Tax Attorney Facing Prison For Allegedly Helping Billionaires Robert Smith And Bob Brockman Dodge The IRS

It’s a new legal development for private equity billionaire Robert F. Smith and his onetime mentor Bob Brockman, already accused of the biggest tax evasion in U.S. history.

Yesterday, the U.S. Department of Justice announced the indictment of Carlos E. Kepke, a Houston tax attorney who prosecutors say conspired with Smith to hide $225 million in untaxed capital gains from the IRS between 1999 and 2014 — during the years when Smith was rapidly growing Vista Equity Partners.

Prosecutors say that Smith paid Kepke $1 million since 2007 for his services, which included assisting in the preparation of Smith’s false 2012-2014 tax returns and setting up offshore entities to aid in tax evasion.

Prosecutors allege Kepke created for Smith a limited liability company in Nevis called Flash Holdings, as well as an offshore trust based in Belize, called Excelsior Trust. Excelsior was set up to own Flash. Thus, when Smith’s portion of capital gains from Vista funds was deposited into accounts held in Flash’s name in Switzerland and the British Virgin Islands, the money could be routed to the offshore Excelsior trust, away from the eyes of the IRS.

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When billionaire Robert Smith ended his 2019 Morehouse College commencement speech by vowing to pay off student debt for the entire graduating class, cheers of “MVP, MVP, MVP!” rose from students and faculty on the Atlanta campus.
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According to the DOJ’s press release, Kepke enabled what Smith has admitted to as an illegal scheme. Thanks to Kepke’s work, “Smith was able to hide this income because Excelsior, and not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS.”

An official indictment is not yet available from U.S. District Court for the Northern District of California, in San Francisco. Kepke is scheduled to be arraigned April 22. According to the announcement, he faces 5 years in prison on one conspiracy count and 3 years on each of 3 counts of preparing false tax returns. There was no answer at the number listed for Kepke’s Houston law office. A University of Texas law school graduate, he appears to have been admitted to the Texas bar in 1964.

This indictment looks to be the next step in the DOJ’s unraveling of a decade’s long financial fraud against U.S. taxpayers perpetrated not just by Robert Smith but also, allegedly, by his mentor and financial backer Bob Brockman. Brockman in 2000 agreed to put up $1 billion to fund the startup of Smith’s private equity group, which now has $73 billion under management.

Last October Smith entered into a “non-prosecution agreement” with the DOJ, in which he admitted to felony tax evasion and the wrongful use of roughly $30 million in charitable trust funds for his personal benefit. Smith agreed to fork over $139 million in taxes and penalties, and to cooperate against affiliated scofflaws like Brockman, and Kepke. U.S. Attorney David L. Anderson said at the time that despite having committed “serious crimes,” Smith’s cooperation had “put him on a path away from indictment.”

Kepke’s indictment comes as no surprise to Smith’s camp, who insist Smith is now out of legal jeopardy. “This indictment is not a new development as top Robert Smith. He resolved his situation last year with the government and this in no way affects that resolution,” says Smith attorney Emily Hughes

Indeed, prosecutors are no doubt focusing their attentions on Kepke’s primary client, Bob Brockman. Indicted by the DOJ for evading taxes on some $2 billion in gains from Vista Equity Partners investments, Brockman does not appear to be in a position to cut a deal like Smith did. Especially with Smith providing evidence against him.

According to a December 2020 motion by Brockman’s attorneys to move his case from San Francisco to Houston, Smith has already told prosecutors that Kepke “had a central role in establishing the trusts and assisting Mr. Brockman with asset planning.”

Kepke’s name also appears in a secret 2017 memo written to Brockman by his money man and former trustee Evatt Tamine (submitted as evidence), in which Tamine writes about meeting with Smith, his attorney and Carlos Kepke in order to help cover their tracks: “I worked through their files and identified areas of concern.”

In that same memo, Tamine describes traveling to see the widow of a recently deceased Brockman confidant from whom he collected and destroyed “drives, disks or documents” with incriminating financial information.

With Smith and Tamine already cooperating against Brockman, this new indictment could be aimed at getting Kepke to talk as well.

Meanwhile in Bermuda, oversight of the multi-billion-dollar A. Eugene Brockman Charitable Trust, remains in limbo, as attorneys for Brockman and his wife Dorothy argued recently to the Bermuda appelate court that they ought to appoint a new independent trustee to oversee the trust, replacing anyone connected to former trustee Tamine. According to attorneys, Cayman Island-based trust specialist Maples Group has agreed to take on the job.

Entities owned by the Brockman trust control Reynolds and Reynolds, the provider of software solutions to auto dealerships which Brockman ran until his retirement last year. According to court documents, he and his attorneys are now focused on convincing prosecutors and court-appointed psychiatrists that he is suffering from dementia too far advanced to allow him to stand trial.

Source: Tax Attorney Facing Prison For Allegedly Helping Billionaires Robert Smith And Bob Brockman Dodge The IRS

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Tax Refund Chart Can Help You Guess When You’ll Receive Your Money In 2021

Hear that? It’s the sound of millions of taxpayers cheering across the country: the Internal Revenue Service (IRS) has announced the open of the tax filing season. That date is February 12, 2021.

If you want to get your refund as fast as possible, the IRS recommends that you e-file your tax return and use direct deposit (be sure to double-check those account numbers before you send your return). If you file by paper, it will take longer. According to the IRS, eight out of 10 taxpayers get their refunds by using direct deposit.

Assuming no delays, here are my best guesses for expected tax refunds based on filing dates and information from the IRS. I can’t stress enough that these are simply educated guesses. I like math and charts as much as the next girl, but there are a number of factors that could affect your tax refund (keep reading)

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refund chart
KPE

* No matter when you filed your tax return, if you claimed the EITC or the ACTC, don’t forget to take into consideration that hold date.

My numbers are based on an expected IRS receipt date beginning on the open of tax season, February 12, 2021, through the close of tax season on April 15, 2021. To keep the chart manageable, I’ve assumed the IRS received your e-filed tax return on the first business day of the week; that’s usually a Monday, but if there’s a holiday (like President’s Day), I’ve skipped ahead until Tuesday. The same logic holds true for issuing refunds. In reality, the IRS issues tax refunds throughout the week, so the date could move forward or backward depending on the day your return was received.

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Other sites may have different numbers but remember they’re just guessing, too: The IRS no longer makes their tax refund processing chart public.

Do not rely on any tax refund chart—this one included—for date-specific planning like a large purchase or a paying back a loan. 

Remember that if you claim the earned-income tax credit (EITC) and the additional child tax credit (ACTC), the IRS must wait until February 15 to begin issuing refunds to taxpayers who claim the EITC or the ACTC (that’s pretty close to the start date). Don’t forget to consider regular processing times for banks and factor in weekends and the President’s Day holiday. The IRS expects to see tax refunds begin reaching those claiming EITC and ACTC during the first week of March for those who file electronically with direct deposit and there are no issues with their tax returns.

If you want to get your tax refund as fast as possible, the IRS recommends that you e-file your tax return and use direct deposit. Keep in mind that if you e-file, the day that the IRS accepts your return may not be the day that you hit send or give the green light to your preparer. Check your e-filing confirmation for the actual date that the IRS accepts your return.

If you file by paper, it will take longer. Processing times can take more than four to six weeks in the best of times (and these are not the best of times) since the IRS has to manually input data. Don’t forget about postal holidays, too, when counting on the mail. There’s just one official postal holiday during tax season, Monday, February 15 (President’s Day), and one that follows just after tax season, Monday, May 31 (Memorial Day).

Even if you request direct deposit, you may still receive a paper check. Since 2014, the IRS has limited the number of refunds that can be deposited into a single account or applied to a prepaid debit card to three. Taxpayers who exceed the limit will instead receive a paper check. Additionally, the IRS will only issue a refund by direct deposit into an account in your own name, your spouse’s name or both if it’s a joint account. If there’s an issue with the account, the IRS will send a paper check.

If you’re looking for more information about the timing of your tax refund, don’t reach out to your tax professional. Instead, the IRS encourages you to use the “Get Refund Status” tool. Have your Social security number or ITIN, filing status and exact refund amount handy. Refund updates should appear 24 hours after your e-filing has been accepted or four weeks after you mailed your paper return. The IRS expect that the refund tool will be updated for those claiming EITC and ACTC, beginning on February 22, 2021. Otherwise, the IRS updates the site once per day, usually overnight, so there’s no need to check more than once during the day.

If you’re looking for tax information on the go, you can check your refund status with IRS2Go, the official mobile app of the IRS. The app includes a tax refund status tracker.

Remember that the IRS will not contact you by phone or by email regarding your refund. If you receive a call from someone claiming to be from the IRS or a debt collection agency regarding your tax refund, hang up immediately: it is a scam. Follow me on Twitter or LinkedIn. Check out my website

Kelly Phillips Erb

Kelly Phillips Erb Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future, I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I earned an LL.M Taxation. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. At one such audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax. Just like that, Taxgirl® was born.

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Gregg Learning

Once the tax liability has been determined, we must consider the final three items in income tax preparation: tax credits, other taxes, and payments. When an overpayment occurs, the taxpayer has the option of receiving a refund or applying the amount of the overpayment to next year’s estimated tax.

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Your Financial Year-End Checklist

2020 is over, and for many of you, it can’t end soon enough. There will be plenty of time to celebrate the end of one year and to hope for better days in the one ahead. But before we get to that, take these steps to get financially ready for 2021.

1) Review your goals: The end of the year is a great time to review the goals you made at the beginning of the year and set new ones for 2021. How did you do this year? Is there anything you’re proud of accomplishing? I like to start with bright spots because they can guide you toward success as you set new goals. But let’s be realistic, too; 2020 threw us a lot of curveballs.

Was there anything you wish you could have done better? You can also learn from any potential stumbling blocks and figure out how to use them as stepping-stones next year. You may also want to take time now to review your net worth. That’s one way to gauge the progress you’ve made in your financial health this year.

2) Update your budget: Did you save the money that you wanted to? Pay off the debt that you needed to? The end of the year gives you a solid end point to assess whether met the goals you set at the outset of 2020. What if you didn’t have a budget or financial goals? You’ve got a blank slate ahead. Why not create a budget that works? 

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3) Create a holiday bucket: Holidays can be budget breakers, so why not incorporate them into your spending goals right from the start? Christmas may look a lot different this year. But you can still create a separate bucket for holiday spending and when that money is gone, stop spending. You’ll thank yourself in January when you don’t have an unusually large credit card bill.

4) Use it or lose it: Some of your benefits—like vacation days or a medical or dependent care flexible spending account (FSA)—expire at the end of the year. Take stock of what you have left and use these benefits to your advantage. MORE FOR YOUPPP Loan Forgiveness Application Guidance For The Self-Employed, Freelancers And ContractorsSBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To KnowWhat You Can Do Now To Maximize Paycheck Protection Loan Forgiveness

5) Make any last charitable contributions: December 31st is the last day your charitable contributions can be deducted on your 2020 tax return. If giving to charity is a part of your spending plan, you can use these questions to help make the most of your charitable giving.

6) Pump up your 529: Just like charitable contributions, contributions to your 529 college savings plan must be made by December 31st to count for this tax year. Find out if your state is one of over 30 that allow you to deduct your contribution. You can find the specific deduction here. If your state is one of the four that allow an unlimited deduction, keep in mind the yearly gift-tax and super-funding rules.

7) Max out your 401k: While you have until April to make contributions to your traditional IRA, Roth IRA and HSA, you can only contribute to your 401k through December 31st. So, if you have extra cash and are looking to boost your savings, consider contributing your last couple of checks entirely to your 401k. Business owners can do the same with the employee portion of your Solo 401k contributions.

8) Find your tax return: You’ll be doing your taxes before you know it, so use this time to get prepared. Review last year’s return and make a mental list of records you’ll need to assemble. Year-end is also a good time to decide whether a Roth conversion makes sense for you.

9) Review your business structure: Evaluate your business structure and the QBI deduction to identify any changes you need to make to your business. You might want to set up a solo 401k, for instance, and if so, you’ll have to act before December 31st (although you can make employer/profit sharing contributions up to the business tax filing deadline).

10) Defer income and incur expenses: If you’re a business owner, you may also want to look at ways to defer income into 2021 or pay for business expenses you anticipate for early next year. This is any easy way to reduce your tax liability for 2020. However, remember not to spend money on business expenses that you wouldn’t otherwise incur just for a tax deduction. Spending a $1 to save 24 cents still costs you 76 cents.

 11) Will and trust review: The end of the year is a good time to take stock of changes in your life—like getting married or divorced, having children, starting a business or retiring.  Your estate plan should reflect these changes. Get out your will, documentation for trusts you’ve established and powers of attorney and make sure they match your current situation.

12) Insurance documents: Insurance documents also need to cover your current situation. Take a look at your life and disability insurance policies to make sure they protect your current income and those dependent on it. Your renters or homeowners insurance should cover any additional big purchases you made during the year. And lastly, you should review your health insurance policy for any upcoming changes for 2020. For those of you enrolling in the Market Place, you have until December 15th to pick your plan.

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My last bonus task is to enjoy this holiday season. I love the holidays because you can reflect and appreciate what you have. We’ve been tested a lot this year, living our lives through a pandemic, racial unrest and a contentious election. I hope the end of the year brings you comfort and peace. Follow me on Twitter or LinkedIn. Check out my website

Brian Thompson

Brian Thompson

As both a tax attorney and a CERTIFIED FINANCIAL PLANNER™, I provide comprehensive financial planning to LGBTQ entrepreneurs who run mission-driven businesses. I hold a special place in my heart for small-business owners. I spent a decade defending them against the IRS as a tax attorney and have become one as a financial advisor. It’s a position filled with hope and opportunity. It gives you the most flexibility to create the life that you want. I also understand the added stresses of running a business while being a person of color and a part of the LGBTQ community. You may feel like you don’t have access to the knowledge that others do. I’m here to help lift some of that weight from your shoulders.

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Critics:

A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget. For example, jobs are an income source, while bills and rent payments are expenses.

Contents

Great Ways to Get Charitable Tax Deductions

Follow these tax tips to get the biggest tax savings when making charitable contributions of cash or checks, household goods, cars or appreciated property.

Choose the right organization

In order for your donation to be deductible, it must go to a nonprofit group that is approved by the IRS. Most often, these are charitable, religious or educational organizations, though they can also be everything from your local volunteer fire company to a group for the prevention of cruelty to animals.

  • If you’re not sure whether the group you want to help is approved by the IRS to receive tax-deductible donations, check online at IRS Exempt Organizations Select Check.
  • This site allows you to enter an organization’s name and location to instantly find out if it qualifies.

Make sure it counts

To write off any cash contributions, no matter how small, you need a canceled check, bank record or a receipt with the charity’s name and donation amount. That means that putting cash in the church collection plate or the Salvation Army bucket is a no-no if you want to be able to take a deduction for it.Your resource on tax filingTax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.Go Now

As with all deductions, timing is everything. You can take the deduction for your contribution in the year that you make it.

  • For example, if you mailed a check to your favorite charity on December 31, you can write it off on that year’s tax return.
  • If you charge the donation on a credit card, the write-off is claimed in the year the charge is made, even if you don’t pay the credit card bill until the following year.
  • But a pledge to make a donation is different: Because it’s only a promise to make a future donation, there’s no deduction until you actually follow through.

Donations are limited

There’s also a limit on how much you can deduct. The basic rule is that your contributions to qualified public charities, colleges and religious groups can’t exceed 60 percent of your Adjusted Gross Income (AGI) (100% of AGI in 2020 for qualified charities).

  • The caps are a bit lower for gifts to other types of nonprofits. When it comes to gifts of appreciated property, the limit drops to 30 percent of AGI.
  • If these restrictions limit your write-off in the year of the gift, the excess deduction carries over to the next year.

Also, keep in mind that you can’t write off a contribution to the extent that you get something in return.

For example:

  • If you buy a $50 ticket to a fundraising dinner at a church, but the cost of the dinner is $20, you can deduct $30.
    • $50 donation – $20 return = $30 deduction
  • For donations of more than $75, the nonprofit must give you a written statement telling you the value of what you received in return and reminding you that you can’t deduct that portion of your contribution.

There’s also a special rule for folks who donate to colleges and universities and receive the right to buy tickets to school athletic events: They can deduct 80 percent of their donation.

Appreciated property

Cash may be king, but if you want a really big tax saver, your best bet may be a donation of appreciated property—securities, real estate, art, jewelry or antiques.

  • If you have owned the property more than a year, you can deduct its full fair market value and escape income tax on the appreciation.
  • For property held one year or less, IRS only allows you to claim a deduction on the price you paid for it.

Let’s say you own stock that you bought many years ago for $1,000 that is now worth $10,000, and that you intend to make a $10,000 gift to a major fundraiser for your alma mater. If you write a check for $10,000, the college gets $10,000, and you get to deduct $10,000.

If instead, you give the $10,000 worth of stock,

  • The college still gets $10,000 (it won’t owe any tax on the profit when it sells the stock.)
  • You still get to deduct $10,000.
  • You eliminate the tax you’d owe if you sold the stock for $10,000: Such a sale would trigger a capital gains tax on the $9,000 of profit, and that would cost you $1,350. Making your gift with stock instead of cash saves you that $1,350.

If you don’t really want to part with the stock because you think it’s still a good investment, give it away anyway. Then use your $10,000 of cash to buy the shares back in the open market. That way you’ll only be taxed on future appreciation.

How a gift is used affects donor value

If you’re donating tangible personal property, what the charity does with the item affects how much you can deduct.

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  • If you donate land so the local homeless shelter can build a new facility to house more people, you can write off the full market value.
  • If you donate a work of art to the shelter for its fundraising auction, you only get a deduction for the price you paid for the artwork.
  • What if you donated the piece of art to a museum that will display it as part of its collection? In that case, you get to deduct the full market value.

For property worth more than $5,000 ($10,000 for stock in closely-held firms), you’ll need to get a formal appraisal. You’ll also have to make sure the appraiser is a member of a recognized professional group or meets minimum education and experience guidelines. If you don’t, the IRS can disallow your deduction.

Contributing household items

Donating used goods such as clothing, linens, electronics, appliances and furniture gets you a write-off for the item’s fair market value at the time you donated it, which may be considerably less than what you originally paid.

The IRS has a helpful booklet on this subject, Publication 561: Determining the Value of Donated Property.

For items valued at more than $500, you’ll need to fill out Form 8283 and attach it to your return. On this form you have to

  • describe each item over $500 that you donated,
  • identify the recipient, and
  • provide information about the value of the item, including your cost or adjusted basis.

Congress has clamped down on donations of household goods to make sure folks aren’t inflating the value of their used stuff.

  • No tax deduction is allowed unless an item is in good condition or better.
  • If an item in less-than-good condition is valued at more than $500, you can take a deduction only if you get the item appraised and attach the appraisal to your return.
  • Congress also gave the IRS broad authority to deny deductions for low-value items such as used socks and underwear.

When preparing your taxes with TurboTax, you can use ItsDeductible Online to help you value and track your donations. This free program gives guidance on prices for commonly donated items and is designed to transfer your donation information to your tax return. ItsDeductible is a built-in feature on TurboTax Deluxe and above.

Donating vehicles

If the claimed value of your donated vehicle is more than $500, in most cases your deduction is limited to the amount the car brings when it’s sold at auction.

  • The charity has 30 days after it sells your vehicle to issue you a Form 1098-C that shows the sale price.
  • You must attach that form to your tax return or the IRS will disallow the deduction.

There are, however, some situations where you’re permitted to claim the car’s estimated market value:

  • If the charity significantly improves the vehicle,
  • makes significant use of it, or
  • gives the vehicle (or sells it at a discount) to a poor person who needs transportation.

For more information, check the IRS article: IRS Guidance Explains Rules for Vehicle Donations.

Volunteer services

Don’t overlook the volunteer work you perform, which may also generate a deduction. You can write off many out-of-pocket expenses you incur to do good work, such as costs for:

  • materials
  • supplies
  • uniforms
  • stationery
  • stamps
  • parking
  • tolls

You can also deduct the cost of driving to and from your volunteer work, at a rate of 14 cents per mile. If you take public transportation, that bus or rail fare is deductible, too.

But here’s the bad news: The value of services you provide as a volunteer don’t merit a write-off. For instance, if you’re a carpenter and you help a nonprofit group build a home for the poor, you can deduct travel costs and building supplies you buy, but not the value of the work you do. (That’s not as hard-hearted as it may seem. If you were paid to do the work, you’d have to report the pay as income, which would drive up your tax bill.)

For more tax tips in 5 minutes or less, subscribe to the Turbo Tips podcast on Apple Podcasts, Spotify and iHeartRadio

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Retirement Planning Demystified

What you need to know about taking tax deductions for charitable donations. Links in this video: Retirement Planning Insights – https://www.tenonfinancial.com/newsle… Taxes in Retirement – https://www.facebook.com/groups/taxes…#RetirementPlanning#TaxPlanning#CharitableDonations

Why You Should Keep Tax Records For More Than Three Years

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A Pennsylvania citizen, who will be identified here as “P,” has a bone to pick with the collections agency that handles taxes for his municipality. P says he duly paid his 2015 local income tax, but just a few weeks ago got a nasty notice calling him a delinquent and demanding immediate payment of more than $2,000 in taxes and penalties.

P asks: Isn’t there a three-year limit on tax audits? What am I supposed to do if my bank can’t locate a five-year-old cancelled check? Do I have to pay the taxes twice? Short answer: Yes. If you don’t have good records you can get nailed for taxes you don’t really owe. Three years of documents won’t cut it. Seven years is more like it. Some tax records should be kept on hand until you’re dead.

Barry Dolowich, a CPA in Monterey, California, is representing a Nevada citizen who just got a dunning notice from California’s notoriously aggressive Franchise Tax Board. What did this taxpayer do wrong? He inherited a house in California and sold it, at a loss, in 2015. He didn’t file a California income tax return for that year. The state wants him to fork over $30,000-plus on the supposition that the entire proceeds were profit.

David Caplan, a CPA in Lafayette Hill, Pennsylvania, is fighting for a taxpayer from whom the Internal Revenue Service wants to extract approximately $35,000. This client, now in her 80s, had a small business whose withholding taxes were handled by a payroll processor. It took the sleepy IRS a decade to figure out that the processor was embezzling money and forging powers of attorney in order to keep clients in the dark about delinquency notices. The crook is now in jail and evidently has scant assets. The former business owner paid the tax money once and may have to pay again.

There is indeed a three-year rule on tax audits, but it doesn’t provide the protection you think it does. Normally the IRS has three years from a return’s due date (or when you filed, if you got an extension) in which to challenge your numbers. Many states copy that rule; a handful, including California, stretch out the audit period to four years.

But there are exceptions. Three years becomes six if the tax collector can show that there is a “substantial understatement” of your liability. For the federal government, “substantial” means by 25% or more; state rules vary on this point.

The other exception is if no return was filed. On the theory that a nonfiler is akin to a fugitive bank robber, undeserving of having the clock run on a statute of limitations while he is in hiding, the three-year period does not start until the return comes in.

This presents a potential hazard for people who don’t retain yellowed records. A Pennsylvania township could in principle send out a notice declaring, “We were just going through some old punch cards and can’t find a record of your 1997 return. Please send in $2,000 plus 22 years of penalties.”

Matthew Melinson, a state and local tax partner in Grant Thornton’s Philadelphia office, says he hasn’t witnessed anything that egregious, but has seen states trying to collect ten years of tax from nonfilers. Given that records are now electronic, he says, you should keep returns for a long time—seven years, at least.

Herewith a nine-point guide to record retention:

1. Keep copies of income tax returns and proof of tax payments as long as you can.

2. Discard supporting documents (like receipts for business expenses and charitable donations) after seven years. That covers you for six years beyond your filing date.

3. Keep records of asset costs for seven years after you dispose of the asset, recommends Stephanie Pervez, who leads the private-clients practice at CohnReznick in New York City. If you bought a house in 1990, remodeled it in 2000, and sold it in 2019, you’d keep both sets of closing documents and the remodeler’s bill until 2026.

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4. Keep support for carryforward items (such as for capital losses) until seven years after using up the carryforward. Says David Klasing, an Irvine, California, attorney representing clients with big tax headaches: “A lot of times they won’t contest the original accrual of a net operating loss until you try to use it.”

5. Keep copies of gift tax returns forever. Your executor may have to attach them to an estate tax return, Pervez says.

6. Maximize the value of your health savings account by preserving both the assets and medical receipts for a long time. Instead of using the HSA to cover co-pays and other costs, you pay them out of your checking account and let the HSA grow. In retirement, you pull the money out, making the withdrawal tax-free by matching it to past medical costs, which can stretch back for decades. The strategy only works if you can retrieve the receipts.

7.  Consider filing a nonresident return, perhaps one showing a small amount of income, in states where you have some business connection. That starts the clock running on an audit period, and might protect you from an open-ended tax grab going back a decade. California, in particular, is known for an expansive notion of what constitutes local income. It went after a scriptwriter living in Arizona because the scripts were used by California film companies.

8. Keep proof of filing. Melinson has his clients retain either a certified mail receipt for a paper return or an email confirming acceptance of an e-filed return.

Here’s another way to establish that a return was received. Instead of having all your refund applied to the next year’s estimated tax, direct $20 of it into your bank account. Keep the bank statement.

9. Keep an eye on your tax preparer, or payroll tax handler. Tax collectors are predictably reluctant to give a break to victims of dishonest intermediaries, lest taxpayers seek out sketchy ones in order to lower their tax bills. But if you can document your diligence you might get mercy.

What will become of the forlorn taxpayers cited above? Taxpayer P is the victim of Pennsylvania’s quirky local-tax system. Much in the manner of a feudal king farming out tax collection to independent agents, municipalities delegate enforcement to private-sector firms, sometimes dropping the ball in the hand-off. For P, the middeman is Kratzenberg & Associates, doing business as Keystone Collections Group. A Keystone executive says this taxpayer can get his problem quickly resolved if he has the right documents.

The Nevadan with the house in California? He will probably owe the state little. The house, with a cost basis stepped up to the value on the owner’s death, was clearly sold at a loss. The worst that the Franchise Tax Board can do is to impose a failure-to-file penalty, and accountant Dolowich hopes this penalty will be waived.

The retiree with the ancient payroll tax liability may be out of luck. Accountant Caplan says the IRS agreed to a reprieve for her and some of the other victims on the hook collectively for at least $3 million. Then the agency changed its mind. She and 100 or so other taxpayers are in limbo.

Follow me on Twitter.

I aim to help you save on taxes and money management costs. I graduated from Harvard in 1973, have been a journalist for 45 years, and was editor of Forbes magazine from 1999 to 2010. Tax law is a frequent subject in my articles. I have been an Enrolled Agent since 1979.

Source: https://www.forbes.com

How long should you keep your tax records? The IRS website has a page that claims to answer this question: https://www.irs.gov/businesses/small-…
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