Joseph Pearman, Attorney at LawJoseph Pearman, Attorney at Law2026-09-19T00:27:37Zhttps://www.josephpearman.com/feed/atom/WordPress/wp-content/uploads/sites/1103754/2024/04/cropped-Joseph_Pearman-site-icon-32x32.pngOn Behalf of Joseph Pearman, Attorney at Law<![CDATA[A tax mistake is not tax fraud]]>https://www.josephpearman.com/?p=478672026-09-19T00:27:37Z2026-09-19T00:27:37ZThe concern many people feel over tax mistakes is rooted in the fact that they believe there will be severe ramifications if they make an error. They are worried that the government will accuse them of fraud or committing a crime. This is especially true for small business owners, who often have far more complex tax returns than individuals.
But the important thing to remember is that tax fraud is a willful or intentional action taken to defraud the government. This is much different than a genuine and accidental mistake made on your taxes. While tax mistakes can lead to fines and financial penalties, they are not criminal events and they do not qualify as tax fraud.
A misunderstanding of tax laws
For example, someone may have a genuine misunderstanding of the tax laws. This leads to an error on the paperwork, where they inadvertently make false statements about their income or tax liabilities. They are not intentionally trying to get out of paying taxes, but simply did not understand what they were required to report.
Accidentally leaving out certain income
Another issue could be leaving out a source of income. Perhaps a business owner has dozens or even hundreds of various clients, so their income is very complex. They hire a CPA to handle their taxes, but they accidentally forget to provide paperwork for a few different sources of income, which then go unreported. They may need to rectify the mistake and pay the taxes that are due, but they have not intentionally committed fraud.Navigating tax errors and disputes can be complicated, so it is important for those involved to understand what legal steps to take.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[When can cryptocurrency investment lead to tax controversies?]]>https://www.josephpearman.com/?p=478642026-09-07T11:26:12Z2026-09-07T11:26:12ZCryptocurrency reporting is mandatory
The Internal Revenue Service (IRS) definitely monitors what people do with their money and the strategies people popularize for avoiding income tax obligations. The IRS has been aware of cryptocurrency as a common investment for many years, and there is formal policy in place regarding the need to report cryptocurrency holdings. More importantly, people must report the capital gains obtained when selling cryptocurrency.
While there may not be a centralized bank that retains records of all cryptocurrency holdings and transactions, trading platforms and other financial institutions must make disclosures to the IRS. As such, those who fail to report their holdings and profits derived from sales could be at risk of underpaying their taxes, triggering an audit or even facing significant financial penalties.
Those facing an audit or concerned about an IRS letter they’ve recently received regarding how they’ve reported their assets and earnings may need legal guidance to protect themselves. Working with an attorney after receiving an IRS letter related to undisclosed cryptocurrency investments or profits can help people minimize the consequences of an income tax controversy.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[High earners are now at lower risk of IRS audits]]>https://www.josephpearman.com/?p=478622026-08-15T20:40:16Z2026-08-15T20:40:16ZHigh-income audit rates are down
When looking at the tax controversies that lead to IRS audits, it is possible to identify trends in audits that can give insight into the enforcement priorities of the IRS. Currently, high earners are at relatively low risk of an audit.
Data from the IRS shows that audits of those who make more than $5 million dropped by 66% between 2010 and 2019, and the trend does not seem to have changed. Of course, audits do still occur, even if the risk is lower. Discrepancies in paperwork, undisclosed income and the misuse of tax rules can all trigger a broader audit in addition to a notice of unpaid taxes.
Those facing a federal income tax controversy generally need guidance to understand if a mistake occurred and evaluate their options for resolving the problem at issue. Retaining legal guidance when facing an audit is often the best option available and can help people understand not only why the IRS chose to audit them but also their rights throughout the audit process.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[When both co-parents claim dependent child tax deductions]]>https://www.josephpearman.com/?p=478472026-08-09T18:09:56Z2026-08-09T18:09:56ZDivorce and child custody disputes sometimes concern tax-related matters. For example, when one parent claims a child as a dependent despite a custody order or divorce decree stating that the other parent is entitled to do so, challenges can arise.
The IRS has its own rules for determining who may claim dependent-related tax benefits. These rules may or may not reflect the realities of a particular custody or divorce decree order. As a result, these cases are not always as straightforward as one might initially assume.
What happens next? The IRS will be involved
If both parents claim the same child on separate tax returns, the IRS will typically identify the duplicate claim during processing. This may delay one or both returns while the agency requests additional information or documentation. In some cases, the IRS may send notices asking each parent to substantiate their eligibility for the dependency-related tax benefits they’ve claimed.The IRS is not responsible for enforcing state court custody orders. Instead, the agency generally applies federal tax law to determine which parent is entitled to claim the child at issue. Depending on the circumstances, that analysis may involve residency requirements, the amount of time the child lived with each parent, whether a valid release of the dependency exemption or related tax benefits was executed when required, and other applicable federal rules.If the IRS determines that a parent improperly claimed the child, it may disallow the claimed tax benefits. The parent may be required to repay any resulting tax savings, along with applicable interest and, in some situations, penalties. The dispute may also result in consequences in family court if the claim violated the terms of a custody order or divorce agreement.Whether a parent is being accused of claim-related misconduct or needs to enforce the terms of a court order in their tax-related favor, seeking personalized legal guidance can facilitate a fair resolution to what may be a contentious and consequential concern.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[How an Offer in Compromise may resolve tax controversies]]>https://www.josephpearman.com/?p=478422026-07-28T07:04:53Z2026-07-28T06:48:45ZTax debt can create uncertainty that affects your finances and your peace of mind. If you owe more than you can realistically pay, you might wonder if the Internal Revenue Service (IRS) offers any way to settle the debt. An Offer in Compromise could provide that opportunity for some taxpayers. Still, the program follows strict rules and approval is never guaranteed. Learning how an IRS Offer in Compromise works may help you decide if it fits your situation and what role it could play in resolving a tax controversy.
What is an Offer in Compromise?
An Offer in Compromise is a program that may allow you to settle your tax debt for less than the full amount you owe. The IRS reviews your financial situation before deciding if it will accept your offer. Your income, expenses, assets and ability to pay all play a role in that decision.It also helps to know what an Offer in Compromise does not do. It does not erase tax debt automatically or forgive taxes simply because paying them feels difficult. You must qualify under IRS standards and continue meeting your future tax filing and payment obligations if the IRS accepts your offer.
How could an Offer in Compromise resolve a tax controversy?
Once the IRS accepts your Offer in Compromise and you satisfy its terms, the tax debt covered by the agreement generally reaches a final resolution. That outcome may stop collection efforts related to that liability and give you a structured path toward compliance.An accepted offer could help you:
Settle eligible tax debt for less than the full balance.
Resolve the specific tax liability covered by the agreement.
Create a clear plan for meeting future tax obligations.
An Offer in Compromise may not resolve every tax controversy. For example, an ongoing audit or another dispute with the IRS could continue unless it receives a separate resolution.The IRS administers the Offer in Compromise program which authorizes the agency to compromise certain tax liabilities when legal requirements support that result.
When might an Offer in Compromise make sense?
Several financial situations may lead taxpayers to explore tax debt settlement through an Offer in Compromise. The program often serves people whose financial circumstances make full payment unrealistic.Common examples include:
Carrying large tax balances that exceed your ability to pay.
Facing IRS collection actions, such as tax liens or levies.
Experiencing reduced income or long-term financial hardship.
Each application receives an individual review, so similar financial situations may produce different outcomes.
A possible path toward financial resolution
An IRS Offer in Compromise may provide an opportunity to resolve certain tax debts and reduce the uncertainty that often comes with collection activity. Still, the program requires careful preparation and strict compliance with IRS requirements. Getting legal advice, reviewing your financial circumstances and the program's eligibility rules may help you determine if this option deserves further consideration for your tax situation.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[What is a theft-loss tax deduction?]]>https://www.josephpearman.com/?p=478402026-07-23T15:42:32Z2026-07-23T15:42:32ZA theft-loss tax deduction allows certain taxpayers to deduct qualifying financial losses caused by theft or fraud. For better and worse, the rules related to this particular deduction are far more complex than many people realize.
Whether a loss qualifies depends on the facts of the situation, the Internal Revenue Code and current IRS guidance. As a result, individuals who have suffered significant financial losses due to another’s theft or attempt to defraud them should not assume they either qualify or are automatically excluded from claiming this kind of deduction without careful review and legal support.
The basics of theft-loss deductions
Recent IRS guidance issued in 2025 clarified that some victims of sophisticated financial scams may be eligible to claim theft-loss deductions. This includes certain investment-related fraud schemes, such as so-called "pig butchering" scams, in which criminals persuade victims to invest money through fraudulent platforms while falsely promising substantial returns. Because these transactions were entered into with the expectation of making a profit, the IRS has recognized that some losses may qualify for favorable tax treatment.The outcome is different for victims of romance scams. Although the financial harm caused by this kind of scam can be just as devastating, the IRS has generally concluded that these losses do not qualify for the same deduction because the victim's primary motivation was to establish or maintain a personal relationship rather than to earn income or make investment gains.This distinction has generated considerable discussion among taxpayers and tax professionals. Two individuals may lose significant funds to equally sophisticated fraud operations, yet receive different tax treatment based largely on the reason they were persuaded to transfer their funds. One person's expectation of financial return may support a deduction, while another person's reliance on emotional trust may not.Determining whether a theft-loss deduction is available requires careful analysis of the underlying facts, applicable tax law and supporting documentation. Every situation is unique, and seemingly minor details may significantly affect the outcome, which is one of the many reasons why it is generally wise for fraud victims to seek legal guidance when navigating their tax obligations. ]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[What is IRS Letter 2566?]]>https://www.josephpearman.com/?p=478372026-07-10T12:55:09Z2026-07-10T12:55:09ZIf you receive IRS Letter 2566, it is a proposed individual tax assessment. This may mean that more taxes are due, and the IRS has sent you the letter as notice that they are assessing your tax obligations.Often, this means that the IRS has no record that you actually filed a tax return. They may have proposed the amount of taxes that they believe are due. The letter allows you to get this process started, although providing more in-depth information could change the exact amount that you have to pay the IRS.
How can the IRS decide how much you owe?
Often, the IRS is going to get information from other sources. This information can still be connected to you through your tax identification number.For example, your employer should have filed tax paperwork that includes the amount of money they paid you as an employee. Your financial institutions may have filed paperwork that includes information about transactions. This gives the IRS some idea of the money that you have received, even if they have not actually received your paperwork detailing how much you believe you should pay in taxes.Because you have not filed, the IRS has prepared a tax return for you, and Letter 2566 will tell you how much they believe is due in taxes, interest and any necessary penalties. That said, you can still file an original tax return on your own, which may reduce the total amount that you owe.
Acting quickly
There is a deadline to reply to this notice, which is typically 30 days. If you have received Letter 2566 from the IRS, it is important to act quickly so that you do not lose your right to appeal. Be sure you know what legal steps to take.
]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[How Illinois’ new digital advertising tax could affect business]]>https://www.josephpearman.com/?p=478352026-06-26T19:06:38Z2026-06-26T19:06:38ZUnderstanding Illinois’ new digital advertising tax
Illinois recently approved a new tax on certain targeted advertising services as part of its Fiscal Year 2027 budget. Beginning January 1, 2027, the law imposes a 10% tax on gross receipts earned from targeted advertising services provided in Illinois by businesses that exceed the state's revenue threshold. Unlike an income tax, this tax is based on gross receipts, meaning it applies before business expenses are deducted.
The tax generally targets businesses that provide targeted advertising services using personal information to deliver ads to specific audiences. This can include advertising delivered through:
Websites
Social media platforms
Search engines
Other digital channel
While the law is aimed primarily at advertising providers rather than businesses simply purchasing advertisements, companies involved in digital marketing should understand how their advertising relationships may be affected. Because the legislation contains broad language, additional guidance may be needed to clarify exactly which businesses are covered and how certain transactions will be treated.
Businesses that sell digital advertising, operate advertising platforms or generate revenue from targeted advertising should begin reviewing their operations before the law takes effect. Evaluating advertising contracts, sourcing methods and tax compliance procedures now may help reduce future complications. As Illinois releases additional guidance, businesses may also need to update their internal processes to ensure they remain compliant with the new requirements.
Tax laws involving digital services continue to evolve, and even small changes can have significant financial consequences. Businesses with questions about how Illinois' new digital advertising tax may apply to their operations should consider speaking with a qualified legal professional to better understand their obligations and prepare for future compliance.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[4 things that can trigger an IRS audit]]>https://www.josephpearman.com/?p=478192026-06-15T16:16:40Z2026-06-15T16:16:40ZAudits do happen, but they are relatively rare. Some reports indicate that they have dropped by about 66% since 2010. Many people will never experience an audit at all.
However, even though it is rare, since it is a possibility, it is important to know what can trigger it. What makes the IRS decide to conduct an audit on someone's tax return, and what red flags should you be aware of? Below are a few examples.
1. Unreported earnings
First and foremost, discrepancies between reported earnings can cause an audit to occur. If your employer reports that they paid you a certain amount of money, but you report that you earned far less, for example, the IRS is going to see that the numbers simply do not match up.
2. High annual income
Additionally, the IRS does sometimes focus more resources on those with a high level of income. These returns can often be more complex, perhaps with multiple sources of income, and it can be complicated to sort through all of the details and paperwork.
3. Numerous deductions
The IRS also looks at the things that you deducted from your taxes. Someone who has a high number of deductions may be more likely to be audited. The IRS simply wants to check to make sure that those deductions actually apply and should have been used to reduce the tax burden.
4. Typos and mathematical mistakes
Finally, the IRS is going to check your mathematical calculations, and discrepancies or typos may be flagged. This does not necessarily mean that you have done anything wrong, as it could just be a negligent mistake, but paperwork errors could trigger an audit.If you do find yourself facing an audit, especially if it is the first time, it can help to work with an experienced attorney to explore your options.]]>On Behalf of Joseph Pearman, Attorney at Law<![CDATA[What is a short-term payment plan?]]>https://www.josephpearman.com/?p=478102026-06-01T20:09:58Z2026-06-01T20:09:58ZA short-term payment plan is an option that the IRS may use to give you a small amount of additional time to pay off your tax liabilities.
If you owe an outstanding balance, the first step is often for the IRS to ask you to pay it in full immediately. There are various options you can use to do this, such as using IRS Direct Pay. You may have the money on hand to pay the outstanding balance, which can resolve the issue relatively quickly.However, if you cannot pay in full right away, then the IRS may authorize a short-term payment plan that runs for up to 180 days. This is done with no additional fee. Both businesses and individuals are able to set up these short-term payment plans, though businesses need to do so by phone and individuals can sometimes use the Online Payment Agreement application. Either way, although potential penalties and interest may apply, this is a way to pay your tax balance over the next few months without significant issues.
What if 180 days is not enough?
If 180 days will not be enough time to pay off the balance, there are also long-term payment plans. You may need to submit specific paperwork, such as Form 9465. There is often a user fee for a long-term plan, but it depends on the individual. Some low-income taxpayers are eligible to have this fee waived.
Exploring your options
This helps demonstrate various ways to pay off your tax balance with the IRS. It is important to know exactly what you are eligible for and what legal options you have.
]]>