Illinois Business Sales & Use Tax, Chicago Rental Tax, and IRS Income Tax OVDP / FBAR Attorneys in Chicagoland.
As a Tax Law Firm in the Midwest, we work with the following departments:
IRS, Illinois Department of Revenue, Michigan Department of Treasury, and Ohio Department of Taxation, U.S. Tax Court, Illinois Tax Tribunal.
The Ansari Tax Law Firm LLC works with IDOR, MDOT, ODOT, IDES, Sales Tax, IRS audits, tax-debt restructuring, and offshore bank account disclosures. With years of experience dealing with Federal and State sales and income tax matters, our tax lawyers carefully design solutions for our clients using the most cutting edge technology for research, defense, and client management. We pride ourselves on our ability to quickly resolve IRS tax controversy cases. This involves cooperation from three parties: 1) Client 2) IRS or IDOR, and 3) Our law firm. For this reason, we only work with clients that understand that problems that have taken years to accrue, will also take time to resolve.
Sampling method used in Illinois sales tax audits
Sampling? Does it make any sense at all that the Auditor would audit your sales, then, when it came time to look through all of your books and records, that they would only pick 1-3 months out of a given year and then estimate the sales and profits for the entire year? If you think this is an entirely unfair and incompetent method, you are right. If you think this is fair, then, you are probably an auditor for the State and are enjoy getting paid for doing at best half your job.
Below are a few examples of how sampling will determine your sales tax liability:
Sampling for gross revenue:
Sampling to determine gross revenue works like this. The auditor takes your gross sales for January, June, and September, for a given year. They will add up the three months and then take an average sale. For example:
Average Sale: $8000.00
Do you notice the problem here? Our client in the example above is poised to make gross revenues of $96000.00 in sales; assuming the sales tax rate is 8.5%, their sales tax collection will be determined to be $8160.00. When the auditor takes the average sales figure, then, applies the sales tax rate for your county, you are left with the balance owed per the Auditor. Obviously, penalties and interest will apply to the difference in what you collected versus the Auditor’s findings.
Estimating your prices is even more ridiculous. It works like this. The auditor will looks to similar stores just like yours in your area, and there is no clear indication of what the “area” encompasses. However, they compare prices at other businesses and suggest that you should be selling the items at the same price. This does not take into account your clientele, sales, specials, giveaways – do you get the picture? However, the auditor will use these prices and profit margins of other businesses and compare them to yours. If you sell for less, then, the difference in estimated profits will be used to determine the difference in sales tax.
Estimating cash sales:
I intentionally saved the best for last. If all of your sales are on debit or credit card, then, you are out of luck. The Auditor will compare the amount of cash sales of similarly situated businesses to your cash sales. If they determine that the number of cash sales in the area is 5%, then, you have now lied to the auditor, as you are considered to be hiding an extra 5% of your gross sales. Again, tack 5% worth of gross sales to your liability and add penalties and interest.
As you can see, a sales tax audit can almost never go well without at least an appeal if not a managed audit by a sales tax attorney. You are guilty until proven innocent. The remedy is to file your case at the Illinois Tax Tribunal for a better outcome.
Illinois Cigarette sales tax and little cigars:
Despite opposition by aldermen from the city’s South and West Sides who have made the case that Mayor Rahm Emanuel’s tobacco-tax hike will lead to more black-market sales and violence, the Committee on Finance held a recessed meeting on Feb. 10, just minutes before the full City Council meeting, and passed the mayor’s plan by a roll-call vote of 22-9.Alderman Leslie Hairston, 5th Ward, and Alderman Brendan Reilly, 42nd Ward, made a motion to defer and publish the ordinance, effectively delaying a full City Council vote until March.
The average cost of a pack of cigarettes purchased in the city of Chicago is $12, $7.17 of which is taxes. The mayor’s plan would set a minimum price on a pack of cigarettes at $11.50, add a 15-cent tax per “little cigar,” impose a 90-cent tax on larger cigars, add a tax of $1.80 per ounce on smokeless tobacco, and a $6.60-per-ounce tax on roll-your-own tobacco. The new tax would fund a new summer orientation program for Chicago Public Schools freshmen, smoking cessation programs, and a remedial program for at-risk eighth graders.
Illinois Liquor License Revocation
If you have unpaid, under reported, or uncollected sales tax that is due to the state of Illinois, then, your Illinois Liquor License will be revoked. In a recent case, an honest client made a very honest mistake. As his profits began to dwindle during the recession, he fired his accountant. He then began filing his own ST-1 forms on a monthly basis. Two days before his liquor license renewal, he was contacted by the IDOR and was told that he was about $20,000.00 short on his sales tax deposits over the last four years. As a result, his license was suspended and he was forced to closed down his business for the next two days. He hired our firm to get his sales tax account straightened out with the IDOR. It was a great achievement for our firm as well as the client, when two days later, we scanned a copy of the new liquor license to our client’s place of business. Our office is located just blocks away from the Thompson center in downtown Chicago. We will fight your battle face-to-face with the Illinois Department of Revenue to get your Liquor License back on your wall and put you back in business!
Offshore Voluntary Disclosure Initiative 2011
The OVDI eliminates the risk of criminal prosecution for taxpayers that are accepted into the program, and provides for reduced civil penalties than would apply if the IRS were to discover the taxpayer’s noncompliance in this area. Our firm frequently represents clients facing harsh penalties associated with their offshore bank accounts. Did you know that the IRS can now Revoke your passport for unpaid debt?
Streamlined domestic offshore procedures: an alternative to 2014 OVDI/OVDP
Under the 2014 OVDI Streamlined procedure, U.S. residents who meet certain requirements have the option of using the Streamlined Domestic Offshore Procedures to address their unreported income and/or undisclosed foreign bank accounts. Taxpayers who qualify for, and take advantage of, these procedures simply have to pay any tax due on any unreported income they had in the past three years, plus interest on the tax, and an offshore penalty equal to 5% of their maximum aggregate balance in their unreported foreign accounts over the past six years. This 5% penalty works much differently from the penalties that are part of the offshore voluntary disclosure program. Under the standard OVDI program, the base amount for calculating the penalty is computed on the value of many classes of foreign assets that are not subject to the various international reporting requirements (i.e. directly-held real estate). Under the new streamlined OVDP program, only assets that were supposed to be reported are included in the penalty computation. Since you are not required to disclose the value of offshore real estate you own directly, these properties are excluded from the penalty computation.
Streamlined Domestic Offshore Procedure qualification requirements
In order to qualify under the new Streamlined Domestic Offshore Procedure, four eligibility requirements must be met:
- Fail to meet the non-residency requirements for the Foreign Domestic Offshore Procedure. If you otherwise qualify for the Streamlined Domestic Offshore Procedures, but were a non-resident of the U.S. for any of the three most recent years, then you will qualify for the Streamlined Foreign Offshore Procedures. Under the foreign program, there are no offshore penalties. Therefore, taxpayers who meet the non-residency requirements of the Streamlined Foreign Offshore Procedures are far better off entering that program than the Domestic Procedures because they will be able to avoid paying the 5% penalty.
- Have previously filed all required U.S. tax returns for each of the last three years. This requirement is pretty self-explanatory. The only nuance is the way the 3 year period is determined. The years in issue are the three most recent years for which the due date for filing a return has already passed. Therefore, taxpayers who have filed an extension for their prior year return, and the extended due date (generally October 15th) has not already passed, then the years in question are the three years prior to the return for which the extension applies.
- Have failed to report income from a foreign financial asset and pay tax on that income. This requirement needs a little context in order to make sense. On its face, it appears odd that the IRS requires you to have unreported income in order to qualify for this favorable 5% offshore penalty. However, the reason for this requirement is that taxpayers who properly reported all of their income and paid all the tax that was due on that income have a better option available to them. If you reported all your income, and paid all your tax, yet failed to file your FBARs or other international information returns, all you need to do is file all of the delinquent forms, amending your last three tax returns if necessary, and you will not be penalized for failing to report your accounts on time.
- Your failure to pay tax on your foreign income and report your foreign assets must have resulted from non-willful conduct. In this context, the word “willful” refers only to a “conscious disregard of a known legal duty.” Under this definition, if your failure to meet your tax obligations was due to a mistake, a misunderstanding of the law, inadvertence, or negligence, then your conduct meets this requirement.
You may need our assistance if you are accused of or under investigation for:
- Failure to file tax returns (wage garnishments and tax liens)
- Failure to pay tax debt
- Failure to pay employees’ payroll withholding tax
- Filing a false/frivolous tax return (zero returns and underreporting)
- Failing to report Offshore bank accounts and international income
If you are facing an audit, need to set up taxes and payroll for your business, or simply want to speak with us to see if you need a tax lawyer or not, give us a call today. Our local tax resolution Attorneys know how to help.
Mansoor Ansari J.D., LL.M. – Tax Attorney Chicago – Tax Attorney Rolling Meadows, Schaumburg, Lombard, Lisle, Naperville, Warrenville, Oak Brook;