Tax Attorney https://klasing-associates.com Tue, 25 Apr 2017 23:22:30 +0000 en-US hourly 1 Louisiana Attorney Sentenced in Income and Employment Tax Evasion Case https://klasing-associates.com/louisiana-attorney-sentenced-income-employment-tax-evasion-case/ https://klasing-associates.com/louisiana-attorney-sentenced-income-employment-tax-evasion-case/#respond Tue, 25 Apr 2017 12:02:24 +0000 https://klasing-associates.com/?p=11411 The post Louisiana Attorney Sentenced in Income and Employment Tax Evasion Case appeared first on Tax Attorney.

Although most attorneys, accountants, and other professionals strive to hold themselves to a high moral and ethical standard, there will always be a few bad apples […]

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Although most attorneys, accountants, and other professionals strive to hold themselves to a high moral and ethical standard, there will always be a few bad apples that will act in their own self-interest in derogation of tax law. According to a Department of Justice press release, Michael Thiel, 66, criminal defense attorney from Baton Rouge, Louisiana, was sentenced to 30 months in prison for evading federal income and employment taxes.

It is important for taxpayers to realize that tax evasion can be charged both with evading the assessment of tax and after a tax has been assessed, by evading payment of tax. Per court documents, Thiel failed to file federal tax returns for tax years 2003 through 2013 nor did he pay the tax that he owed in a timely manner. Although he had the means to pay his tax debt, Thiel evaded paying his tax obligations by hiding his income and liquid assets using nominee entities and trusts. The trusts were formed so that Thiel was the trustee, beneficiary, and fiduciary. In 2008, in an effort to avoid detection of his deceit, Thiel created two additional trusts in the name of family members for the purpose of safekeeping his income.

In December of 2016, Thiel pleaded guilty to evading the payment of federal income and employment tax. All in all, Thiel shorted the government by nearly $1 million. In addition to his sentence of 30 months in a federal prison, Thiel will spend two years under supervised release and must repay approximately $996,000 to the IRS in restitution.

In addition to paying federal income tax, employers are required by federal law to withhold federal taxes from the paychecks of employees, including themselves. The amounts withheld must then be remitted to the IRS. Additionally, employers are required to pay employment tax for each employee. Although many (if not most) businesses hire a third-party payroll processing company to perform these services, there are an appreciable amount of small businesses that perform these duties manually. In those situations, it is easy to see how a taxpayer can fall into employment tax noncompliance where a business is having cash flow problems. Additionally, employment tax withholding and remittance is not the easiest or most intuitive process, and thus, it is possible that a business may fail to correctly comply with their payroll withholding and remittance obligations inadvertently. On the other hand, there are some employers who simply refuse to collect employment tax, or worse, collect employment tax and intentionally use the funds for personal (and typically extravagant) expenses.

The IRS and their Criminal Investigations Division understand that some businesses do not operate within the bounds of the law. In the process of their attempt to single out those who fail to do so, some small and medium-sized businesses find themselves unfairly targeted in an employment or income tax examination or criminal investigation. Whether you know that you or your company has made mistakes with regard to income or employment taxes or if you simply feel that you are being unfairly targeted, the first step to resolving the issue is contacting an experienced tax attorney.

Contact an Experienced Employment Tax Attorney Today

The Tax Attorneys, CPAs and EAs at the Tax Law Offices of David W. Klasing have extensive experience representing small to medium-sized business owners in a myriad of different civil and criminal tax situations. From routine tax examinations to full-blown criminal tax investigation, our zealous advocates are ready to defend and protect your physical and financial freedom. When the IRS or state taxing authority comes knocking, they bring with them an army of highly trained lawyers and civil and criminal tax investigators whom are trained and experienced at securing civil tax assessments, penalties and interest and where the situations warrants, criminal tax convictions. It is wise to answer with a team of experienced tax professionals standing firmly beside you. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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Here is a link to our practice overview video on employment tax representation.

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I didn’t file my 2016 FBAR or FATCA; Can I Fix my Noncompliance? https://klasing-associates.com/didnt-file-2016-fbar-fatca-can-fix-noncompliance/ https://klasing-associates.com/didnt-file-2016-fbar-fatca-can-fix-noncompliance/#respond Mon, 24 Apr 2017 16:46:54 +0000 https://klasing-associates.com/?p=11407 The post I didn’t file my 2016 FBAR or FATCA; Can I Fix my Noncompliance? appeared first on Tax Attorney.

Taxpayers are increasingly aware that of foreign account disclosure obligations. Since at least the late 2000s, the IRS has devoted significant resources towards educating taxpayers that […]

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Taxpayers are increasingly aware that of foreign account disclosure obligations. Since at least the late 2000s, the IRS has devoted significant resources towards educating taxpayers that secret offshore accounts are not acceptable and can result in significant legal liability. In most circumstances, taxpayers will face monetary penalties and fines. However, in certain circumstances where it appears the noncompliance was voluntary or intentional, a taxpayer can face criminal tax penalties that carry a potential federal prison sentence.

While the IRS is cracking down on concealed foreign accountant foreign income, taxpayers do still have options to mitigate the consequences they can face. Standard Offshore Voluntary Disclosure Program (OVDP) and Streamlined Disclosure can reduce the penalties owed and in some cases, eliminate offshore penalties. The Tax Lawyers of the Tax Law Offices of David W. Klasing can help you get a handle on FBAR, FATCA, and other international tax obligations before the IRS or Department of Justice pursue an enforcement action.

What if I Didn’t File FBAR?

Taxpayers are generally required to file FBAR when the aggregate balance of covered foreign accounts exceeds $10,000. Generally, this obligation is satisfied by filing FinCEN Form 114 through the Bank Secrecy Act web portal.

This obligation was traditionally due on June 30, however, 2017 was the first filing season where the obligation was moved up to align with Tax Day. Therefore, in 2017, the FBAR was required to be filed on or by April 18. In future years, the FBAR filing deadline will continue to align with the tax filing deadline.

Taxpayers may have missed the filing deadline because they became accustomed to the old June FBAR deadline. While an extension for FBAR was not available in the past, it is available for the first time in 2017. In fact, likely due to the new filing deadline, FinCEN announced that all taxpayers have an extension of time to file FBAR. The extended FBAR filing deadline is October 16, 2017. Taxpayers do not need to request an extension but should allow ample time to assess financial documents and records and file FBAR.

Even inadvertent failures to file FBAR can be punished with a fine of up to $10,000. The fine can be imposed for every year the FBAR obligation existed but was not satisfied.

What Can Happen if I didn’t File FATCA?

FATCA is a relatively new foreign disclosure obligation passed by Congress in 2010. Under FATCA, taxpayers are also required to make independent foreign account disclosures when their foreign assets exceed certain levels. There is no single filing threshold for FATCA and taxpayers who are married filing taxes jointly and living abroad can hold significantly more assets before they are required to disclose.

The FATCA obligation is satisfied by filing IRS Form 8968. This form should be filed at the same time the taxpayer’s tax return is filed. If the taxpayer fails to file FATCA, significant penalties are possible. In fact, continued noncompliance can trigger additional $10,000 penalties.

OVDP and Streamlined Disclosure can fix Offshore Account Disclosure Mistakes

If you suspect that you made errors regarding account disclosures, you can take steps to minimize the impact these mistakes can have on your finances and life. For taxpayers who are concerned that IRS agents may view their actions as “willful,” the OVDP program can reduce potential offshore fines while also providing some assurance against criminal prosecution. If willfulness is not a concern, the Streamlined Disclosure Program may be more appropriate. Under the Streamlined Disclosure Program, taxpayers can pay a significantly reduced or no offshore penalty and face less rigorous filing requirements. However, the Streamlined Program will not protect against potential criminal tax prosecutions.

Therefore it is essential for taxpayers to seek the guidance of a tax lawyer before taking any action on a standard or streamlined disclosure. Mistakes made during the disclosure process can have the effect of turning over evidence to the government regarding potential reporting noncompliance and crimes.

Work with Foreign Account Disclosure Lawyers in Los Angeles and Irvine

If you are concerned that mistakes made regarding FBAR or FATCA will come back and trigger significant penalties and potential criminal liability, the tax lawyers of the Tax Law Offices of David W. Klasing may be able to help.  When you come to our office as a client, you can rest assured that the disclosures you make will be protected due to the attorney-client privilege. In fact, if willfulness is a concern in your matter it is important that you only speak to a tax lawyer.

To schedule a confidential, reduced rate consultation with the tax lawyers of the Tax Law Offices of David W. Klasing, please call 800-681-1295. We have locations conveniently located in Los Angeles and in Irvine.

 

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I Didn’t File My 2016 Income Taxes, What Now? https://klasing-associates.com/didnt-file-2016-income-taxes-now/ https://klasing-associates.com/didnt-file-2016-income-taxes-now/#respond Fri, 21 Apr 2017 16:34:10 +0000 https://klasing-associates.com/?p=11403 The post I Didn’t File My 2016 Income Taxes, What Now? appeared first on Tax Attorney.

For most taxpayers, the 2016 tax filing deadline has come and gone. The regular tax filing deadline to file one’s 2016 tax return was April 18, […]

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For most taxpayers, the 2016 tax filing deadline has come and gone. The regular tax filing deadline to file one’s 2016 tax return was April 18, 2016. Taxpayers actually had an additional three days to file taxes this year because the traditional tax deadline fell on a weekend. The following Monday was Emancipation day which pushed Tax Day back to April 18 this year.

However, despite the extra time, some taxpayers still fail to file taxes. The reasons for a taxpayer’s failure to file will vary. Some taxpayers fail to file taxes because they believe that their income is too modest to the IRS or California FTB to notice. Other taxpayers may believe that they do not have an obligation to file taxes for an array of reasons. Other taxpayers may simply wish to avoid the “bad news” that completing and filing taxes will mean for one’s finances.

Unfortunately for taxpayers attempting to stay off the IRS’s radar, not filing taxes is one of the least effective means of accomplishing this goal. While some taxpayers may not hear from the IRS for the first year or two of non-filing, this type of non-compliance is extremely easy for the IRS to detect because the IRS matches forms from your employer.  And furthermore, the longer the non-filing practices persist, the larger the tax problems the taxpayer will face.

What Can Happen When I Don’t File Taxes?

When a taxpayer fails to file taxes, an array of consequences can be imposed following an audit or upon conviction of a tax crime. One the less serious side of the spectrum, a taxpayer can face fines for both their failure to file taxes and their failure to pay taxes. These penalties are computed for each full month or each part of a month where the tax obligation remained unfulfilled. Depending on the amount of the tax debt, these penalties and unpaid taxes can accumulate quickly.

One of the harshest consequences a tax non-filer can potentially face is tax evasion charges. Tax evasion is a felony and carries a federal prison sentence. Normally, one cannot face tax evasion charges for failures to take action or inaction. Thus, the question taxpayers sometimes ask is, “ How can I face tax evasion charges when I didn’t do anything.”

In truth, this characterization of “not doing anything” obscures the fact that prosecutors can bring tax evasion charges against tax non-filers when there is a “last affirmative act of evasion.” Essentially, a last affirmative act of evasion is any step or act that taxpayer takes to further their non-filing scheme or conceal their failure to comply with the U.S. Tax Code. Theoretically, a taxpayer who fails to file taxes for several years and then lies about it to an IRS agent could face tax evasion charges. Other acts in concert with tax non-filing that could potentially justify criminal tax evasion charges include:

  • Keeping multiple sets of books.
  • Making, keeping, or presenting false financial or tax documents.
  • Destroying company books or records.
  • Concealing assets or income
  • Any handling of one’s affairs in a different manner to avoid making records of transactions.

Simple statements regarding income, sources of income, and other factors can have serious consequences when made in the context of an audit or IRS investigation.

Handling Unpaid Back Taxes

No taxpayer wants to create new instances of legal liability. However, many taxpayers inadvertently do so when avoiding taxes because of fears about how much they owe for the current tax year or for past tax years. Instead of potentially making false statements to an agent or auditor, taxpayers should consult with a tax professional regarding getting caught up on filing and tax debt relief options. Some options to reduce the burden of tax debt include:

  • Tax payment plans – An array of tax payment plans are available for individual taxpayers and small businesses. Taxpayers should ensure that their plan is reasonable and tailored to their situation to increase the likelihood that it is accepted by the IRS.
  • Innocent spouse relief – This type of tax relief is most commonly sought after a divorce. During divorce proceedings, one spouse may learn that the spouse who handles taxes made a number of “mistakes.” If granted, this relief can excuse a taxpayer from liability.
  • Tax appeal – If you disagree with a tax determination or ruling, you have the opportunity to file an appeal. Several appeal options are available, however, time limits on when an appeal can be timely filed requires the taxpayer’s diligence and attention.
  • Offerin-compromise – This type of tax relief is rarely granted, but can excuse a taxpayer from some or all of their tax liability. Offers that consider a taxpayer’s reasonable collection potential are more likely to be accepted.

Working with a tax professional when you forget to file can help you assess whether these or other tax relief options are right for your situation and goals.

Work with Tax Lawyers in Los Angeles and Irvine

If you failed to file your 2016 taxes or have failed to file taxes for years, the tax attorneys of the Tax Law Offices of David W. Klasing can help. Our tax attorneys can help you come out of the shadows and back into compliance with the U.S. Tax Code. We work simultaneously to mitigate the consequences you face in coming back into compliance with the law. To schedule a confidential reduced rate tax consultation, please call our Irvine or Los Angeles law offices at 800-681-1295.

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What Happens if My Income Taxes Have Errors and I get Audited? https://klasing-associates.com/happens-income-taxes-errors-get-audited/ https://klasing-associates.com/happens-income-taxes-errors-get-audited/#respond Wed, 19 Apr 2017 19:34:39 +0000 https://klasing-associates.com/?p=11386 The post What Happens if My Income Taxes Have Errors and I get Audited? appeared first on Tax Attorney.

Now that the tax filing deadline for 2017 (to file 2016 tax returns) has passed, taxpayers throughout the nation have already had the pleasure of tracking […]

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Now that the tax filing deadline for 2017 (to file 2016 tax returns) has passed, taxpayers throughout the nation have already had the pleasure of tracking down W-2s, 1099s, and various documents showing income and other financial transactions. But what if a taxpayer decided that he or she would simply skip reporting 1099 income from one or more sources because when he or she put the numbers into his or her preferred tax program, it generated a huge tax bill?

The reason a 1099 may generate a seemingly huge tax burden is two-fold. First, recipients of 1099s are typically independent contractors meaning that they are also responsible for self-employment taxes typically paid by the employer. Second, their failure to withhold taxes throughout the year means that the full amount of tax is now due. To make matters even worse, the taxpayer or taxpaying entity may even have had a quarterly reporting obligation and additional penalties and interest have been included in calculations.

Omitting a 1099 is almost a sure way of drawing an audit because the IRS will compare the total revenue reported on the taxpayer’s schedule C to the total of the 1099’s issued on the taxpayer’s social security number or the business’s EIN number.  This process is also carried out where 1099’s are issued to an entity a taxpayer owns an interest in.  If the net income reported is less than the sum of the 1099’s at least a correspondence audit is almost guaranteed as this process is automated and the audits are computer generated.   If a large amount of unreported income is detected a criminal investigation could be sparked as any underreporting of income of at least $10,000 will require the auditor to consult with a technical fraud specialist whose sole job it is to work up civil audits for potential referral to the IRS criminal investigation division.  The mission of the criminal investigation division is to investigate and criminally prosecute tax cheats.

What Can I Expect from an Audit?

An audit by the IRS can take a number of forms. It may be conducted by mail which is known as a correspondence audit. Typically, correspondence audits are ordered for matters where there was a relatively minor mistake or error. However, correspondence audits can reveal much more concerning issues. Audits may also be conducted in-person in the field at the taxpayer’s home or office. In general, audits conducted at a taxpayer’s home or business can mean that agents are looking for assets and other signs of fraud. Clearly, this is not a good sign and in-person audits typically suggest a major tax problem.

Facing an Audit When You Intended to Commit Tax Fraud

When you face an audit and know or strongly suspect that you evaded taxes, intentionally filed a false return, or engaged in any array of fraudulent behavior you face a scenario that is known as an “eggshell audit.” The general concept of an eggshell audit is a taxpayer is selected for an audit when he or she knows that there are major improprieties or tax crimes in his or her files. The taxpayer thus faces a situation where he or she does not wish to unnecessarily disclose or tip the agent off regarding underlying fraud. However, the taxpayer must simultaneously worry about making false or misleading statements in furtherance of the fraud.

In certain scenarios, such conduct may create new grounds for obstructing the administration of the U.S. Tax Code. However, the worst-case scenario a taxpayer could face is that false statements made to an auditor are viewed as a “last affirmative act of fraud.” The presence of a last affirmative act of fraud could give rise to felony tax evasion charges under a Spies’ evasion theory. Tax evasion can be punished by a federal prison sentence, fines, restitution, and interest.

Facing an Audit When You Merely Made a Tax Error

If you merely made a tax error, you still face the potential for tax consequences. While it is significantly less likely that you will face criminal tax proceeding, there is always the possibility that agents will misinterpret statements, transactions, and behavior. In other circumstances, mistakes of law can produce harsh, inequitable outcomes.

Thus, even if you think your matter is a routine audit, it is important to have a representative who can set ground rules to prevent the audit from going off the rails. Similarly, it is important to proceed professionally and tactically to reduce the odds or confusion or inadvertent disclosures of damaging information. Furthermore, working with a tax attorney from the outset means that you will be well positioned for tax litigation or a tax appeal if it is required.

Work only with a Tax Lawyer When Dealing with a Suspected Tax Crime

If you are worried about a tax crime, do not return to your original preparer regardless of whether it was an accountant, a CPA, or a company that produces tax software. Their interests in protecting their professional reputation are now in conflict with your desire to mitigate any potential criminal prosecution. Some accountants may even provide evidence to an auditor that their client provided inaccurate, incomplete, or misleading information that caused the tax understatement to protect their reputation.

Furthermore, the accountant-client privilege is not widely recognized. Even where it is recognized, it is unlikely to protect criminal disclosures to the client original preparer from discovery or subpoena. Rather, when you have concerns about potential tax crimes, work with a criminal defense tax lawyer. The attorney-client privilege is robust and can protect the disclosures you make in seeking legal advice.

The Tax Attorneys, CPAs and EAs of the Tax Law Offices of David W. Klasing may be able to help you strategically navigate a high-risk tax audit or when you are being investigated for criminal tax charges. To schedule a reduced rate initial consultation, please call 800-681-1295 or schedule online today.

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Tax Treatment of Bitcoin is Certainly Uncertain https://klasing-associates.com/tax-treatment-bitcoin-certainly-uncertain/ https://klasing-associates.com/tax-treatment-bitcoin-certainly-uncertain/#respond Mon, 17 Apr 2017 16:10:10 +0000 https://klasing-associates.com/?p=11381 The post Tax Treatment of Bitcoin is Certainly Uncertain appeared first on Tax Attorney.

It has been over three years since the Internal Revenue Service released guidance on the tax treatment of bitcoin and other virtual currency. Although the IRS […]

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It has been over three years since the Internal Revenue Service released guidance on the tax treatment of bitcoin and other virtual currency. Although the IRS made it very clear in Notice 2014-21 that virtual currencies are property for U.S. federal income tax purposes, there are plenty of questions that have been left unanswered. Considering that the IRS expects taxpayers to comply with federal tax laws and to treat bitcoin and other virtual currency thereunder, it is concerning that there are so many unanswered questions that could end up causing a taxpayer to inadvertently fail to comply with federal tax laws. Dealing for or in a virtual currency should prompt a consultation with a bitcoin and virtual currency tax attorney.

Valuation

One of the vague pieces in the guidance of Notice 2014-21 is specific information surrounding the valuation of virtual currency. The Notice requires that taxpayers value virtual currency in a “reasonable manner that is consistently applied”. Although seemingly easy enough, there is no official valuation authority for bitcoin and most other virtual currency. Instead, various websites across the internet update exchange rates throughout the day. A simple Google search can evidence the fact that each bitcoin valuation estimate varies from one website to the next, making it extremely difficult for a taxpayer to measure the value of their virtual currency at the time of its disposition. Furthermore, taxpayers have not received guidance as to whether averaging valuations can be an appropriate valuation manner.

Another consideration regarding valuation is timing. Notice 2014-21 does not indicate if there is a particular time of day that virtual currency should be valued at. The fair market value of a unit of virtual currency will need to be determined at least twice, once upon acquisition (to determine basis) and upon disposition (to compare with the basis to compute gain). Unlike other property with market values that tend not to fluctuate nearly as much as virtual currency, the time-of-day delineation is less of an issue. But with bitcoin, along with other virtual currencies, there can be a large fluctuation between the morning and evening.

Expenses Related to Acquiring Virtual Currency

Many virtual currencies, such as bitcoin, enter the market through the mining process. Said simply, powerful computers solve increasingly complicated mathematical equations (“mining”) that are used to authenticate the validity of outstanding virtual currency. In exchange for the calculations, the owner of the computer receives virtual currency. IRS guidance has been quiet as to how the costs associated with mining virtual currencies are treated from a tax perspective.

Generally, taxpayers that produce a piece of property include the costs to produce or to acquire it on the basis of the particular property. Thus, if the mining of virtual currencies were considered to be a production activity, taxpayers would include the costs of the mining operation on the basis of the virtual currency. Notice 2014-21 appears to treat virtual currency mining as a service activity as it states that gross income is realized at fair market value when the virtual currency is received. This guidance appears to treat virtual currency mining as a service activity whereby a taxpayer is rendering a service and receiving payment in virtual currency. Under such a service-based approach, costs related to mining would likely be expensed when incurred.

FBAR Inclusion

Foreign Bank Account Reporting (FBAR) laws require that Americans with foreign financial accounts with combined balances of $10,000 or more report the existence of those accounts to the government on a yearly basis. The IRS has indicated that even money that is not in foreign bank accounts may be subject to FBAR requirements if the requisite dollar amount is held in other types of accounts like online casino accounts based in a foreign country.

Although FBAR laws only apply to currency (and thus assumedly does not apply to virtual currencies), the IRS and Department of Justice have made a push to gain more insight as to who owns virtual currency, particularly bitcoin. The Department of Justice recently issued a “John Doe” summons to Coinbase, a virtual currency trading company. The summons demands that Coinbase turn over records of all of those who have bought or sold bitcoin. This action was undoubtedly taken for enforcement purposes. Whether the IRS and DOJ will begin to target owners of virtual currency for FBAR violations is yet to be seen, but one thing is for sure: the IRS is aware that taxpayers are not reporting dispositions of virtual currencies and they are actively taking steps to catch them. It may be only a matter of time until efforts are expanded to encompass foreign virtual currency holdings.  Another area of concern is can bitcoin and other forms of virtual currency be 1031 exchanged in a tax-free manner.

Knowing When to Contact a Tax Attorney

The uncertain points about bitcoin and other virtual currencies described above are just a sampling of some of the issues that are unclear from a tax planning and compliance perspective. The tax code and corresponding regulations are comparable to a labyrinth wherein even the most informed taxpayer can become lost without the proper guidance. Dealing with or for virtual currency can create unexpected outcomes and without the proper guidance from an experienced tax attorney, has the potential of landing a taxpayer in a compliance nightmare. If you have bought, sold, or are dealing in a virtual currency, it is in your best interest to contact a tax attorney familiar with the subject matter as soon as possible.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers from all walks of life. From tax planning to defending against an audit or prosecution, our team of zealous advocates are ready to work diligently in your best interest. Don’t let the uncertainty of tax controversy cost you any more sleep. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on warning signs that an audit has gone criminal.

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Colorado Businessman Indicted on Tax Evasion Charges https://klasing-associates.com/colorado-businessman-indicted-tax-evasion-charges/ https://klasing-associates.com/colorado-businessman-indicted-tax-evasion-charges/#respond Mon, 17 Apr 2017 10:03:34 +0000 https://klasing-associates.com/?p=11376 The post Colorado Businessman Indicted on Tax Evasion Charges appeared first on Tax Attorney.

Sergio Murillo, a resident of Colorado was indicted last week for tax evasion by a federal grand jury sitting in Denver. According to prosecutors, Murillo owned […]

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Sergio Murillo, a resident of Colorado was indicted last week for tax evasion by a federal grand jury sitting in Denver. According to prosecutors, Murillo owned and operated Mountain High Window Cleaning. The indictment alleges that from 2007 through 2010, Murillo willfully evaded federal income taxes by causing clients to pay him in checks written in his name instead of the name of the business. Murillo then allegedly deposited a significant portion of his business payments into his personal bank account. When it came time to file Mountain High Window Cleaning and Murillo to file their federal tax returns, Murillo allegedly failed to include those payments received in his name as income, significantly reducing his taxable income.

According to a press release by the Department of Justice, when IRS employees questioned Murillo about checks written by customers, he allegedly explained that certain customers chose to write him checks personally, rather than to his business. Prosecutors have taken the position that he specifically directed clientele to write checks to him in an effort to willfully avoid federal income tax.

The IRS and Department of Justice will prosecute taxpayers who they feel have made willful attempts to evade or defeat tax assessment. This type of behavior typically involves the inclusion of false information on a tax return or the omission of an item that would increase a taxpayer’s tax liability, like additional income. A taxpayer can also be charged with tax evasion for making willful attempts to evade or otherwise avoid the payment of taxes owed.

In addition to showing the act of evasion on behalf of the defendant, the government must also prove beyond a reasonable doubt that (1) the defendant owed a “substantial income tax” in addition to that which was actually declared on his or her income tax return, (2) the defendant “made an affirmative attempt” to evade or defeat assessment or payment of tax and (3) the defendant’s actions were “willful,” i.e. deliberate. The IRS states that any “voluntary, intentional violation of a known legal duty” is sufficient to fulfill the willfulness requirement.

If convicted of tax evasion, a defendant can face up to five years in prison and criminal fines of up to $100,000 per count. Additionally, those found guilty of tax evasion are typically required to pay restitution and are often sentenced to additional supervised imprisonment.

Although the simple act of depositing business income into a personal bank account does not amount, by itself, to tax evasion, doing so with the intent to conceal income that should be reported on a business tax return could be considered tax evasion by the IRS or a state taxing authority. Businesses that are unsure if their business finance processes and bookkeeping have the potential of creating a criminal or civil tax exposure should consult with an experienced business tax attorney.

Another well-known scheme to attempt to evade taxable income is to take the checks that are written in your name to the bank that the check is written on and cash it.  Checks written to a business’s name will not ordinarily be cashed by the bank they are drawn upon. Bankers are very aware of the potential for income tax evasion associated with this method and have been known to require a fingerprint on the canceled check and have been known to issue suspicious activity reports (SARs) to the authorities.

The government is also aware of check cashing services that fraudsters have utilized to try and hide taxable income by converting the checks to their business or to them personally into cash thinking if the cash does not hit their books their accountant will be none the wiser.   Many a sting operation has been aimed at these check cashing organizations looking for income tax evaders.

If you are subject to an IRS or state tax examination or criminal tax investigation, or you know for a fact you have used on of these methods to purposely understate your federal or state tax liabilities, it is in your best interest to contact an experienced criminal tax defense attorney as soon as possible. A criminal tax defense attorney has the experience that civil tax professionals are known to have, but also has extensive training in criminal law, criminal tax procedure, and Constitutional law. These additional skill sets can help keep you out of jail and quite possibly get you back into compliance and remove or substantially mitigate the risk of criminal prosecution by using a domestic or foreign voluntary disclosure or through effective eggshell audit defense techniques.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have assisted taxpayers of all walks of life on a myriad of potential civil and criminal tax problems. From individuals to small businesses facing audits or a criminal tax investigation, our zealous advocates work with our clients to develop a cohesive and comprehensive plan of action to both maximize the potential of negative consequences of an audit or investigation and minimize the stress that such an experience can produce. Don’t lose another night of sleep over your potential tax troubles. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on criminal tax evasion.

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Owners of Pizza and Sandwich Shop First Face Raid & Then Federal Criminal Tax Charges https://klasing-associates.com/owners-pizza-sandwich-shop-first-face-raid-federal-criminal-tax-charges/ https://klasing-associates.com/owners-pizza-sandwich-shop-first-face-raid-federal-criminal-tax-charges/#respond Fri, 14 Apr 2017 18:16:37 +0000 https://klasing-associates.com/?p=11371 The post Owners of Pizza and Sandwich Shop First Face Raid & Then Federal Criminal Tax Charges appeared first on Tax Attorney.

Many owners of retail businesses where many transactions are carried out in cash can come to believe that the use of cash provides the cover and […]

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Many owners of retail businesses where many transactions are carried out in cash can come to believe that the use of cash provides the cover and plausible deniability required to commit tax fraud. Others may simply believe that their pizza shop, sandwich store, gas station, or convenience store is simply too small for the IRS, DOJ, or other government agencies to devote attention or resources to investigating. Unfortunately, this assumption is rarely accurate. Many business owners who adhere to this type of approach can soon find themselves looking on in fear as federal agents seize documents, records, and assets from the business.  It is also important to realize that any taxing authority be it State or Federal, Income tax or Sales Tax is very likely to criminally prosecute if a pattern of cash skimming is discovered especially if a “Zapper” program is used to hide cash sales.

The owners of an ostensibly successful pizza shop recently experienced this type of situation. Unfortunately, for business owners who play fast and loose with tax obligations and attract scrutiny and suspicion,  auditors and investigators simply follow the paper trail.

Business Owners Face Raid on Pizza Parlor Premises, Bank Safe Deposit Box

On the morning of February 15, 2017, the owners of Giovanni’s Roast Beef & Pizza started their day with federal agents knocking on the door of their restaurant. Theodora Panousos, 63, and Konstantinos Panousos, 37, were served with search warrants authorizing federal agents to search the premises and remove potentially relevant evidence and materials. The search of the pizza and sandwich shop resulted in the seizure of various materials including safe deposit box keys. The agents also searched Theodora Panousos’ home.

According to federal agents and prosecutors, following the raids, one or both business owners went to a local bank where they maintained at least one safe deposit box. According to prosecutors,  Theodora Panousos was captured on the bank’s surveillance cameras entering the bank with an empty tote bag and leaving the bank with the same bag fully stuffed.

After visiting the first bank, prosecutors claim that Panousos went to a second local bank.  At this location, prosecutors claim that Panousos told bank employees that she had lost her safe deposit box keys and asked for employees to drill the locks to open the box.

However, before bank employees could take this action, federal investigators arrived on the scene and presented a search warrant. The agents discovered that one safety deposit box contained over $400,000 in cash. A second safety deposit box contained an additional $224,000 in cash.

What Charges do the Business Owners Face?

The business owners are currently facing charges related to their obstruction of a federal tax crime investigation. The taxpayers both face two counts of “corruptly concealing a record, document or another object, and attempting to do so with the intent to impair the object’s integrity or availability for use in an official proceeding.” The taxpayers were under investigation for filing false tax returns and tax evasion. The taxpayers may yet still face additional tax charges stemming from their concealment of business income.

Aside from the charges mentioned above, it is also common for business owners in cash intensive industries who are caught engaging In tax fraud to have failed to meet all payroll tax obligations. The business owners may understate the number of employees at the location, pay workers under the table, misclassify employees as independent contractors or engage in a broad array of practices to reduce the company’s payroll tax obligations. While it is unclear if these practices were also present at these taxpayer’s business, these types of payroll tax schemes are reasonably common for business owners who are looking to reduce their tax obligations by any means necessary.

Concerned about Irregularities at Your Business?

If you are concerned about the actions of a bookkeeper – even a long-time, trusted employee – don’t hesitate to get a second opinion. Tax problems can create major cash flow issues for a company and can result in a company winding down operations. In the case of payroll tax fraud, responsible parties such as the business owner can be personally liable for the unpaid taxes. These and other issues may come to light during a tax audit.

If you know that you have a history of cheating on your taxes and for some reason can no longer live with the exposure, we can enter you into a foreign or domestic voluntary disclosure and effectively remove the risk of subsequent criminal prosecution and get you right with the federal and state governments.

The Tax Attorneys, CPAs and EAs at The Tax Law Offices of David W. Klasing can assist business owners in assessing their books for problems before an audit or government raid. If we find problems, we can develop solutions that mitigate the civil and potential criminal tax consequences you will face while also bringing your business back into compliance with the law. To schedule a confidential reduced rate initial consultation, please call our law firm at 800-681-1295 or schedule online today.

 

 

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U.S. Expatriate Taxpayers: Tax Filing and Foreign Account Reporting Due Dates Are Quickly Approaching https://klasing-associates.com/u-s-expatriate-taxpayers-tax-filing-foreign-account-reporting-due-dates-quickly-approaching/ https://klasing-associates.com/u-s-expatriate-taxpayers-tax-filing-foreign-account-reporting-due-dates-quickly-approaching/#respond Thu, 13 Apr 2017 16:20:56 +0000 https://klasing-associates.com/?p=11365 The post U.S. Expatriate Taxpayers: Tax Filing and Foreign Account Reporting Due Dates Are Quickly Approaching appeared first on Tax Attorney.

Some American citizens and tax residents may decide that the opportunities they wish to pursue will necessitate living outside of the United States. For many individuals, […]

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Some American citizens and tax residents may decide that the opportunities they wish to pursue will necessitate living outside of the United States. For many individuals, living abroad as an expat in a nation like Hong Kong, Brazil, the U.K., France, or Saudi Arabia is an adventure and a treasured life experience. For other people, living abroad as an expatriate is merely one element in the total package that brings them closer to their goals. However, regardless of your reasons or views on living abroad, most Americans will have tax obligations to consider while abroad. In fact, certain foreign tax and information reporting obligations are likely to exist for expats that are not widely known and carry large civil penalties if omitted.

U.S. Expats Living Abroad Have Additional time to File Taxes

When a person is living overseas, it can be relatively easy to become disengaged with the normal course of life. When one is living abroad, it is unlikely that the same reminders regarding tax filing deadlines will be part of daily life. At best, one might be sporadically reminded about taxes through conversations with fellow expats or through advertisements in publications targeting American expats. For these and other reason, expats living abroad automatically have an additional two months to file their taxes. This means the tax filing deadline for expats is June 15, 2017. However, one important note is that, if the taxpayer owes money, late payment penalties (up to 25% of tax due) and interest is calculated starting on the original April 18th 2017 due date as an extension of time to file is not an extension of time to pay.

If an extension to June does not permit ample time to file, then the taxpayer still has the option of filing for an additional extension. Taxpayers can file IRS Form 4868 before June 15, 2017, to receive an additional individual income tax extension to October 15, 2017.

Do I Need to File FBAR? FATCA Form 8938?

Expatriate taxpayers are also often concerned about whether they have a duty to file under FATCA or need to file an FBAR. The duty to file an FBAR exists when a taxpayer holds foreign accounts where the aggregate balance exceeds $10,000 during the calendar year. Thus, if a U.S. taxpayer holds two covered accounts, one with a balance of $2,000 and another account with a balance of $9,000, a duty to file the FBAR exists despite neither account exceeding the filing threshold individually. However, when aggregated, the taxpayer would have $11,000 in foreign assets and therefore an obligation to file FBAR exists.

For Form 8938 FATCA obligations, there is no single filing threshold. Rather, taxpayers should consider both their residency status and tax filing status. For expats, they are ordinarily concerned with the filing thresholds for citizens and taxpayers living outside of the United States. For taxpayers living abroad, a sole filer must file form 8938 under FATCA when he or she has $200,000 on the last day of the tax year or more than $300,000 in the account at any time during the year. If you file your taxes jointly with your spouse and live abroad, you must file taxes when the aggregate balance in your foreign accounts exceeds  $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

If you have an obligation to file an FBAR or an 8938 under FATCA, both obligations are now due on Tax Day. For individuals who have filed FBAR in the past, it is essential to note that this is the first year where the FBAR filing deadline was moved up to align with Tax Day. However, an automatic extension that allows taxpayers to delay FBAR filing until October 15 is in place. It is also important to note that while it may seem duplicative, one can have an obligation to file both FBAR and FATCA. That is, filing FBAR does not relieve a taxpayer of the independent duty to file FATCA and vice-versa.

Tax and Foreign Account Disclosure Guidance for Expats

If you have questions regarding whether you have an obligation to file U.S. taxes, FATCA, FBAR, or any other tax obligation while abroad the Tax Lawyers, CPAs and EAs of the Tax Law Offices of David W. Klasing may be able to assist. We can also review your finances and previous tax filings to look for mistakes and errors that can result in unexpected tax or foreign information reporting obligations or trigger an audit. To schedule a confidential, reduced rate initial consultation, call our Irvine or Los Angeles law offices at 800-681-1295 or schedule online today.

 

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Police Officers and Law Enforcement Officers Can Face Tax Audits and Civil/Criminal Tax Penalties Even When Using a Tax Preparer https://klasing-associates.com/police-officers-law-enforcement-officers-can-face-tax-audits-civilcriminal-tax-penalties-even-using-tax-preparer/ https://klasing-associates.com/police-officers-law-enforcement-officers-can-face-tax-audits-civilcriminal-tax-penalties-even-using-tax-preparer/#respond Tue, 11 Apr 2017 23:38:58 +0000 https://klasing-associates.com/?p=11358 The post Police Officers and Law Enforcement Officers Can Face Tax Audits and Civil/Criminal Tax Penalties Even When Using a Tax Preparer appeared first on Tax Attorney.

Police officers, investigators, detectives, and other individuals who dedicate their life to carrying out a role in the criminal justice system are viewed as modern day […]

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Police officers, investigators, detectives, and other individuals who dedicate their life to carrying out a role in the criminal justice system are viewed as modern day heroes. The public relies on law enforcement officers to carry out their duties effectively and ethically. When the public comes to believe that a police officer may not be acting in the best interest of the town or community, significant efforts and energy can be expended to address the concern.

Thus, police officers are held to an extremely high standard. When one considers the fact that police officers are responsible for enforcing the laws, it makes sense that officers would be held to at least the same standard as the public is where income taxes are concerned. Unfortunately, Law enforcement officers are held to a high standard when it comes to income tax obligations. In fact, the Standards of Conduct Model Policy written by the International Association of Chiefs of Police and issued August 1, 1997, states under section IV, Procedures, that“. . . officers shall not violate any law or any agency policy, rule, or procedure.” Officers who attempt to play fast and loose with their tax obligations can face an audit along with any accompanying exposure for prosecution for any tax crimes they commit.

IRS Reports a Spike in Prosecutions of Tax Preparers Serving Law Enforcement Officers

While many police officers try to do the right thing, and work with a tax professional to prepare their taxes, working with a tax preparer is not a guarantee that all questions of tax law will be appropriately handled. In fact, IRS Criminal Investigations (IRS-CI) has reported a spike in investigations and prosecutions against tax preparers who primarily market to and service police officers.

While the criminal investigation may initially focus on the tax preparer, that doesn’t mean that the law enforcement officer will escape without, at a minimum, suffering through an embarrassing investigation and audit. Throughout the investigation process, the IRS agent is likely to raise questions probing to determine whether the police officer knew or should have known about the fraud. The investigator is also likely to determine the degree of participation, if any, of the officer.  This creates criminal tax exposure for the officer as well as the tax preparer.

The fact of the matter is that taxpayers remain responsible for the information contained and set forth on their tax returns. When a taxpayer submits a tax return that contains incorrect or inaccurate information, he or she may be liable for an accuracy-related penalty under Section 6662 of the tax code. When it is believed that the taxpayer intentionally or voluntarily violated his or her tax duties, then more serious tax charges up to and including criminal tax evasion and a 75% civil fraud penalty can be advanced. Officers who are convicted of tax-related offenses are often subject to discipline up to and including dismissal from the force.

The Danger of Unresolved Tax Issues

One of the dangers of using a tax preparer that holds him or herself as a “specialist” in law enforcement officer taxes is the potential that he or she is engaging in improper actions to justify their lofty promises of large tax deductions. One common scheme by tax preparers involves mischaracterizing the officer’s expenses to reduce taxable income. The tax preparer may claim that “lots of police officers set up private security businesses” so no one will notice. However, in reality, the tax preparer may be “creating” a sham company solely to fraudulently reduce the individual’s taxable income.

The issue with this type and many other types of fraudulent tax practices are that they are easily discoverable by the auditing revenue agent. When the IRS or Franchise Tax Board agent looks at your finances, he or she is simply going to follow the paper trail. If your tax and financial records raise red flags, it is highly likely that the agent will engage in a much more thorough review. If the agent believes that the law enforcement officer contributed or played a role in the tax fraud, the matter may be referred to the IRS or Franchise Tax Board Criminal Investigations Department.

What Should Police Officers Do When they Face a Tax Audit?

All tax situations and scenarios are different. However, it is wise for police officers and others to periodically get a second opinion on some of the tactics employed by their tax preparer. In light of IRS warnings that some unscrupulous preparers may be targeting law enforcement officers, this type of due diligence is essential. Similarly, if you have received a letter from the IRS regarding an upcoming audit, it is also wise to determine whether any underlying tax fraud issues exist before they are discovered at audit. If the Tax Law Offices of David W. Klasing is hired for this purpose and we discover criminal tax fraud exposure issues, we can work to develop an audit strategy likely to effectively mitigate the potential criminal tax consequences you face especially where your preparer is under criminal investigation.

The Tax Attorneys, CPAs and EAs of the Tax Law Offices of David W. Klasing approach criminal tax exposure issues strategically. If you have concerns about aggressive or fraudulent tax positions taken by a preparer or are worried about an audit, we would be honored to assist. To schedule a confidential, reduced rate consultation please call 800-681-1295 or schedule online today.

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FBAR Non-Compliance Results in Sanctions of $1,000 a day for a Taxpayer https://klasing-associates.com/fbar-non-compliance-results-sanctions-1000-day-taxpayer/ https://klasing-associates.com/fbar-non-compliance-results-sanctions-1000-day-taxpayer/#respond Tue, 11 Apr 2017 18:41:22 +0000 https://klasing-associates.com/?p=11353 The post FBAR Non-Compliance Results in Sanctions of $1,000 a day for a Taxpayer appeared first on Tax Attorney.

Taxpayers who fail to consider and comply with offshore financial account reporting standards can face extremely serious consequences. However, in at least some cases, wealthy taxpayers […]

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Taxpayers who fail to consider and comply with offshore financial account reporting standards can face extremely serious consequences. However, in at least some cases, wealthy taxpayers decide to take the risk that their accounts will remain secret and undiscovered. Unfortunately for taxpayers who come to rely on keeping one or more accounts secret from the IRS and government, it has never been more difficult to do so.

This is because the U.S. government has taken many steps to crack down on unreported offshore accounts. Aside from the passage of Foreign Account Tax Compliance Act (FATCA), the United States government has signed international governmental agreements to allow tax information sharing with more than 100 different nations. Thus, taxpayers generally cannot rely on a lack of communication or bank secrecy laws to keep accounts secret from the IRS and U.S. government. Discovery of secret foreign accounts is often only an investigation or an audit away.

And yet, some taxpayers continue to avoid offshore reporting obligations. In time, a court’s patience can be exhausted and the taxpayer may face sanctions without ever reaching the merits of the case.

Continued FBAR Noncompliance Can Result in an Order for Sanctions

In a recent proceeding in the Southern District of New York, a court ordered that Respondent E, a taxpayer with foreign bank accounts, had violated the terms of a 2010 subpoena and subsequent 2013 compulsion order.

The proceedings in question were motivated by a October 4, 2010, subpoena that sought “[a]ny and all records created, obtained, and or maintained from October 5, 2005, to the present that are in [Respondent’s] care, custody, or control relating to foreign bank accounts in which she maintained a financial interest.” Subsequent to the 2013 compulsion order, the taxpayer finally produced just 2 documents.

However, in December 2015, the U.S. government obtained documents from the government of Lichtenstein concerning this taxpayer’s accounts. These foreign tax documents revealed that the taxpayer was concealing her ownership of accounts through a foreign sham entity. From these foreign documents and through other sources, auditors determined that the taxpayer failed to report and concealed at least three accounts containing millions of dollars. These accounts included a Credit Suisse account held jointly with her husband, an HSBC account in France, and a financial account in the name of a foundation in Lichtenstein.

Due to these alleged reporting failures and steps taken to conceal these accounts, was charged with obstructing and impeding the due administration of the internal revenue laws, and subscribing to a false and fraudulent U.S. individual income tax return. The government also sought an order for sanctions to be imposed at a rate of $5,000 a day until the taxpayer turned over the relevant bank and financial documents.

Court Finds Sanction Order Justified

In its assessment of the government’s motion for sanctions against the taxpayer, the court adhered to a three-prong analysis. The court considered the character and magnitude of the threatened harm of continued contempt weighed against the probability that the proposed sanctions would be effective. Additionally, the court considered the financial impact of the sanctions on the taxpayer.

Here, the taxpayer’s arguments regarding why the sanctions were inappropriate centered around two main points. First, the taxpayer argued sanctions were inappropriate because of a particularly cramped definition regarding what constituted records in her “care, custody, or control.” In this case, the taxpayer improperly focused on physical control of the records rather than the correct standard which considers legal control. Furthermore, the taxpayer failed to consider that the Lichtenstein documents established an association and relationship between the taxpayer and the foreign financial accounts. As such, the taxpayer had the legal authority and practical ability to obtain and produce these records.

The taxpayer also argued that, in light of the indictment against her, she could not comply with the terms of the 2010 subpoena because it would amount to improperly aiding the government in its preparation for a criminal trial. In this context, the court was not receptive to this argument first noting that a grand jury’s wide-ranging investigative power “does not end when it indicts a defendant.” Rather, the taxpayer would need to rebut the presumption that such activities were in the regular course of grand jury proceedings and show some evidence of irregularity. The taxpayer failed to produce any evidence of this type.

Due to the foregoing, the court determined that the taxpayer had not produced all relevant records in violation of the subpoena and order to compel. While the court found that the potential for harm due to continued noncompliance was significant, it did find that a sanction of $5,000 a day was excessive. The court believed that sanctions in the amount of $1,000 was sufficient to compel the taxpayer to produce the required documents.

Failure to Comply with FBAR can Result in Significant Penalties

It is essential to note that the court has not yet addressed the merits of the case in this matter. Therefore, the taxpayer can still face additional penalties and fines due to her underlying conduct regarding failing to report offshore accounts. Thus, the situation and consequences faced may still get worse for this taxpayer before there is light at the end of the tunnel.

However, the consequences of FBAR non-compliance do not have to reach this stage. When taxpayers attempt to conceal or cover-up past tax noncompliance, they often compound their liability and make the situation worse. Taxpayers who consult with a FBAR lawyer and consider their full range of options may be able to mitigate the consequences of their noncompliance through Offshore Voluntary Disclosure Program (OVDP) or Streamlined Disclosure.

The Tax Attorneys , CPAs, CFAs and EAs of the Tax Law Offices of David W. Klasing can help you correct foreign disclosure issues before facing an audit or criminal tax charges. To schedule a confidential and reduced rate initial consultation, please call 800-681-1295 or schedule online today.

 

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