Seasoned. Local. Tax Defense Services For Hawaii & IRS Tax Matters.
I help people with tax problems. Licensed as a lawyer in Hawaii since 1993, my office is located in the Thomas Square Historic District, adjacent to downtown Honolulu. My law degree is from the USC Law Center and my undergraduate degree is from the University of California at Santa Barbara.
Most tax matters are administrative, meaning, before the State of Hawaii Department of Taxation (“DoTax”) or the Internal Revenue Service. I also appear in Hawaii State Courts, our local U.S. District Court, and occasionally in U.S. Tax Court.
I represent mostly individuals and small businesses in civil tax controversies and criminal tax matters. Typical projects involve:
Hawaii civil tax matters typically relate to the imposition of General Excise Tax (“GE” or “GET”) or Transient Accommodations Tax (“TA” or “TAT”), frequently in the context of a small business or vacation rental property. Current (2020) Hawaii trends reflect:
Federal tax issues are too varied to easily be described. An expanded list of my projects can be found elsewhere on this website.
Unless and until we have a written agreement for my services, I will not represent you or take any steps to protect your rights. Nothing on this site is intended as legal advice for your situation, the details of which of course I know nothing about. Generalizations such as those on this site can be misleading given the specifics of your matter and should not be relied upon. Sometimes, the devil is in the details.
Cost of Services
While peace of mind is important, most of us live in a world of limited resources. Some matters are probably better handled by a CPA or EA ("Enrolled Agent.") Legal fees are relatively expensive (although some CPAs have rates comparable to or higher than attorneys) and careful thought must be given to what is sought to be accomplished in light of the expenses of services. With a lower hourly rate, depending on the nature of the services, a CPA or EA may well obtain the same or similar result at a lesser cost to you.
Attorney’s fees are generally NOT recoverable even if the Taxpayer prevails in tax litigation.
No, I Will Not Give You A Representative Client List
You do not see a client list on this website because its inappropriate, given the nature of my services, to disclose the identity of my clients.
No, I Did Not Work For the Internal Revenue Service
I have never worked for the IRS. I generally have a high level of respect for Internal Revenue Service and Department of Taxation employees, but I do not believe its a "qualification" to have worked for them. I do not believe that there are particular "secrets" to my business that the tax authorities are privy to, and I am suspicious of any sales pitch that suggests insider knowledge or "connections."
COMPLIANCE WITH THE LAW
The law requires us to file accurate tax returns on time and to pay in full. The law also provides a range of civil penalties and criminal sanctions if we fail to meet its requirements.
In my view, an advisor should be urging you to comply with the present requirements of the tax law for purely legal reasons.
PEACE OF MIND
Tax problems can cause worry and stress frequently far beyond their likely ramifications. I was not saddened by the character played by Clint Eastwood in the film "Gran Torino" that mentioned a small but unreported profit on the sale of a boat engine in his final confession. While I’m doubtful whether this transaction would have been taxable in our “real” world, the gentleman had worried for years over a matter that could have been cleared up or likely was no longer subject to sanction due to the statute of limitations.
Psychological preoccupation with tax problems can result in the substantial diminution of your quality of life. An audit or investigation can easily take eighteen months, and if you worry a couple hours a day, you will have consumed an important portion of your life during this period with little or nothing to show for it. While you must respond to the demands of the tax authorities and your representative, and consider possible outcomes in your planning, you should not become pre-occupied or unable to function.
Honest and conscientious people can miss a deadline or overlook a source of income, recognize it later, and then become paralyzed with doubt or fear as to how to appropriately resolve it.
Capable representatives can make a meaningful difference in reducing the psychological impacts of a tax problem.
ONE THING LEADS TO ANOTHER
It is not uncommon for someone who has missed a deadline to become pre-occupied with coming forward and thereafter fail to take corrective action or file the next year's returns. Once several years have "piled up," getting back on track can be daunting and seem overwhelming.
Unfortunately, criminal investigators are looking for exactly such a pattern of conduct to build a case that the matter was intentional, as opposed to a mistake or simple oversight. “Late filing syndrome” is not a recognized mental disorder or psychiatric condition.
An advisor with a holistic approach can go a long way to helping you understand the corrective measures that could be taken to “break the cycle” and improve the range of resolution outcomes.
UNDERSTANDING YOUR ECONOMIC MODEL
Failure to pay your taxes as you go may give you a misleading impression on the economic merits of your business. This particularly true with Hawaii’s GE and TA, which are imposed on gross receipts or a slight variation of gross receipts. Many businesses are simply not viable as structured if they pay the GE taxes on their operations. The sooner this is recognized the sooner appropriate adjustments can be made or operations ceased.
Many vacation rental owners did not calculate GE and TA taxes into their business model when the property was originally acquired. The investment may not have been made if this expense was fully understood.
Many vacation rental owners, if they were filing and paying TA tax, would realize a long-term rental might be a better option in light of the vacancy rate and the TA tax rate (currently 10.25% of gross rental receipts.)
SIDE JOBS, RENTAL UNITS & CASH MONEY ARE OF TREMENDOUS INTEREST TO HAWAII'S DEPARTMENT OF TAXATION
Sometimes a second (or third) job or a “side job” is considered or hoped to be too small to mention to a tax preparer. Tax authorities will not share this view. "Under the table" or "cash" jobs are of great interest to the tax authorities, indeed, Hawaii DoTax has a special unit, the Special Enforcement Section, dedicated to rooting out cash-based businesses.
In Hawaii, "independent contractors" are subject to General Excise Tax at 4% plus probable County Surcharge. An $800 a month second job produces approximately $10,000 per year gross or a GE/SC liability of approximately $450. This additional income will also generate an income tax assessment, and penalties and interest will apply to both assessments.
Like side jobs, there are rental units. In general, rental income is subject to General Excise and County Surcharge and may also be subject to Transient Accommodations Tax. A $1200/month studio apartment built into a carport would only result in an approximate $650 annual GE tax bill and probably very little in income tax. Yet that unacknowledged, unpaid $650 per year could result in a criminal investigation and the authorities might consider a felony fraud and false statement charge.
FIRST, DO NO HARM – DO NOT MAKING IT WORSE
"Knee jerk" reactions can make a difficult situation worse or actually into a catastrophe.
A classic reaction to receiving an examination letter or discovering that a Failure to File criminal investigation has been launched is to file the outstanding returns as soon as possible. At best, the returns are an admission or confession that income was subject to the tax and that returns were not filed on time. Prepared hastily, the returns could be incorrect and the misdemeanor FTF investigation could rapidly morph into a felony tax fraud investigation based upon the newly filed returns.
A classic reaction to an audit inquiring into an area where completely correct returns are not on file is to submit an "amended" return disclosing overlooked or omitted items. Auditors may or may not accept amended returns during audit, and may proceed to dig further using the amended returns as a roadmap or guide for additional document requests. Questions about why the omissions can become difficult to answer.
A representative knowledgeable in these areas can be a brake on impulsive action and advise you how to minimize your exposure to the worst outcomes.