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Marital Privileges

By Caroline Rule
The Journal of the Section of Litigation
Vol. 45 No. 4 Summer 2019

Marriage is perplexing, and the marital privileges even more so. Contradictory views determine when they apply and what they protect. In many states, statutes, rather than case law, govern, but federal law leaves it to the courts, which sometimes results in conflicting decisions among the circuits.

There are two quite different and separate safeguards for spouses. One is the confidential marital communications privilege, which, with some exceptions, allows a spouse to refuse to testify about, or produce documents evidencing, any confidential communication made during a marriage and allows the other spouse to prevent that testimony or document production.

The other privilege is the adverse spousal witness privilege, which applies in criminal proceedings and allows one spouse to refuse to testify against the other spouse. This privilege belongs only to the non-defendant spouse, however. Unless the defendant can invoke the confidential marital communications privilege, she cannot prevent her spouse from testifying against her if he decides to do so. This form of the privilege applies only while the marriage exists. And numerous states have repealed the adverse spousal witness privilege entirely.

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Bryan Skarlatos quoted in "IRS Leadership Shuffle Continues With New Division Chiefs", TaxNotes

The IRS has selected two longtime agency executives, Eric Hylton and Tamera Ripperda, to take over as heads of the Small Business/Self-Employed Division and the Tax-Exempt and Government Entities Division, respectively.

Current SB/SE Deputy Commissioner Ripperda will replace TE/GE Commissioner Sunita Lough, who will take over as deputy commissioner of services and enforcement starting September 1. IRS Criminal Investigation Deputy Chief Hylton will then become head of SB/SE, according to an IRS release.

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Tax Controversy Corner: The Internal Revenue Code Injunction Statutes

By Megan L. Brackney
Journal of Passthrough Entities
May - June 2019 Edition

Under the injunction statutes in the Internal Revenue Code, the U.S. government has broad discretion to seek—and the federal courts to order—the injunction of the preparation of false or fraudulent returns, as well as the aiding and abetting of false tax returns, and the promotion of abusive tax shelters. This power includes enjoining persons and businesses from engaging in specific conduct, and other equitable remedies, such as requiring preparers and promoters to turn over their clients’ identities, notify their clients of the injunction, and disgorgement of fees. The injunction statutes provide a powerful civil enforcement tool for the Department of Justice and the IRS. In many ways, the injunction action is a much worse consequence for a tax promoter or preparer than civil penalties because the action is part of the public record (unlike the results of a preparer or promoter audit, which would be subject to taxpayer confidentiality under Code Sec. 6103), and the court may shut down the preparer’s practice altogether. This column discusses the injunction statutes and two recent cases filed against alleged tax shelter promoters.

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Prominent Tax Attorney Robert Russell Joins Kostelanetz & Fink as Counsel in D.C. Office

NEW YORK AND WASHINGTON (July 29, 2019) – Kostelanetz & Fink, LLP is pleased to announce that it is expanding its Washington, D.C. office by bringing on Robert Russell, a prominent domestic and international tax planning and controversy attorney with broad experience in government enforcement and tax policy developed during his tenures with the Internal Revenue Service, U.S. Department of Treasury Office of Tax Policy, and Joint Committee on Taxation.  Mr. Russell’s arrival, the latest in a handful of recent additions to the D.C. office, enhances Kostelanetz & Fink’s already impressive tax controversy and tax planning practice.  

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Bryan Skarlatos Quoted in "IRS Sends Warning Letter to 10,000 Crypto Speculators," Mish Talk

Some cryptocurrency holders are now disclosing past tax lapses to avoid potential criminal prosecution.

Bryan Skarlatos, a lawyer with Kostelanetz & Fink with several such cases, reminds cryptocurrency investors of the IRS’s success in piercing the veil of Swiss bank secrecy. Since 2009, more than 56,000 Americans who hid money in offshore accounts have paid more than $11 billion to resolve tax issues.

"Digital currency holders shouldn’t think they can hide from the IRS," he says.

Smaller investors are also feeling heat. Many traded during last year’s price spike, and tax preparers are now asking clients routinely about cryptocurrency sales. They aren’t supposed to sign returns with unreported income.

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Caroline D. Ciraolo moderated a panel titled "Ethical Pitfalls and How to Avoid Them When Representing Clients in IRS Collections and Audits," at the University of San Diego School of Law - RJS LAW Tax Controversy Institute 2019

The Institute is the premier tax controversy event in San Diego. The region's top tax attorneys, CPAs, and law/business school professors discussed topics including passthrough planning, Wayfair, ethical pitfalls to avoid in practice, and employee classification issues in California.

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Michael Sardar Quoted in "Could You Obstruct the Fake College Cheating Scam Audits?", Tax Notes

Michael Sardar of Kostelanetz & Fink LLP said the Varsity Blues prosecutors may have considered using tax charges, but the lack of tax obstruction charges isn’t surprising.

Section 7201 tax evasion charges would be a more obvious choice for charges against the parents, Sardar said. The government would have several alternatives, including defraud conspiracy charges, before it would need to settle for tax obstruction charges, he said.

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On Congressional Subpoenas to Accounting Firms

By: Brian P. Ketcham
The CPA Journal
July 2019 Edition

Recently, a midsize accounting firm that had prepared financial statements and reports for President Donald Trump and various entities associated with him for many years received a subpoena from the House of Representatives Committee on Oversight and Reform seeking a broad array of documents and communications regarding the firm’s work in that capacity. The subpoena, which seeks six years of personal and corporate financial records, may lead to troubling precedent and a sharp increase in broad subpoenas to accounting firms in all manner of cases. Indeed, although the subpoena itself is not yet publically available, a letter from Elijah Cummings (D-Md.), the chairman of the Oversight Committee, to the chairman and CEO of the accounting firm can be found online, and excerpts from the subpoena are quoted in publically filed court documents. The subpoena, if ultimately enforced, will have a chilling effect on the relationship between taxpayers and their accountants.

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Jay Nanavati has been admitted to the Edward Bennett Williams American Inn of Court

The Inn is an invitation-only professional organization devoted to white-collar practice. Membership in the Edward Bennett Williams American Inn of Court, which has the distinction of being one of only a few Inns of Court focusing on white-collar criminal prosecution and defense, includes D.C. Circuit Court judges, District Court judges and Superior Court judges, U.S. Department of Justice officials and some of the most established defense attorneys in Washington, D.C.

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Michael Sardar and Caroline Ciraolo participated in a panel titled "IRS Voluntary Disclosures: Past, Present, And Future" at The American Academy of Attorney-CPAs 2019 Annual Meeting & Education Conference

The IRS has offered noncompliant taxpayers a path to come into compliance for decades. First, under the Internal Revenue Manual voluntary disclosure practice, and then under the historic Offshore Voluntary Disclosure Programs. In November 2018, the IRS announced new provisions that will apply to all future domestic and offshore voluntary disclosures. Since then, practitioners have been debating the new voluntary disclosure practice and its impact on clients, and taxpayers are wondering if this is the best approach to resolve outstanding issues. The panelists outlined the new framework and engaged in a spirited discussion regarding various open issues and best practices.

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