office audits, and field audits. Correspondence audits are the most common and involve the IRS sending a letter asking for additional information about specific items on a tax return. Office audits require the taxpayer to bring specific documents to an IRS office for review. Field audits are the most comprehensive and involve an IRS agent visiting the taxpayer’s home or place of business.

One of the first things you should do when you receive notice of an IRS tax audit is to review the letter carefully and understand what the IRS is asking for. The letter will typically outline the specific items on your tax return that are being questioned and list the documents you need to provide. It’s important to respond to the audit notice in a timely manner and to gather all necessary documents before meeting with the IRS.

When preparing for an IRS tax audit, it’s crucial to have all your tax documents organized and ready to go. This includes receipts, bills, canceled checks, legal papers, and any other documents that can support your case. Having an organized and complete set of documents will not only make the audit process smoother but will also strengthen your case against any potential discrepancies found by the IRS.

It’s also important to remember that you have rights during an IRS tax audit. The IRS has to treat you with fairness and respect, and you have the right to know why the IRS is asking for specific information. You also have the right to representation during an audit, which can be a crucial resource for those facing a complex tax situation. This is where a tax lawyer can be invaluable. A Jacksonville, FL tax lawyer can provide the expertise and support needed to navigate the complexities of an IRS tax audit.

No matter what type of IRS tax audit you are facing, the key is to remain calm and prepared. The IRS is simply trying to ensure that all tax laws are being followed correctly, and in many cases, an audit can be resolved without any penalties or additional tax owed. However, if you do find yourself facing a situation where you disagree with the IRS’s findings, it’s important to know that you have the option to appeal the decision.

At Crepeau Mourges, we have a team of experienced tax lawyers who can help guide you through the process of an IRS tax audit. We understand how stressful and overwhelming these situations can be, and we’re here to provide the support and expertise you need to successfully navigate the audit and protect your rights. Let us handle the complex tax laws and IRS procedures while you focus on what matters most. So, let’s work together to ensure that your audit experience is as smooth and stress-free as possible. Contact us today to learn more about how we can help you.

July 21, 2023

Understanding IRS Tax Appeals

Tax Lawyer

IRS’ CDP Appeal Program

We are pleased to feature this guest post from our colleagues at Mankus & Marchan, Ltd. discussing the intricacies of the appeal program, the appeal office, and tax court issues. © Copyright reserved.

In 1998, Congress passed the IRS Restructuring and Reform Act (“R&RA”). This act provided, among other things, that the IRS must issue a final notice and demand for payment (by certified mail) to a taxpayer (business or individual) with unpaid tax liabilities before it can take enforcement action to collect the tax balance due. The R&RA also required this notice to state that the taxpayer has a right to a collection due process (“CDP”) hearing with an IRS’ Appeals officer if he/she/it files such an appeal within 30 days from the date of such a final demand.

This portion of the R&RA was incorporated into IRC §6330 and gave the taxpayer the right to a hearing before an independent appeals officer of the IRS in order to dispute the tax liability and/or to propose alternative ways to settle it through other means, such as an offer in compromise (“OIC”), for example. Under IRC§7122, an OIC allows the IRS to settle the taxpayer’s liability for less than the full amount due, depending on the taxpayer’s financial wherewithal and other relevant circumstances.

One purpose of IRC§6330 was to protect the taxpayer from an overzealous collection agent of the IRS and to provide the taxpayer with another chance to work out the tax liability before an allegedly impartial (and less zealous) employee of the IRS’ Appeals office. In the 25 years since the enactment of this statute, it’s not clear to this practitioner that the intended purpose of this statute has fully achieved its aspirational goals.

While it is true that R&RA gave taxpayers additional due process rights, including jurisdiction to petition the U.S. Tax Court for a hearing before a Judge, in practice it still continues to have procedural problems. Below is a list of some of the procedural problems I have encountered in the last twenty five years.

Employees of the IRS Appeals Office

  1. The employees who handle the CDP appeals for the IRS Appeals office are known as “Settlement Officers” (“S/Os”). S/Os are often former employees of the Collection Division of the IRS, known as “Revenue Officers” (“R/Os”). As R/Os, they have been trained to collect delinquent taxes and have been doing so for a number of years. They have reached Grade 12, the highest grade for regular R/Os, before they are promoted to Grade 13 S/Os. Therefore, they often have an imbued collection mentality and find it hard to be objective and independent, as required by IRC§6330. The S/Os are often skeptical about taxpayers who have unpaid tax liabilities and have the mentality that “I pay my taxes and believe that everyone else should, too.” Alternatively, they justify their attitude with the statement that “settling with a taxpayer for less than the full amount due is not fair to the other taxpayers who pay their taxes in full.” These S/Os are sometimes less inclined to take special circumstances of the taxpayer into account, such as age, or health issues, for example. They are also less inclined to give the taxpayer a second chance after a business failure, or after an acrimonious and difficult divorce, for example. Consequently, some S/Os pay only lip service to being an independent arbiter between the IRS Collection Division and the taxpayer, as required by IRC§6330, as well as IRS’ numerous regulations.
  2. Under IRS regulations and policy guidelines, the S/O must act as an independent arbiters between the taxpayer and the R/O. The R/Os are usually the ones who initially determined the financial wherewithal of the taxpayer to pay the taxes due, also known as the “collection potential.” If the R/O reject the taxpayer’s offer of settlement through an OIC, for example, the S/O must review the file and determine if the R/O made the proper decision under the IRS’ procedures and guidelines. This requires the S/O to re-review the detailed financial documents and information submitted by the taxpayer to the R/O. On the surface, this sounds fairly straightforward; in practice, however, it’s much more complex. 
  3. Due to the budget cuts imposed on IRS by Congress over the past ten years, the IRS has been obligated to make staffing cuts and has shrunk from about 120,000 employees nationwide ten years ago to about 80,000, through 2021. This has resulted in increased workloads for the employees, including for the S/Os of the Appeals office. The S/Os have less time to devote to each taxpayer’s situation. In cases involving taxpayers with more complex financial pictures, the S/Os often agree with the R/O’s decision and just say no to the taxpayer’s proposal for settlement with the IRS through an OIC – not because that is the correct decision under IRS regulations, but because they would rather deny the request than be second-guessed by a manager for accepting less than the “collection potential.” Worst yet, to be put under a cloud of suspicion by the Treasury Inspector General for Tax Administration (“TIGTA”) for maybe showing favoritism to a particular taxpayer.
  4. Another problem presented by the budget and staffing cuts is the increased delays in handling the IRS’ workloads. Once the taxpayer submits an OIC, it may take months for IRS to assign the case to an employee for review. The financial documents submitted with the OIC, such as the taxpayer’s bank statements, for example, become outdated and then require the taxpayer to submit updated information once it is assigned to an IRS employee. If the taxpayer also files a CDP appeal under IRC§6330, there are additional delays before the case is assigned to an S/O.
  5. Being former R/O’s, however, some S/O’s often feel obligated to review the case de novo, for fear of being blamed by their managers for not doing a thorough financial analysis. Against IRS’ own regulations, the S/Os often require the taxpayers to present even more updated financial documents and information rather than deciding on whether the R/O made the right decision based on the financial documents that had been presented to him/her some months, or years, before. This adds more time and expense to the taxpayer to start all over again with the S/O, with little hope that the S/O is more sympathetic than the R/O who reviewed the case to begin with.
  6. While the S/Os I’ve dealt with in the past are often overcautious about accepting an OIC for fear of being blamed by their managers for accepting an amount less than the collection potential, most of the managers of the S/Os that I’ve dealt with do not get involved with the details of the case and leave it up to the S/Os to make the final decisions. The managers are usually just as overloaded as the S/Os. Having no practical recourse for a managerial review, the taxpayer is then left with no options if he/she doesn’t agree with the decision of the S/Os, other than to incur additional time and expense to file a petition in the US Tax Court for a judicial review.

US Tax Court Issues

  1. The US Tax Court is not a panacea, either. It is just as overloaded with cases as IRS itself. Besides an overload of cases, many of the tax court petitions are filed by pro se taxpayers who are not knowledgeable about the rules, regulations and procedures of the tax court. This leaves the judges and IRS Counsel’s attorneys overworked, frustrated and inclined to give short shrift to even meritorious cases. 
  2. IRS attorneys have begun the routine practice of filing motions for summary judgment in many cases and ask the tax court judges to dismiss the cases on grounds that there are no issues of material fact between the taxpayers’ petitions and IRS‘ answers to those petitions. I’ve had at least one of my cases dismissed on summary judgment by a US Tax Court Judge even though there were significant issues of material fact. If you’re concerned this could happen in your case, working with an experienced tax lawyer is wise. Unfortunately, the taxpayer could not afford the fees and the additional delays to file an appeal of this decision to the US District Court. He chose another route that resulted in zero dollars for the IRS, rather than the $200,000.00 that had been ultimately offered with the OIC.
  3. The IRS attorneys also take the position that the facts in these cases be limited to the documentary file and that no new evidence be admitted by the taxpayer at trial. The documentary file usually is limited to the documents in IRS’ records. One of the problems with this approach, however, is that many of the interactions between the taxpayers and the S/Os, such as the required CDP appeal conference, is conducted verbally and has no documentary record, other than the CDP Determination prepared and issued by the S/O. Not surprisingly, these CDP determinations are biased and present the perspective and point of view of the S/Os.
  4. Finally, the legal standard of review by the US Tax Court is “abuse of discretion,” which means that the Judge in the US Tax Court will not overturn the decision of the S/O, unless the taxpayer can prove to the Judge that the S/O abused his/her discretion. That is a very difficult standard to overcome.

In conclusion, the positive news is that while the R&RA has not worked as ideally as had been hoped for, IRS has begun to accept many more OICs, compared to its historical record before the passage of the R&RA in 1998. I’ve had a number of OICs accepted by the IRS, usually by more experienced and knowledgeable R/Os and S/Os who used their common sense, in addition to their knowledge of IRS’ procedures and regulation. It also helped that, despite their heavy workload, they possessed good communication skills.

April 27, 2023

Why You Need A Business Litigation Lawyer

Business Litigation Lawyer

When you are a business owner, you need to be as prepared as possible for anything that is thrown at you. As a business owner, you may encounter various legal issues that can be challenging to handle without the help of a lawyer you can trust. Business litigation lawyers specialize in handling legal disputes related to commercial transactions, contracts, partnerships, employment, and intellectual property, among others. Here are some reasons why you may need a lawyer for your business.

How a Lawyer Can Help

Protect your business interests

A lawyer, like a business litigation lawyer from a law firm like Eric Siegel Law, can help you protect your business interests by representing you in court, negotiating settlements, and advising you on legal matters. They have experience dealing with various legal issues that businesses face, such as breach of contract, fraud, and employment disputes.

By having a lawyer on your side, you can ensure that your business is protected from legal risks and potential losses. A lawyer can also help you avoid legal disputes by ensuring that your contracts and agreements are legally binding and enforceable.

Handle complex legal issues

Business litigation can be complex and involve various legal issues that require specialized knowledge and expertise. A lawyer can help you navigate complex legal issues and provide you with legal advice on matters such as intellectual property, regulatory compliance, and business contracts.

Minimize legal risks

Business lawyers can help you minimize legal risks by identifying potential legal issues and providing you with strategies to avoid legal disputes. By having a lawyer review your contracts and agreements, you can ensure that they are legally binding and enforceable.

A lawyer can also provide you with legal advice on compliance with state and federal laws, such as employment and environmental regulations. By being proactive in your legal approach, you can minimize the risk of legal disputes that can be costly and time-consuming.

Resolve disputes efficiently

A lawyer can help you resolve legal disputes efficiently by negotiating settlements or representing you in court. They can help you understand the legal implications of a dispute and provide you with strategies to resolve it effectively.

By having a business litigation lawyer on your side, you can resolve disputes quickly and efficiently, minimizing the impact on your business operations.

Protect your reputation

Business disputes can damage your business reputation and affect your ability to attract new customers and clients. A business litigation lawyer can help you protect your reputation by handling disputes professionally and confidentially. A lawyer can also advise you on the legal implications of your actions and help you avoid actions that can harm your business reputation.

What Should You Do?

As a business owner, you need a business litigation lawyer to protect your business interests, handle complex legal issues, minimize legal risks, resolve disputes efficiently, and protect your reputation. By having a skilled lawyer on your side, you can ensure that your business is legally protected and avoid potential legal risks that can harm your business operations.

Having a lawyer is an essential part of managing a successful business. It can save you time, money, and protect your business from potential legal risks. If you want to avoid legal disputes and ensure your business’s long-term success, consider hiring a local lawyer today.

March 22, 2023

The Benefits of Business Succession Planning

The Benefits of Business Succession PlanningBusiness succession planning is an essential element of any successful business owner’s long-term strategy. It is the process of developing and implementing a plan for the orderly transfer of ownership and management of a business to the next generation, family members, or key employees. Business succession planning is especially important, where many businesses are family-owned and operated.

Business owners often overlook succession planning, which can be a costly mistake. A well-executed business succession plan provides a variety of benefits, including:

  • Continuity: A succession plan helps ensure that your business will continue to operate successfully after your departure. It provides a roadmap for the transfer of knowledge, skills, and expertise from one generation or owner to the next.
  • Minimizing Disruption: A well-thought-out succession plan helps minimize the disruption that can occur when a business owner retires or passes away. With a clear plan in place, the transition of ownership and management can be seamless, allowing the business to continue operating smoothly.
  • Reducing Taxes: Business succession planning can help minimize the tax burden associated with the transfer of assets from one generation to the next. Careful planning can reduce or eliminate estate taxes, capital gains taxes, and other taxes associated with the transfer of ownership.
  • Protecting Assets: Business succession planning can help protect the assets of the business and the owners. A well-crafted plan can help minimize the risk of litigation, protect intellectual property, and ensure that assets are transferred in a manner that is consistent with the owner’s wishes.
  • Preserving Family Harmony: Family-owned businesses often face unique challenges when it comes to succession planning. A well-developed plan can help preserve family harmony by providing a clear roadmap for the transfer of ownership and management.

    Developing a Business Succession Plan

Developing a successful business succession plan requires careful consideration of a variety of factors. Some of the key steps in the process include:

  1. Identifying Potential Successors: The first step in developing a business succession plan is to identify potential successors. This may include family members, key employees, or outside buyers.
  2. Developing a Timeline: Once potential successors have been identified, it is important to develop a timeline for the transfer of ownership and management. This timeline should be flexible enough to accommodate unexpected events but structured enough to ensure that the transition is smooth.
  3. Valuing the Business: Valuing the business is a critical step in the succession planning process. A professional valuation can help ensure that the business is transferred at a fair price and that all parties are satisfied with the transaction.
  4. Structuring the Transaction: Once the business has been valued, it is important to structure the transaction in a manner that is tax-efficient and consistent with the owner’s wishes. This may involve the use of trusts, buy-sell agreements, or other legal structures.
  5. Communicating the Plan: Communication is key to the success of any business succession plan. All parties involved should be informed of the plan and their roles in the transition process.

    Working with a Business Succession Planning Attorney

Working with a business succession planning attorney can help ensure that your plan is effective and legally compliant. If you are a business owner, it is important to work with an experienced attorney from Silverman Law Office, PLLC, to develop a plan that meets your specific needs and goals. With the right plan in place, you can ensure that your business will continue to thrive for generations to come.

 

February 27, 2023

Breach Of Contract

Business Litigation

The best business advice anyone can give business owners is to get everything in writing and get it in a contract if possible. However, what happens when that contract is broken regardless of the original agreement around it? According to a commercial litigation lawyer from Brown Kiely, LLP, what happens next depends on just how the contract was broken:

Mutually Beneficial Breach of Contract

If both parties agree that they wish to break the contract, then that is all it takes. Of course, you will want to get this in writing from both parties and have them sign it. Things happen and times change. Mutually agreeing to step away from a contract happens more often than you might assume. It is one of the better legal outcomes that a business can expect when discussing breaches of contract.

Minor Breach

This is when you do not receive what was agreed upon by a certain date. For example, if a company promises to clean your company’s building on a Monday but they show up on Tuesday, then this is a minor breach of contract. As the name suggests, these are small infractions of a contract that may not always make it to court because they are so minor.

Material Breach

This is when you receive something different than what was included in the original agreement. For example, your fashion company ordered one hundred cotton t-shirts but actually received one hundred polyester shirts. If the company you ordered from does not rectify the mistake, then they can be taken to court to either pay up or hand over the goods that were promised.

Actual Breach

This is when the other side refuses to carry out the contract. If this costs your company money, then it can go to court. However, if someone signs a contract to work as your employee and then they never show up, that type of breach will not normally hold up unless there are extenuating circumstances.

Anticipatory Breach

This is when the other side announces ahead of time that they will not be participating in the contract. Again, if this hurts your company particularly financially, then this case can be taken to court.

The trick with contracts is to prove they are legally binding. While an oral contract is binding to an extent, it must be proven that someone said exactly what they said in order for it to hold up in court. In other words a video would be needed or several eye witnesses would be needed to prove that it was valid. However, if oral contracts are involved, there are certain dollar amounts and time limits on how much these contracts can be enforced for.

As for the other kinds of contracts, the court only awards money based on the amount of the contract. If you lost money because of the breach of contract, you will need to be able to prove that in a court of law and show that it was extremely damaging to the life of your company. Otherwise the courts will look to award you the amount for the contract itself. If you are facing contract issues and are in need of help, contact a lawyer near you immediately.