By Joel N. Crouch on January 12, 2018
Any tax practitioner who has contacted the IRS after January 3, 2018 to obtain client information has received an unpleasant surprise. The IRS is asking the practitioner to provide his or her social security number and date of birth for authentication purposes. There is no doubt this is an attempt to address security concerns, including concerns about compromised CAF numbers, but the change has caught many in the tax community off guard and led to unpleasant exchanges with IRS personnel.
By Paul M. Budd on January 3, 2018
On December 20, the Tax Court issued a supplemental opinion in Graev v. Commissioner, in which it reversed its prior position on I.R.C. Section 6751(b) and agreed with the Second Circuit’s decision in Chai v. Commissioner. In Chai, the Second Circuit held that Section 6751(b)(1) requires the IRS to obtain written supervisory approval of an initial penalty determination no later than the date the IRS issues the notice of deficiency or files an answer asserting the penalty. A previous blog post discussed the Chai decision and its impact on pending Tax Court cases.
By David E. Colmenero on December 27, 2017
As the year comes to a close, one additional matter that individual taxpayers may want to consider is whether to expedite any large dollar purchases into this year if sales tax will be due on those transactions.
By Laura L. Stapleton on December 22, 2017
The House of Representatives and the Senate have been busy these past few weeks in their attempt to drag some semblance of H.R. 1, also known as the Tax Cuts and Jobs Act (“TCJA”), over the proverbial goal line, and it appears that they have done so this week. Barring any additional procedural snafus, the TCJA should land on President Trump’s desk for his signature before the break for the holidays. While there hasn’t been much publicity surrounding the possible changes to non-qualified deferred compensation plans, employers of privately held companies should pay particular attention to the end result of the TCJA as passed in its final form.
In a much anticipated decision the Texas Supreme Court today issued its decision in Graphic Packaging Corp. v. Hegar, No. 15-0669, (December 22, 2017). The Court held that Graphic Packaging could not use the three-factor apportionment formula provided for in the Multistate-Tax Compact for apportioning Texas franchise tax, notwithstanding that Texas is a member of the Compact.
By Alan K. Davis on December 21, 2017
As we sit on the precipice of the new tax act going into effect (it only needs the President’s signature to become law), it appears that the only transfer tax change in the Act consists of the doubling of the Section 2010(c) basic exclusion amount from $5,000,000 to $10,000,000 for transfers made and decedents dying after December 31, 2017 and before January 1, 2026.
By Joel N. Crouch on December 5, 2017
Read about two cases involving interesting rulings in Undisclosed Foreign Account Penalty Cases: United States v. Forbes and Jarnagin v. United States.
By Joel N. Crouch on December 4, 2017
In a prior blog post (here) my colleague Chris Weeg discussed using Bitcoin as part of year end charitable giving. Bitcoin has been in the news lately as the value of a single Bitcoin has risen dramatically in the last month. Some financial experts view Bitcoin as the next great investment, while other financial investors believe that Bitcoin is a scam. Currently Bitcoin has limited usage beyond investment, but one of the Big 4 accounting firms says it has begun accepting Bitcoin as payment (here). In addition, futures trading on Bitcoin is expected to start next week.
By Christopher C. Weeg on December 1, 2017
Time is running out to make charitable contributions for the 2017 tax year. With virtual currencies trading at record highs, contributions of this pioneering property may be a viable option for some. The most common (and valuable) virtual currency is Bitcoin, which is valued at approximately $9,600 as of this writing and up over 900% year-to-date. Other popular virtual currencies include Etherum (valued at approximately $415) and Bitcoin Cash, a split-off of Bitcoin (valued at $1,260). For those riding the Bitcoin rocket ship (or, perhaps, the Bitcoin roller coaster), you may consider taking advantage of the following favorable charitable contribution tax rules.
By Stephen A. Beck on November 27, 2017
As of the date of this article, the U.S. Congress is considering two different legislative proposals that would cause significant changes to the U.S. income taxation of international business activities and investments. The U.S. House of Representatives passed on November 16, 2017, H.R. 1, the “Tax Cuts and Jobs Act” (the “House Proposal”) while the Senate Finance Committee passed, on that same date, its own proposal (the “Senate Proposal”). The Senate and House proposals are generally consistent regarding the nature of the changes that would be made to the U.S. income tax laws affecting international transactions, but there are subtle differences that will need to be resolved as the legislative process moves forward to achieve passage of final legislation. This article does not attempt to summarize every change to the U.S. international tax laws that would result under the pending House and Senate proposals. Rather, this article summarizes five categories of international tax reforms under the pending proposals that would be broadly applicable and thus are important to monitor as the legislative process advances. In addition, this article does not discuss every nuance or detail relating to the pending proposals discussed herein. Instead, this article is intended to provide a high level overview of the pending proposals so that readers will be alerted and can look further into the proposals potentially impacting them.
By Anthony P. Daddino on November 16, 2017
IRS officials are making it known that the IRS is losing patience with taxpayers who have not come forward to fully report their offshore activities. Not only is the IRS doubling down on its efforts to audit taxpayers who withdrew or were denied entry into the IRS’ Offshore Voluntary Disclosure Program, the IRS recently announced a program whereby they will be sending not-so-subtle “soft” letters to taxpayers encouraging them to disclose (or else).
By Joel N. Crouch on November 6, 2017
On November 3rd, the IRS announced the rollout of 11 Large Business and International (LB&I) enforcement campaigns. The 11 new campaigns are in addition to the 13 LB&I enforcement campaigns introduced by the IRS in January 2017
By Anthony P. Daddino on October 26, 2017
Statistics show that IRS Criminal Enforcement is down. But it is certainly not out. Seemingly adopting the mantra “quality not quantity,” earlier this year the IRS Criminal Investigations division announced the creation of two new nationally-coordinated investigation units that, according to statements made this week, the IRS expects will be fully operational in January 2018.
By Anthony P. Daddino on October 17, 2017
The Tax Court’s decision in Avrahami v. Commissioner created a storm that is brewing in the I.R.C. Section 831(b) micro-captive insurance industry. Some microcaptives are a safe distance away from the storm’s path. Others are at risk for an indirect hit. Still others are likely facing the very eye of the storm. The key is preparation, and this requires an objective assessment. We must know where the captive insurance planning sits on the storm’s projected path so we can help our clients make the planning storm-ready. As we begin to look more closely at our clients’ captive insurance planning in light of Avrahami, we should be mindful of the following warning signs:
By Anthony P. Daddino on October 16, 2017
With funding and staffing low, and caseloads high, you would expect the IRS to be more attentive in its efforts to resolve cases. But in my experience the opposite holds true, with IRS personnel seemingly more interested in moving a case to someone else’s desk rather than out the door. So how do you get the IRS to seriously consider an otherwise fair settlement offer? Make it a qualified offer.
By Joel N. Crouch on October 11, 2017
Whether due to oversight or intentional conduct, there are number of individuals and businesses with unfiled federal tax returns. Under the Internal Revenue Code (IRC) the failure to file a tax return is a misdemeanor (IRC Section 7203) punishable by imprisonment of not more than one year and a fine of up to $25,000.
By Christopher C. Weeg on October 4, 2017
The long, tumultuous road of the proposed regulations under I.R.C. Section 2704 (the “2704 Proposed Regulations”) should be coming to an end with Treasury’s recent report in response to Executive Order 13789.
By Joel N. Crouch on October 2, 2017
On September 28th, the Treasury Inspector General of Tax Administration (TIGTA) issued a report recommending changes to fix the procedures the IRS uses to select estate and gift tax returns for examination.
By Anthony P. Daddino on September 29, 2017
Hurricane Harvey tax relief has been extended to taxpayers residing in Dallas and Tarrant counties.
By Anthony P. Daddino on September 7, 2017
I recently explored in a separate Blog post whether partners that live outside the disaster area qualify for additional time to make tax payments and file returns if the partnerships are located inside the disaster area. A similarly burning question is whether hurricane victims have additional time to file FBARs (Form 114), the filing obligation for which arises under Title 31 rather than Title 26 of the United States Code and which have an extended due date of October 15, 2017. The proverbial jury was out on this issue until today, when FinCEN delivered a verdict.
By Anthony P. Daddino on September 6, 2017
When disaster strikes, the IRS may permit taxpayers additional time to make tax payments and file returns provided they qualify as “affected” taxpayers in counties that have been designated as federal disaster areas. IRC Sec. 7805A. While it is clear that partnerships with a principal place of business inside the disaster area qualify as affected taxpayers, what about the partners of those partnerships who live outside the disaster area? Do they qualify for tax relief? As is often the answer in the tax world, it depends.
By Anthony P. Daddino on August 23, 2017
On August 21, 2017, the Tax Court handed the IRS a critical victory in the first ever case deciding an IRS challenge to an IRC section 831(b) microcaptive insurance arrangement. This decision follows an over three year enforcement push by the IRS against the small captive insurance industry, an initiative that ensnarled captive managers and taxpayers alike as well as landed microcaptives on the IRS’ dirty dozen lists. But a ruling issued just days before that decision reveals that the IRS is not seeking to disavow all captive insurance arrangements – perhaps just cull out some of the bad apples.
By Anthony P. Daddino on August 22, 2017
The Tax Court has delivered its long-awaited decision in Avrahami v. Commissioner, which represents the first court decision – ever – addressing an IRS challenge to a microcaptive insurance arrangement. Not only did the Tax Court hand the IRS a critical first win in disavowing the tax benefits of the planning, the Tax Court also handed the IRS something far more valuable: a potentially unlimited statute of limitations with which to attack microcaptives. The verdict: score one for Uncle Sam.
By Anthony P. Daddino on August 22, 2017
In recent months, the IRS has fired two separate shots across the proverbial bow, highlighting the dangers of “incomplete” or “inadequate” reporting as it relates to imposition of penalties and the elongation of the statute of limitations. This blog post explores an International Practice Unit issued by IRS Exam detailing when compliance is not “substantial” and therefore international information return penalties apply.
By Anthony P. Daddino on August 22, 2017
In recent months, the IRS has fired two separate shots across the proverbial bow, highlighting the dangers of “incomplete” or “inadequate” reporting as it relates to imposition of penalties and the elongation of the statute of limitations. This blog post explores a Legal Advice memorandum wherein the IRS ruled that a gift tax return did not adequately disclose a gift and therefore the return did not start limitations period.
By Christopher C. Weeg on August 1, 2017
I last provided an update on the proposed regulations under I.R.C. Section 2704 (the 2704 Proposed Regulations) on January 31, 2017, in which I covered President Trump’s then recent Executive Orders and their potential to halt to the controversial 2704 Proposed Regulations. Since then, President Trump has called on the Treasury to identify burdensome tax regulations, and the fate of the 2704 Proposed Regulations (at least under the Trump administration) may be known as soon as September.
By Matthew L. Roberts on July 25, 2017
At last year’s Annual Meadows Collier Tax Conference, my colleague, Stephen Beck, and I discussed some of the more recent hot topics in international tax law. During our discussions, we spoke of the current ambiguity in U.S. tax law as it relates to the sale of a U.S. partnership interest by a foreign person. For decades, the IRS has argued that the sale of such partnership interests should be subject to U.S. tax if the partnership was engaged in a U.S. trade or business. See Rev. Rul. 91-32, 1991-1 C.B. 107.
By Michael A. Villa, Jr. on July 14, 2017
The RESPECT Act (H.R. 1843), also known as the Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools Act, was originally introduced in the House of Representatives in March 2017. The House Ways and Means Committee recently unanimously approved the RESPECT Act, which prohibits the IRS from carrying out seizures relating to a currency structuring transaction unless the property to be seized is from an illegal source or the funds were structured for the purpose of concealing the violation of another criminal law. It also requires notice and a post-seizure hearing for such currency structuring seizures.
By J. Daniel Boysen on July 12, 2017
On Friday, July 7th, the U.S. Department of the Treasury (the “Treasury”) announced in Notice 2017-38 that it is targeting eight tax regulations for potential repeal. Included in the eight targeted are the final section 385 regulations issued in October of 2016. In a previous article from December of 2016, I discussed the onerous documentation requirements under the final section 385 regulations for related-party debt and touched on what effect these requirements may have on closely-held corporations. The Treasury’s announcement could prove as a relief to those corporations dreading the potential financial burden resulting from the new documentation requirements.
By Joel N. Crouch on July 5, 2017
In a previous blog posted on June 27, 2017, we discussed some suggestions for representing taxpayers in a IRS examination. In this blog, we discuss the next step, i.e., when the exam cannot be resolved and you must make a request for review by an IRS Appeals Officer. Most of the suggestions in the previous exam blog are applicable to working with IRS Appeals and will not be repeated here. If you are representing a taxpayer in an appeals conference, you should review the previous blog and the suggestions below.
Through the years we have developed, or adopted from other practitioners, suggestions about dealing with the IRS in exams. The suggestions below are generalizations, to which there are substantial exceptions. Practitioners that deal with the IRS are bound not only by their individual professional ethics but also by Circular 230. It is important to recognize the significance and import of those rules and to apply not only their letter but also their spirit. The goal of any representative is to get a client out of an IRS examination as quickly as possible.
By Charles J. Allen on June 12, 2017
With the issuance of Revenue Procedure 2017-34, the IRS has granted qualifying estates an automatic extension of time to file an estate tax return (a “706”) and elect portability. The extension is only applicable to elect portability, and does not serve as an extension of time for any other purposes. Qualifying estates now have until January 2, 2018, or two years after the date of death, whichever is later, in which to file a 706 and elect portability. This is no doubt welcome relief to many estates who failed to timely file a 706 and whose only previous option was a Private Letter Ruling, a lengthy and expensive process.
By Stephen A. Beck on May 31, 2017
Companies often utilize deferred compensation arrangements to incentivize their workers to use their best efforts to grow the value of those companies. If a company provides a worker with a legally binding right to payment that will be received in a future year, that arrangement generally constitutes a nonqualified deferred compensation plan. As such, the plan must satisfy all of the requirements under I.R.C. § 409A in order to avoid potentially disastrous tax consequences to the worker.
By Joel N. Crouch on May 30, 2017
On March 1, 2016 the IRS issued IR-2016-34, alerting “payroll and human resources professionals to beware of an emerging phishing email scheme that purports to be from company executives and requests personal information on employees.” Recent information indicates that cybercriminals have increased the use of this phishing email in 2017. Identity theft and phishing are both on the 2017 IRS Dirty Dozen List.
By Christopher C. Weeg on May 26, 2017
Most clients and many attorneys are unfamiliar with the concept of community property-that is, how it works and how it affects a broad spectrum of legal practices including family law, tax law and estate planning. For attorneys with diverse clients and multijurisdictional practices, ignorance of community property law can be costly. This article provides an introduction to the community property system and highlights topics to discuss with clients planning a move either to or from a community property state.
By Stephen A. Beck on May 23, 2017
It is commonly known that sales of partnerships can give rise to ordinary income (subject to a current maximum tax rate of 39.6%) and long-term capital gain (subject to a current maximum tax rate of 20%). This is true regardless of whether the transaction consists of the partnership’s sale of its assets or the partners’ sale of their ownership interests in the partnership. Tax professionals can assist their clients in maximizing the long-term capital gain recognized from a sale of a partnership by negotiating an allocation of more of the sales proceeds to long-term capital gain assets and less of the sales proceeds to “hot assets,” such as inventory, accounts receivables, and depreciation recapture.
By Anthony P. Daddino on May 5, 2017
At the close of 2016, the IRS’ contempt for syndicated conservation easement deals reached its peak with the IRS identifying such transactions as “listed transactions.” See prior MC Talks Tax blog post dated December 27, 2016, "The IRS Adds Conservation Easements to the List of Tax Avoidance Transactions."
By Anthony P. Daddino on May 4, 2017
The IRS is stacking-up victories in its attack against compensation arrangements of closely held business, with C corporations, S corporations, and partnerships all potentially facing an IRS challenge. Now is the time to engage your owner-operated business clients in a discussion about compensation and ways to potentially enhance existing arrangements and bolster defenses in the event of an IRS challenge.
By Anthony P. Daddino on May 4, 2017
Last year IRS Chief Counsel declared that a “partnership is not a corporation” and that the “wage and reasonable compensation rules which are applicable to corporations…do not apply.” Therefore once a partner is no longer a “passive investor,” his or her entire distributive share of partnership income is subject to self-employment tax. IRS Chief Counsel Advice 201640014
By Joel N. Crouch on April 19, 2017
On April 10, 2017, the IRS Chief Counsel’s Office issued an Action on Decision (AOD 2017-3) refusing to acquiesce to the Tax Court’s and 9th Circuit’s decisions in Shea Homes Inc. v. Commissioner, 834 F.3d 1061 (9th Cir. 2016), aff’g 142 T.C. 60 (2014). Because of the potential tax benefits associated with the Shea Homes decision, real estate developers and their tax advisors should keep an eye on any future developments.
By Josh O. Ungerman on April 10, 2017
IRS Criminal Investigation (CI) recently released their 2016 Annual Report. The report tries to put the best face on the continually diminishing number of investigations. From 2013 through 2016, the number of investigations initiated by IRS CI has dropped an amazing 36%. During that same time period, the number of IRS Special Agents has dropped almost 13%.
By Michael A. Villa, Jr. on April 6, 2017
On April 3, 2017, Senators Jack Reed (D-RI) and Chuck Grassley (R-Iowa) introduced bipartisan legislation that may impact or deny tax deductions for settlement payments regarding corporate regulatory violations. In recent years, the federal government has increased enforcement efforts against corporations for regulatory violations, whether it be for healthcare, banking, or environmental violations. Although the federal government carries a big stick when it comes to regulatory enforcement (i.e. onerous civil fines and potential criminal penalties), there are also carrots that can often facilitate and expedite settlements with corporations.
By Joel N. Crouch on April 5, 2017
On March 30th, the Treasury Inspector General for Tax Administration (TIGTA) released a report titled “Criminal Investigation Enforced Structuring Laws Primarily Against Legal Source Funds and Compromised the Rights of Some Individuals and Businesses.” The TIGTA report (the Report) analyzed and made recommendations regarding how IRS Criminal Investigation (CI) administered cases involving possible currency structuring violations of Title 31 U.S.C. Section 5324(a).
By Joel N. Crouch on March 30, 2017
On March 20th the U.S. Court of Appeals for the Second Circuit issued an opinion in Chai v. Commissioner that could impact every taxpayer who is disputing IRS penalties. Taxpayers with penalty cases pending in Tax Court should review the Chai decision as soon as possible and determine its application to their case.
By Joel N. Crouch on March 27, 2017
On March 21, 2017, the Treasury Inspector General for Tax Administration (TIGTA) issued a report entitled “A More Focused Strategy is Needed to Effectively Address Egregious Employment Tax Crimes”. The report presents the results of TIGTA’s evaluation of the IRS civil and criminal enforcement actions regarding payroll tax noncompliance. The report calls employment tax noncompliance a “serious crime” and recommends that the IRS, including Criminal Investigation (CI), “consider a focused strategy to enhance the effectiveness of the IRS’s efforts to address egregious employment tax cases”. “Egregious employment tax cases” are defined as employers who have 20 or more quarters of delinquent employment taxes. The number of employers with egregious employment tax noncompliance has more than tripled in recent years. As of December 2015, 1.4 million employers owed approximately $45.6 billion in unpaid employment taxes, interest and penalties.
By Anthony P. Daddino on March 22, 2107
The IRS Small Business/Self-Employed Division issued a memorandum to all examination and collection personnel setting forth procedures that apply when a taxpayer alleges return preparer misconduct. The memorandum narrates a cautionary tale for unscrupulous preparers and serves as an important reminder to conscientious preparers to better communicate with clients so as to avoid misunderstandings.
By Joel N. Crouch on March 15, 2017
Section 7345 entitled “Revocation or denial of passport in case of certain tax delinquencies” was added to the Internal Revenue Code in late 2015. The IRS has announced that it will begin sending tax debt certifications to the State Department in early 2017 for revocation or denial of passports. Denying or revoking a person’s freedom to travel can have devastating effects including disrupting business, impeding or eliminating an individual’s ability to generate income and potentially separating families. Therefore, it is imperative that any person with an IRS tax debt who regularly travels internationally or plans to do so, understand when they may become subject to Section 7345, what type of debts can be excluded from Section 7345 and their options if they receive notice of a tax debt certification.
By Alan K. Davis on March 13, 2017
After navigating the turbulent waters of a divorce, many clients have had enough of lawyers and accountants to last a lifetime. Nevertheless, there are many legal and financial matters that should be attended to in order to protect you and your family from unintended consequences, or frankly, an outright mutiny among your family in the event of your death or incapacity.
By Matthew L. Roberts on March 1, 2017
For a multitude of reasons, the late-filing penalty has remained a priority of the IRS. First, the late-filing penalty is easy for the IRS to police through the use of modern computer systems which automatically identity and impose the penalty after a return has been filed late. Second, the amount of the penalty, or 25% of the net tax due after only five months, represents an easy windfall of revenue to the Government. Third, imposition of the late-filing penalty naturally deters taxpayers from filing their returns late and promotes compliance with the tax system. Fourth, attempts by taxpayers to have the penalty waived or abated—termed “reasonable cause” in tax parlance—require an affirmative showing of relief upon which the taxpayer bears the burden of proof.
By Joel N. Crouch on February 20, 2017
On February 16th, the Federal Court of Appeals for the Sixth Circuit issued a very entertaining and interesting opinion in Summa Holdings Inc. v. Commissioner, holding that the taxpayers’ use of a Domestic International Sales Corporation (DISC) and two Roth IRAs for their congressionally sanctioned purposes - tax avoidance - was permissible. The 6th Circuit opinion reversed a Tax Court decision that upheld an IRS determination that the substance-over-form doctrine allowed the transactions to be re-characterized as dividends to the taxpayers followed by excess Roth IRA contributions. The IRS had argued that the transactions should be re-characterized although it agreed that the taxpayers had complied with the relevant Tax Code provisions and that the purpose of the provisions was to lower taxes.
On January 19, 2017, the Texas Third Court of Appeals (the “Court”) in Agri-Plex Heating and Cooling, LLC v. Hegar found that a business buyer may not be able to escape successor liability for hidden tax liabilities assessed after the purchase occurs. Agri-Plex Heating and Cooling, LLC v. Hegar, No. 03-15-00813-CV (Tex. App.—Austin January 19, 2017, no pet. h.) (mem. op.)). As a result and moving forward, a buyer purchasing a business should be cautious and plan accordingly because it could be liable for taxes incurred by the seller before the purchase but not known or ascertainable by either party at the time of closing.
By Anthony P. Daddino on February 2, 2017
The IRS Large Business and International division – which serves corporations, subchapter S corporations, and partnerships with assets greater than $10 million – has announced a new series of targeted audits, referred to as “campaigns.” These campaigns will target 13 specific issues affecting a broad spectrum of taxpayers and industries, and marks a significant step forward in the IRS’ move toward issue-based examinations.
By Christopher C. Weeg on January 31, 2017
Before they were released in August of last year, we all knew the proposed regulations under section 2704 were going to be controversial. What we didn’t know back then was that Donald Trump was going to be president. With the new administration, the section 2704 regulations project could be altogether abandoned. And even if finalized, the Republican controlled Congress could severely undermine the impact of the regulations with a major tax overhaul, including a possible repeal of the estate tax. Despite this uncertainty, Treasury has provided some good news, hinting at the addition of a closely-held business exception to the regulations.
By Joel N. Crouch on January 30, 2017
Last year the Treasury Inspector General For Tax Administration (TIGTA) issued a report on the IRS track record in injured spouse cases. Although similar to the more well-known innocent spouse relief provisions, the injured spouse relief provisions do not relieve the injured spouse of a joint liability on a valid jointly filed return. Instead, the injured spouse provisions allow the injured spouse to request that the IRS return the portion of a joint refund taken to offset a debt of the non-requesting spouse. The background portion of the TIGTA report explains the intent and procedure for filing for injured spouse relief:
By Joel N. Crouch on January 23, 2017
Employment taxes and worker misclassification continue to be priorities for the IRS and the Tax Division of the Department of Justice. The IRS has announced information sharing agreements with the Department of Labor and state agencies to find businesses that are misclassifying their workers as independent contractors. The DOJ has made employment taxes and worker misclassification priorities for its civil tax and criminal tax sections. It is very important for any business that uses independent contractors to be aware of its options in an IRS employment tax/worker misclassification audit.
By Alan K. Davis on January 18, 2017
New tax proposed Treasury Regulations may affect the amount of tax on family businesses. Alan Davis discusses the proposed Regulations under I.R.C. Section 2704.
On January 6, 2017, the Texas Third Court of Appeals (the “Court”) withdrew their opinion and judgment in American Multi-Cinema, Inc. v. Hegar from April 30, 2015 to substitute a revised opinion (No. 03-14-00397-CV (Tex. App.—Austin January 6, 2017, no pet. h.) (mem. op.)). The revised opinion upholds American Multi-Cinema, Inc.’s (“AMC’s”) cost of goods sold (“COGS”) deduction for its film exhibition costs while leaving unresolved whether AMC’s products are “perceptible to the senses” and thus qualify as “tangible personal property” under Texas Tax Code Section (“Section”) 171.1012(a)(3)(A)(i).
By Joel N. Crouch on January 16, 2017
On November 18, 2016 at the 2016 New England IRS Representation Conference in Ledyard, Connecticut, I had the honor of being on a panel discussion entitled Dealing with Non-filers. The panel covered a wide range of issues--from the routine to the exceptional--encountered by tax professionals when representing taxpayers before the IRS.
By J. Daniel Boysen on January 5, 2017
On December 2, 2016, the IRS issued final regulations outlining increased installment agreement entrance fees while adding a reduced fee for online payment agreements. The change in installment agreement entrance fees will apply to installment agreements entered into on or after January 1, 2017.
By Anthony P. Daddino on January 4, 2017
As the old adage goes, no good deed goes unpunished. In McClendon vs. United States, decided on November 17, 2016, the federal district court for the Southern District of Texas upheld the IRS’ trust fund penalty assessments against a good-Samaritan doctor who, following another employee’s embezzlement of funds from the medical practice, loaned money to the practice so it could make payroll. The decision stands as an important reminder to taxpayers of the hair-trigger nature of trust fund penalty liability.
By Anthony P. Daddino on January 3, 2017
Last month, I blogged on the IRS’ identification of Code Section 831(b) micro captives as “transactions of interest,” which triggered an obligation by taxpayers and material advisors to formally disclose the details of their prior-year insurance transactions to the IRS by January 30, 2017 or otherwise face potential penalties up to $50,000.
By J. Daniel Boysen on December 29, 2016
In October of 2016, the IRS issued final regulations under IRC code section 385. The final regulations cover a number of issues under Internal Revenue Code (“IRC”) section 385. IRC section 385 deals, in general, with whether an interest in a corporation should be treated as stock or debt for federal income tax purposes. The purpose of this article is to discuss the documentation requirements under Treas. Reg. § 1.385-2 for related-party debt and touch on what effect these requirements may have on closely-held corporations.
By Joel N. Crouch on December 27, 2016
On December 23rd the IRS issued Notice 2017-10 , which adds syndicated conservation easements to the category of transactions that require formal disclosure by investors and advisors to the IRS. Any taxpayer or advisor who is required to make a disclosure but fails to do so could face penalties of up to $50,000.
By Charles M. Meadows, Jr. on December 20, 2016
Now is the time to engage your clients in discussion regarding the status of their estate planning. Many items must be completed before year-end or they will be lost. Others simply need attention on an annual basis.
By Joel N. Crouch on December 19, 2016
In a prior post, I talked about the latest IRS Alternative Dispute Resolution (ADR) program, Fast Track Mediation Collection, which replaced the prior Fast Track Mediation program. In this blog post, I want to talk about some of the other ADR programs that are available to taxpayers as an option for resolving tax disputes on an expedited basis.
On December 12, the U.S. Supreme Court denied the petition for certiorari in Direct Marketing Association v. Brohl (Direct Marketing). As a result, the Tenth Circuit’s earlier decision in Direct Marketing will stand. In Direct Marketing, 814 F.3d 1129 (10th Cir. Feb. 22, 2016), the Tenth Circuit upheld a Colorado law requiring out-of-state retailers with no physical presence in Colorado to either voluntarily collect sales tax or comply with substantial notice and reporting requirements. At least arguably, the Colorado statute at issue represents yet another attempt by a state to circumvent the physical presence requirement imposed by the U.S. Supreme Court on a state’s ability to impose its tax collection obligations on an out-of-state entity.
By Christopher C. Weeg on December 14, 2016
Beginning January 1, 2017, foreign-owned single member LLCs—disregarded entities commonly used to invest in U.S. real estate—will have increased reporting and record keeping requirements.
By Joel N. Crouch on December 12, 2016
On November 18, the IRS issued Rev. Proc. 2016-57 which provides guidance for the new Small Business/Self Employed (SBSE) Fast Track Mediation Collection (FTMC). The FTMC replaces the SB/SE Fast Track Mediation which was infrequently used and is now obsolete.
By Matthew S. Beard on December 5, 2016
On December 1, 2016, I attended and testified at the hearing on the proposed regulations under IRC § 2704 in the Internal Revenue Service building located in the Federal Triangle in Washington D.C. The proposed regulations provide valuation rules that the Department of the Treasury (the “Treasury”) and the Internal Revenue Service (the “Service”) believe are necessary for the determination of fair market value of entity interests (such as corporations, partnerships, and LLCs) held by family members. These issues typically arise when property is transferred with respect to a large estate. The Service received thousands of comments during the three month comment period. The hearing was the next step in the process.
By Joel N. Crouch on November 30, 2016
Conservation easements are legitimate and very good tax planning transactions for taxpayers who wish to preserve valuable land and wildlife habitats. If the conservation easement is done properly, a taxpayer may be able to claim a substantial charitable contribution deduction pursuant to Section 170. However, due to inflated appraisals, poorly drafted documentation, improper deductions and unscrupulous promoters, the IRS is considering adding syndicated conservation easements to its catalog of “listed transactions”.
By Joel N. Crouch on November 28, 2016
On November, 17, 2016, the Department of Justice filed a petition in a United States District Court in Northern California asking the court to issue a John Doe Summons to Coinbase, the largest bitcoin exchange in the U.S., asking for the records of all customers who bought virtual currency from Coinbase for the years 2013, 2014 and 2015.
By Anthony P. Daddino on November 10, 2016
The IRS has officially declared war on small captive insurance arrangements that rely on I.R.C. Section 831(b) and the ability of the captive to exclude from income a certain amount of premiums earned each year. In Notice 2016-66, the IRS identified these microcaptives, as they are commonly known by, as “transactions of interest” for federal income tax purposes. This identification triggers an obligation by taxpayers and material advisors to formally disclose the details of their insurance transactions to the IRS or otherwise face potential penalties up to $50,000.
By Christopher C. Weeg on October 20, 2016
Growing up my Mom used to say “You’ve made your bed, now lie in it.” Luckily for taxpayers, my Mom is not the IRS. The IRS understands that mistakes happen, conditions change, and deals sour. Under the rescission doctrine, a taxpayer may unwind a transaction and avoid federal income tax consequences flowing from the rescinded transaction.
By Joel N. Crouch on October 4, 2016
Effective October 1, 2016, the IRS has revised the Internal Revenue Manual (IRM) instructing Appeals Officers that most Appeals conferences will be held by telephone instead of in person. The changes to the IRS are in response to the dwindling IRS budget and lack of manpower.
By Eric D. Marchand on September 28, 2016
In recently issued Revenue Procedure 2016-49, the Service has confirmed that both a QTIP election and a portability election may be made on the same estate tax return, thereby maximizing exemption planning and flexibility in your estate plan. This new guidance was issued to clarify a gray area posed by Revenue Procedure 2001-38 whereby a QTIP election could possibly be void where the executor also makes a portability election.
By Christopher C. Weeg on September 28, 2016
As I discussed in detail in my August 4, 2016 blog post, the new proposed regulations are undoubtedly controversial. In their current form, they disregard longstanding valuation principles backed by decades-old legal precedent, and, in doing so, virtually eliminate minority and lack of marketability discounts. To no surprise, the regulations have come under fire from family business owners, tax practitioners, and appraisers, who criticize the new rules as regulatory overreach and the Treasury’s attempt to change and make law.
By Thomas G. Hineman on September 16, 2016
The IRS announced in Rev. Proc. 2016-45 that it will once again issue private letter rulings on issues of corporate business purpose and device under §355, after a hiatus of 13 years.
By Joel N. Crouch on September 2, 2016
In a previous post, I discussed the civil statute of limitations (SOL) the IRS has for assessing additional tax, penalties and interest against a taxpayer. In this post, I will briefly discuss the SOL for criminal tax cases and a recent case where the defendant effectively used the SOL as a defense.
By Mark A. McMillan on August 31, 2016
You are probably familiar with the idea of an IRA rollover. Generally, taxpayers can distribute assets from an IRA account, without an immediate tax consequence, provided that the assets are contributed to another IRA account within 60 days. The distribution is subject to tax, as well as a potential 10% early withdrawal penalty, if a taxpayer misses the 60-day deadline. The IRS may waive the deadline if it “would be against equity or good conscience” to enforce it. See I.R.C. §§ 402(c)(3)(B) or 408(d)(3)(I). Until last week, Revenue Procedure 2003-16 governed the procedure for granting waivers.
By J. Daniel Boysen on August 25, 2016
On July 18, 2016, the IRS released for the first time the procedure for amending a streamlined submission, as part of ongoing updates to its Frequently Asked Questions for U.S. Taxpayers Residing in the United States and for U.S. Taxpayers Residing Outside the United States .
By Matthew L. Roberts on August 12, 2016
Since 2006, the enhanced oil recovery credit (“EORC”) has been unavailable to taxpayers who operate in the energy sector. However, recent reductions in the realized prices of oil have once again made the EORC relevant for tax year 2016.
By Christopher C. Weeg on August 4, 2016
Two days ago, the Treasury released the much-awaited proposed regulations under § 2704. If finalized in their current form, they will likely drastically change the landscape of estate planning with family controlled entities by severely curtailing (if not eliminating) minority and marketability discounts largely predicated on liquidation restrictions. Some of the major changes include the closing of perceived loop holes in § 2704’s definition of applicable restrictions; namely, state law restrictions, assignee interests, and interests held by nonfamily members.
By Anthony P. Daddino on August 4, 2016
Late last year, Congress passed legislation that sought to remove and replace the current audit rules for partnerships under TEFRA. The new rules apply to make the partnership entity liable for taxes and penalties due on the income and expense adjustments that the IRS makes to a partnership’s return. Today the IRS issued its first set of interpretative temporary regulations offering needed (albeit limited) guidance regarding the new partnership audit regime.
By Charles M. Meadows, Jr. on August 4, 2016
A possibility discussed in our May 6, 2016 Meadows Collier Talks Tax Blog post, “Master Limited Partnerships and Cancellation of Indebtedness Income,” has come to pass. Atlas Resources is the last in a series of Master Limited Partnerships which are renegotiating their debts to third parties and vendors.
By Michael A. Villa, Jr. on August 1, 2016
The Financial Crimes Enforcement Network (FinCEN) issued a new Geographic Targeting Order (GTO) that requires U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in six major metropolitan areas. FinCEN is monitoring whether real estate transactions involving “all cash” (i.e. without bank financing) in deals where the purchasers are limited liability companies, or other business structures that are not transparent, are being used to hide assets related to possible criminal activity.
By Joel N. Crouch on August 1, 2016
One of the questions taxpayers regularly ask is: How long does the IRS have to propose and assess additional tax? Or as some taxpayers put it, “ How long before I can be sure I am safe from the IRS”? In this blog post, I will discuss the general rules relating to the statute of limitations (SOL) on assessment and the exceptions to the general rule.
By Matthew L. Roberts on July 19, 2016
In a previous blog post , I generally discussed passage of the Tax Increase Prevention Act of 2014 (“TIPA”) and its overall positive impact on employers who relied on the services of professional employment organizations (“PEOs”) for payroll processing and employment tax payments.
By Joel N. Crouch on July 8, 2016
In a previous blog post, I discussed the duties and rights of a taxpayer who receives an IRS administrative summons for records or testimony. In this blog post, I will discuss the duties and rights of a third party who receives an IRS summons for records or testimony and the taxpayer’s right and duties with regard to a third party summons.
By Joel N. Crouch on July 6, 2016
In most IRS examinations, the taxpayer and the IRS prefer an informal information-gathering process with the IRS issuing Information Document Requests (IDRs) and the taxpayer providing responses. However, there are circumstances where the issuance of an IRS administrative summons to the taxpayer for documents and/or testimony becomes necessary. When the IRS issues an administrative summons, it is very important that the taxpayer and the taxpayers’ representative understand the taxpayer’s duties and rights in responding.
On June 16, 2016, the IRS announced a new procedure for taxpayers who have had their property seized to file a petition for remission or mitigation. The IRS has identified more than 700 taxpayers that it believes may qualify, and the IRS has been notifying these taxpayers by mail over the past month.
By Anthony P. Daddino on June 9, 2016
So far in 2016 we have seen two Tax Court decisions dealing with IRA-owned businesses. In Polowniak v. Comm’r, decided on February 25th, the Tax Court dealt with a purported run-around of contributions limits. Mr. Polowniak owned and operated through an S corporation a successful consulting business. In an effort to siphon some of those consulting fees to a tax-advantaged vehicle, Mr. Polowniak set up a new company and Roth IRA and immediately directed the Roth IRA to acquire virtually all of the new company stock.
By Anthony P. Daddino on June 9, 2016
The IRS is seeking to shine the light on domestic disregarded entities with foreign owners. Under regulations proposed last month, a U.S. disregarded entity that is wholly owned by a foreign person would be treated as a domestic corporation separate from its owner for reporting and record maintenance requirements under IRC Section 6038A.
By Anthony P. Daddino on June 9, 2016
A common way to reward and incentivize key employees in a partnership is to issue them a profits interest. If properly structured, the profits interest is not taxable as income to the employee upon issuance and provides the opportunity for potential capital gains treatment in the event of a future sale. Based on my experiences, however, principals often struggle with the decision to put another seat at the table; to give a mic to another voice; and in some instances, to share the smallest element of control of the business.
By Anthony P. Daddino on June 9, 2016
It would appear that the IRS has been allowing executives and other high-wage earners to offset their taxes by losses from their hobby activities. At least, that was the conclusion of a recent report by the Treasury Inspector General, which has oversight responsibility over the IRS.
By David E. Colmenero on June 9, 2016
In a recent decision with potentially broad implications, the Texas Supreme Court held in favor of a taxpayer on a question involving the treatment of capital losses for purposes of the Texas franchise tax.
By Charles J. Allen on June 3, 2016
The United States District Court for the Eastern District of California has issued an opinion finding that the executors of the estate, the trustees of the family trust, and the beneficiaries of the estate who received distributions from the estate are liable for unpaid estate taxes. United States v. Estate of Espinor, 2016 WL 2880191 (ED Cal. May 17, 2016)
By Stephen A. Beck on May 9, 2016
As discussed in a recent blog post, a new partnership audit regime that was enacted as part of the Bipartisan Budget Act of 2015 (the “Partnership Audit Rules”) will have significant, wide ranging effects on the taxation of income from partnerships. Under the Partnership Audit Rules, the general result (the “General Method”) is that the tax liability resulting from an Internal Revenue Service (“IRS”) audit adjustment to a partnership’s income will generally be assessed and collected directly from the partnership. See I.R.C. § 6221 (2018). This is obviously a significant departure from the result under the partnership audit rules that are currently in place through year-end 2017 (the “TEFRA Rules”), under which an adjustment is made at the partnership level, but the resulting tax liability is assessed and collected from the partners of the partnership.
By Mark A. McMillan on May 6, 2016
A Master Limited Partnership (“MLP”) is an investment vehicle used in oil and gas, and several other industries. MLPs are designed to avoid corporate level taxation; however, this comes at a price that many investors have not anticipated.
By Stephen A. Beck on May 3, 2016
On April 26, 2016, the Tax Section of the State Bar of Texas (“Tax Section”) submitted to the Internal Revenue Service comments (the “Comments”) regarding the implementation of the new partnership audit regime (the “Partnership Audit Rules”) that was enacted as part of the Bipartisan Budget Act of 2015. Stephen Beck of Meadows Collier participated as a principal drafter of the Comments in his capacity as Vice Chair of the Tax Section’s Partnerships and Real Estate Committee.
By Matthew L. Roberts on May 2, 2016
Panama has long been known as a favorite country for many taxpayers on account of its low tax rates and strict confidentiality laws, the latter of which serve to protect the identities of Panamanian corporate shareholders and bank account holders in the case of frivolous civil litigation. Accordingly, it should come to no one’s surprise that many non-Panamanian citizens take advantage of these low rates and confidentiality laws by creating Panamanian entities and utilizing the Panamanian banking system. Until recently, no one really knew how prolific the use of these entities was by non-Panamanian citizens or the extent to which they may be used by persons to avoid detection by taxing authorities and other governments. However, on April 3, 2016, the world got a glimpse of all of the above when a treasure trove of business records and documents relating to the formation and operation of Panamanian companies was released by hundreds of journalists from across the globe.
By Thomas G. Hineman on April 26, 2016
Are you interested in obtaining §1031 like-kind exchange treatment upon disposition of a property but have not located suitable replacement property? You may be able to qualify for deferred exchange treatment under Reg. §1.1031(k)-1 but the Regulations will keep you on a very short leash.
By Mark A. McMillan on April 22, 2016
Excluding pensions and defined benefit retirement plans, there are two basic schemes for retirement accounts: one in which dollars are contributed pre-tax, grow tax deferred and are subject to income tax on withdrawal, and the other, where dollars are contributed after-tax, grow tax free and are not subject to tax upon withdrawal.
By Joel N. Crouch on April 21, 2016
An IRS summons enforcement recommendation was issued by a federal magistrate judge in Massachusetts on April 19th, where the summonsed witness appeared as required, but asserted his 5th Amendment privilege against self-incrimination in response to questions by the IRS. The case has a couple of interesting issues.
By Aaron P. Borden on April 18, 2016
Yes, in Vandenbosch v. Commissioner, the Tax Court listed the taxpayers’ long-term relationship with their tax preparer as one of the facts supporting its decision that the taxpayer acted with reasonable cause.
By on April 5, 2016
On March 30, 2016, in Luis v. United States, the Supreme Court issued an opinion that could have far reaching effects on both asset forfeiture law and a criminal defendant’s ability to hire counsel in fraud cases. The Court concluded that the pretrial restraint of legitimate, untainted assets needed to retain counsel violates the Sixth Amendment.
By Josh O. Ungerman on March 31, 2016
The IRS called the complicated tax plans offered by international accounting and law firms to their wealthy clients in the late 1990s and early 2000s "tax shelters". The IRS shut down that type of planning through aggressive enforcement and a revamping of the requirements for written tax advice. Since those "tax shelters" are long gone, it is disturbing that in March of 2016, IRS Commissioner Koskinen has admitted defeat to a $5 billion a year tax revenue loss.
By Mark A. McMillan on March 24, 2016
The IRS issued Notice 2016-17 (a link to the Notice will be provided when available), effective March 23, 2016. The notice extends the initial filing deadline for the new Form 8971 to June 30, 2016.
By Stephen A. Beck on March 14, 2016
The Internal Revenue Service (“IRS”) recently issued its Fiscal Year 2015 Enforcement and Service Results report (the “Report”), which contains interesting information, particularly for owners of Subchapter K partnerships and Subchapter S corporations.
By Mark A. McMillan on March 4, 2016
On 3/2/14, the IRS issued proposed and temporary regulations addressing the basis consistency requirements under §§ 1014 and 6035 of the Code. As discussed in my prior post on the subject, regulation § 1.6035-2T(b) reiterates the March 31, 2016 due date for filing Form 8971 that would otherwise have been due prior to then.
By Alan K. Davis on March 2, 2016
Just like real estate brokers will help you stage your home before they list it, investment banks and commercial banks will advise you to perform a corporate house cleaning before you begin to market your company. A few common “due diligence” questions you may want to ask yourself include:
By on February 29, 2016
A minority shareholder of a closely held Texas corporation wanted out. She asked the corporation to buy her shares. In response, the corporation offered her a price that she believed inadequate. She asked the corporation to cooperate with her in selling her shares. In particular, she asked the corporation’s president to meet with a prospective buyer. The president declined to meet, citing advice of counsel. (Although the facts are more complicated this is the boiled-down essence.)
By Michael A. Villa, Jr. on February 26, 2016
Nearly two years ago, Khalid Quran, a convenience store owner in North Carolina, obtained an unwanted firsthand account of the power that the IRS has when seizing funds that it suspects were deposited and/or withdrawn in violation of federal currency reporting requirements. In June 2014, the IRS seized $153,907 from Mr. Quran’s business account because he allegedly made several withdrawals of cash under $10,000.
By Joel N. Crouch on February 25, 2016
I had a good friend send me a letter that one of his clients received from the “IRS”. The letter is a hoax and another attempt by scammers to take money from people.
By Stephen A. Beck on February 25, 2016
Earlier this month, the Fifth Circuit Court of Appeals had occasion to decide the applicability of the “self-rental rule” in Treas. Reg. § 1.469-2(f)(6) in the context of a Subchapter S corporation renting commercial real estate to its affiliated Subchapter C corporation. See Williams v. Comm’r, 2016 BL 28240, 117 AFTR 2d ¶ 2016-393 (5th Cir. 2016). The court’s decision is notable because the Fifth Circuit essentially ignored the S corporation’s involvement in the transaction in applying the “self-rental rule.”
By Stephen A. Beck on February 23, 2016
In the right circumstances, a taxpayer may be able to significantly reduce his/her federal income tax liability from the sale of his/her business by establishing that the buyer separately bargained for the purchase of that taxpayer’s personally-owned property (referred to herein as “personal goodwill”). This is because a sale of personal goodwill, if respected, would result in only a single taxable event, with the taxable gain potentially subject to the beneficial long-term capital gain tax rate (with a current maximum marginal tax rate of 20%).
By Mark A. McMillan on February 11, 2016
IRS extends the filing deadline for the new Form 8971 to March 31, 2016.
By Stephen A. Beck on February 10, 2016
Conventional wisdom is that the U.S. income taxation of partnerships is advantageous compared to the taxation of corporations for many reasons, one of which is that it is often easier to contribute “built-in” gain property to a partnership without triggering taxation of that gain. Nevertheless, some property contributions to partnerships are treated as taxable transactions.
By Mark A. McMillan on February 3, 2016
On Jan. 29, 2016, the Internal Revenue Service released Form 8971, “Information Regarding Beneficiaries Acquiring Property From a Decedent” with instructions. The form must be filed by any estate with an estate tax return that was required to be filed after July 31, 2015.
The 5th Circuit last week vacated the fraud convictions of Mike Baker and Mike Gluk. Mr. Baker was the CEO of ArthroCare Corp., a publicly traded company, and Mr. Gluk was the CFO. The government accused them of violating security laws by fraudulently overstating the gross receipts of ArthroCare.
By Kristen M. Cox on January 29, 2016
Often, shareholders of small and midsized corporations who also serve as the governing persons of those corporations must devote so much of their time and energy to business operations that corporate formalities may be overlooked and actions taken without proper approval. An example of such a situation is the issuance by a corporation of stock in excess of the number of authorized shares included in the corporation’s Certificate of Formation, which happens more often than you would expect. Fortunately, a new amendment to the Texas Business Organizations Code (“TBOC”) provides a relatively simple remedy for the overissuance of shares by Texas corporations.
By Joel N. Crouch on January 27, 2016
The IRS head criminal investigator, Richard Weber, had a message for all taxpayers while speaking at a conference on January 25th. “File early before the criminals file for you,” Weber said. Weber explained that “current intelligence” indicates that criminal groups have amassed stolen taxpayer identification information to be used to file fraudulent refund claims during the 2016 filing season.
By Mark A. McMillan on January 26, 2016
Irrevocable trusts restrict a beneficiary’s access to assets. Generally, trusts are designed to provide trustees with sufficient flexibility to achieve the settlor’s goals. However, until Doc Brown perfects the Flux Capacitor, the unforeseeable will occur and trusts, which were thought to be perfect in every regard at inception, will fail to achieve the settlors’ goals.
By on January 22, 2016
The U.S. Supreme Court will review the Ninth Circuit's recent “tippee” insider trading case, United States v. Salman. The review is significant, because what's legal and what's not has become too unsettled - especially in the wake of the Second Circuit’s 2014 decision in United States v. Newman and Chiasson.
We often encounter clients who have not filed tax returns for many years, some of whom have received a notice from the IRS regarding their non-filing status. Many times, these clients don’t have the liquidity or even the assets to pay their delinquent tax obligations and end up applying for an Offer in Compromise (OIC).
By Brian J. Spiegel on January 19, 2016
Last week Chief Judge Michael Thornton announced a number of proposed changes and clarifications to the Tax Court’s Rules of Practice and Procedure. Once finalized, and there is little reason to believe that they won’t be, practitioners may want to adjust the ways they practice before the Tax Court. To assist in that transition, here is a summary of some of the key proposed revisions:
By Aaron P. Borden on January 13, 2016
Internal Revenue Code sections 6055 and 6056 were added to the Internal Revenue Code by the Affordable Care Act and impose certain reporting requirements on minimum essential coverage providers and applicable large employers. The IRS recently issued Notice 2016-4, extending the due dates for the information reporting required by sections 6055 and 6056 for the 2015 calendar year.
By Charles M. Meadows, Jr. on January 11, 2016
Changes have been made to Partnership Tax Return and FBAR filing dates for 2016.
By Josh O. Ungerman on January 7, 2016
The IRS has experienced a 28% decline in collectors from 2010 to 2014. Meanwhile, the IRS estimates that $59 billion is owed from unpaid employment taxes from which employment tax returns have been filed. Additionally, taxes withheld by employers make up two-thirds of IRS revenue collection by the IRS. These factors converge for the perfect storm of IRS Criminal Tax Enforcement on payroll taxes.
By Anthony P. Daddino on January 7, 2016
It’s no secret that the IRS has been eyeing – closely – the small captive insurance industry. This industry embraces Section 831(b) of the Internal Revenue Code, which generally permits an electing insurance company with no more than $1.2 million of annual underwriting income to exclude such underwriting income from taxable income. In that case the insurance company is only subject to tax on its investment income. Back in February 2015, the IRS placed these small captive insurance arrangements on its “Dirty Dozen” list - a list of commonly-promoted techniques that the IRS contends are abusive tax shelters. This was part of a broader IRS crack down on the small-captive insurance industry, which has involved large-scale IRS examinations and promoter investigations and several test cases awaiting decision in the courts.
By Josh O. Ungerman on January 6, 2016
Was the Grinch in Congress last winter? The FAST Act, 2015 Fixing America's Surface Transportation Act, did much more than fix our nation’s highways when enacted on December 5, 2015. The FAST Act broke down previous prohibitions that prevented the IRS from sharing information with the State Department.
By Anthony P. Daddino on December 28, 2015
Closing letters are an important part of estate tax administration and provide great comfort to executors waiting to distribute assets to beneficiaries. To the dismay of many tax professionals, the IRS earlier this year announced that it would no longer automatically send out closing letters to signal the completion of an estate tax audit.
By Matthew L. Roberts on December 22, 2015
There is perhaps no worse a feeling to taxpayers than when they receive an IRS notice indicating their return has been selected for examination. Thankfully, Congress has placed substantial limitations on the IRS’ ability to examine returns and assess additional tax: a 3-year statute of limitations period. Under the general statute of limitations period, the IRS has three years after the return is filed to assess any additional tax. See I.R.C. § 6501(a).
By Michael A. Villa, Jr. on October 28, 2015
On October 19, 2015, a former Drug Enforcement Agent, Carl Force, was sentenced to 78 months in prison for stealing bitcoin related to the federal criminal investigation of Silk Road.
By on October 27, 2015
On September 9th the Department of Justice (DOJ) issued new guidance to its prosecutors aimed at encouraging more white collar criminal and civil cases against corporate executives. The new rules take effect immediately, but they are not likely to apply to investigations that are far along.
By on October 26, 2015
The Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) initiative is headed for the home stretch. Whether it will cross the finish line, however, remains to be seen.
By Josh O. Ungerman on October 21, 2015
On Oct. 16, 2015, the IRS announced that its offshore compliance programs have generated $8 Billion in IR-2015-116. More than 54,000 taxpayers have participated in IRS offshore remediation disclosure programs since 2009. The IRS warned taxpayers with non-compliant offshore accounts to “strongly consider existing paths established to come into full compliance with their federal tax obligations.”
By Joel N. Crouch on October 12, 2015
When a taxpayer or tax professional discovers an error on a previously filed tax return, the taxpayer usually asks whether and how the error should be corrected. While there is nothing in the Internal Revenue Code or Regulations requiring a taxpayer to amend a tax return, CPAs and other tax professionals have a duty under Circular 230 and ethical rules to advise a taxpayer that an amended tax return should be filed and that failure to do so could result in imposition of penalties. If a taxpayer chooses not to file an amended return, he or she could be subject to an accuracy-related penalty pursuant to IRC Section 6662.
By Joel N. Crouch on October 5, 2015
In the typical IRS delinquent tax return examination, the IRS agent will ask that the original delinquent returns be delivered to him or her for filing. Because providing tax returns and other information, such as refund claims, is not considered filing, I will usually file the returns with the IRS Service Center, and provide a copy to the agent with proof of filing. By doing so, I know that a tax return or refund claim has been properly and promptly.
By Joel N. Crouch on September 30, 2015
If you listen to the radio or watch late night TV, you know that the IRS has considerable powers when it comes to collecting unpaid taxes, penalties and interest. Included in these powers is the right to seize and sell real property in which a delinquent taxpayer has an interest, although there are some limits on what real property can be seized and sold by the IRS.
By Joel N. Crouch on September 28, 2015
In my career, I have received calls from panicked tax professionals who have discovered that they have inadvertently missed a tax election and don’t know what to do. When I receive such a call, I tell the caller two things. First, I tell the tax professional to contact his or her malpractice carrier. Second, I tell the caller that there may be a solution, Reg. Sections 301.9100-1 thru 3, which contain rules for allowing for extensions of time for late tax elections. Depending on the circumstances, Section 9100 relief may be automatic or non-automatic.
By David E. Colmenero on September 18, 2015
In a recent decision, the Third Court of Appeals in Texas held that Rent-A-Center, Inc. was entitled to use the .5% tax rate for Texas franchise tax purposes which is generally available to retailers and wholesalers. Rent-A-Center, Inc. v. Hegar, 2015 Tex. App. LEXIS 5865 (Tex. App. – Austin, no pet., June 11, 2015).
By Matthew L. Roberts on September 17, 2015
According to the National Association of Professional Employer Organizations, approximately 2 to 3 million people are currently covered under a PEO arrangement. After TIPA is fully implemented, with many provisions effective January 1, 2016, expect these numbers to increase in the coming years.
Several states have amnesty programs that begin this month and have limited duration. Taxpayers who may be interested should seek legal counsel before approaching any state about past due taxes. Read the full article to see what states have amnesty programs.
By Michael A. Villa, Jr. on August 28, 2015
On July 30, 2015, the Treasury Inspector General for Tax Administration (“TIGTA”) released a report evaluating whether penalties assessed by the IRS against taxpayers are being abated in accordance with IRS Appeals criteria. The report underscores the need for skilled advocacy when it comes to penalty abatement requests and the importance of ensuring that taxpayers’ requests for penalty abatements both comply with the governing standards of penalty relief and contain sufficient information to justify the relief requested.
By Aaron P. Borden on August 19, 2015
Internal Revenue Code section 4980D imposes a $100.00 per day per employee excise tax on any employer that fails to meet certain group health plan requirements. In testimony before the Senate Finance Committee, a policy analyst with the National Federation of Independent Business testified that 18 percent of small businesses are engaged in practices that may subject the employers to the $100.00 per day per employee penalty.
By Michael A. Villa, Jr. on August 18, 2015
In U.S. v. Sperrazza, the U.S. Eleventh Circuit recently affirmed the conviction of a Georgia physician who was convicted of three counts of tax evasion, in violation of 26 U.S.C. § 7201, and two counts of structuring currency transactions, in violation of 31 U.S.C. § 5324(a)(3). U.S. v. Sperrazza, No. 14-11972 (11th Cir. Aug. 17, 2015).
By Matthew L. Roberts on August 10, 2015
After a taxpayer fails to remit payment on an outstanding tax liability and the IRS issues a demand for payment, the Internal Revenue Code imposes a statutory lien in favor of the government on all property and property rights of the taxpayer. I.R.C. § 6321. The lien dates back to the date of assessment and continues until the liability is satisfied or becomes unenforceable. I.R.C. § 6322.
By on August 3, 3015
On July 31, 2015, President Obama signed into law H.R. 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.” In addition to providing a 3-month, stop-gap reauthorization of the Highway Trust Fund and transferring over $8 billion to the Fund, the Act alters a number of tax-return due dates—for instance, moving the due date for partnership tax returns a month ahead of the due date for corporate tax returns—and changes the due date for filing an FBAR (FinCEN Form 114) to match the filing deadline for individual tax returns.
By Michael A. Villa, Jr. on July 28, 2015
In Moore v. U.S., No. C13-2063 (W.D. Wash. July 24, 2015), Judge Richard Jones examined a case in which FBAR penalties of $10,000 were assessed for each year from 2005 through 2008. The Court held the IRS’s decision to assess the FBAR penalties was not arbitrary, capricious or an abuse of discretion.
By on July 28, 2015
Every April, millions of Americans brave the spring ritual of filing an income tax return. In the rush to complete their returns (and, if they are lucky, claim a refund), most give little thought to the fascinating origin and history of the tax that will celebrate its 102nd birthday this October. Our modern federal income tax represents a defining marker in our nation's history and character, with foundational - and, some might say, uniquely American - economic theory. A tax with Civil War origins, it played a key role in the course of American class politics, evolving from a limited-scope "class tax" to the "mass tax" that became the backbone of our federal system.
This article was originally published in Today's CPA, July/August 2015 (a publication of the Texas Society of CPAs).
By Michael A. Villa, Jr. on July 20, 2015
On July 17th, a panel for the U.S. Court of Appeals for the Third Circuit held there is no Fifth Amendment protection for foreign bank account records. U.S. v. Chabot, No. 14-4465 (3d Cir. July 17, 2015).
By on July 14, 2015
The IRS continues to add to its list of “bad” banks, having added eight banks since June and counting. Taxpayers with undisclosed accounts at foreign banks on the list face a heightened 50-percent penalty under the IRS’s Offshore Voluntary Disclosure Program.
By Michael A. Villa, Jr. on July 13, 2015
Identity theft in which a taxpayer’s name and tax identification number are stolen and used in order to obtain fraudulent refunds continues to be a growing problem for the IRS and the victim taxpayers.
By Joel N. Crouch on July 13, 2015
The IRS may be close to issuing new regulations on valuation that could significantly increase transfer tax costs. As a result, it is prudent for families who are contemplating gifts of family entity and limited partnership interests to make the gifts now, while the valuation discounts are still available.
By on July 10, 2015
The U.S. Department of Labor is considering a rule under the Employee Retirement Income Security Act of 1974 (ERISA) that would, in a nutshell, assign “fiduciary status” to those who provide financial advice about employee retirement – for example advice about your 401(k) account.
By Joel N. Crouch on July 7, 2015
The federal tax system is a voluntary system that relies on taxpayers to file complete and accurate tax returns. However, the IRS released a study reporting that individuals and businesses underpay their taxes by an estimated 17% each year, resulting in almost $450 billion of lost tax revenues each year.
By Anthony P. Daddino on July 2, 2015
In the first judicial decision on investor control in thirty years, the IRS scores a landmark victory that poses a material threat to owners of variable life insurance policies and the perceived tax deferral benefits of such policies.
By Aaron P. Borden on June 25, 2015
On June 25, 2015, the Supreme Court ruled that the Affordable Care Act (“ACA”) individual tax credit, codified in Code § 36B, extends to those who purchase coverage on the Federal exchange as well as those who purchase coverage on a state exchange. The plain language of Code § 36B provides a tax credit to middle- and low- income taxpayers who purchase insurance through “an exchange established by the state.” However, the IRS’ regulations under § 36B extended the tax credit to taxpayers who purchase coverage through a state or Federal exchange.
By Anthony P. Daddino on June 22, 2015
Intentionally Defective Grantor Trusts, or IDGTs, are popular estate planning tools. For estate tax purposes, the value of the assets transferred to the IDGT are treated as removed from the taxpayer’s gross estate. But for income tax purposes, the taxpayer is still treated as the owner of the transferred assets and must pay taxes on the income derived therefrom. This differing treatment begs the question: are assets held in an IDGT subject to adjustment under Section 1014 (marking the bases in those assets up to fair market value) when the taxpayer passes away, despite the non-inclusion of those assets in the taxpayer’s gross estate?
By Alan K. Davis on June 22, 2015
Does your Will benefit charity? Is your estate small enough to avoid an estate tax? Do you trust your family? If you answer yes to these questions, you may want to revise your Will and estate plan to enhance the income tax benefits of your charitable bequest.
By Anthony P. Daddino on June 17, 2015
Using a self-directed IRA to operate a business or acquire real estate requires meticulous planning and careful execution. The failure to abide by these rules can cause ruinous results, as demonstrated by two recent decisions.
By Anthony P. Daddino on June 15, 2015
Earlier this week the IRS issued final rules on portability. Portability allows the surviving spouse to essentially inherit the portion of the decedent’s estate-tax exclusion amounts (currently $5,430,000) that went unused.
By Stephen A. Beck on June 10, 2015
IRS Chief Counsel Advice 201511018 provides helpful clarification regarding the tax year in which a taxpayer is eligible to deduct a theft loss incurred in connection with a Ponzi scheme. Before addressing the new ground covered by CCA 201511018, however, this blog post briefly summarizes the prior guidance regarding the timing of deductibility of Ponzi theft losses.
On June 5th, a number of IRS and DOJ representatives made presentations at the NYU's Tax Controversy Forum in New York. The following were of interest.
By Anthony P. Daddino on June 8, 2015
Oklahoma has passed legislation authorizing and directing the OK Tax Commission to establish a “voluntary compliance initiative” to give shelter and relief to delinquent taxpayers.
By Josh O. Ungerman on June 4, 2015
Any IRS exam can be nerve-wracking experience for a tax advisor. If there is a large mistake or pattern of mistakes, an ordinary exam may become an eggshell exam requiring much thought and skill to come through the exam unscathed. This article will address the IRS exam areas that lead to IRS eggshell exams, the IRS tactics and, finally, steps a tax advisor can take to minimize the negative consequences.
Bureau of Economic Analysis Form BE-10 Benchmark Survey of U.S. Direct Investment Abroad
By on May 29, 2015
Yesterday, the Bureau of Economic Analysis announced that it was extending the due date for new filers of the Form BE-10 Benchmark Survey of U.S. Direct Investment Abroad, a filing that may apply to U.S. persons that own, directly and/or indirectly, 10 percent or more of the voting securities of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise. BE-10 reporting obligations are imposed under the International Investment and Trade in Services Survey Act and are separate from, and in addition to, any international tax reporting or other obligations. The extended due date is June 30, 2015. To learn more about the BE-10 filing, as well as the associated penalties for failure to comply, click here to go to my LinkedIn page.
By Aaron P. Borden on May 22, 2015
The Affordable Care Act includes an employer mandate and penalties for employers that do not satisfy the mandate. While the employer mandate may not come as a surprise, the following four aspects of the Affordable Care Act are not commonly known and could be pitfalls for the unprepared employer.
A Discussion of Recent Tax Decisions
By Joel N. Crouch on May 19, 2015
Joel Crouch was a speaker at a tax conference sponsored by Texas Bank and Trust in Tyler (May 6th) and Longview (May 19th). Mr. Crouch’s topic was “A Discussion of Recent Tax Decisions.” A copy of the outline from the presentation is at the following link Texas Bank and Trust Speech Judicial Update.
By Matthew L. Roberts on May 6, 2015
With release of Notice 2015-38, 2015-21 I.R.B. 21, effective May 6, 2015, the Internal Revenue Service has provided an updated list of private mail carriers taxpayers may use to qualify under the timely-mailed-timely filed provisions of section 7502 (i.e., the mailbox rule). As discussed more fully below, taxpayers mailing documents or payments by private mail carrier are well-advised to understand fully the implications and requirements of this notice.
By Charles J. Allen on May 1, 2015
Where a private foundation has an interest expectancy in property held in an estate or trust, any transaction involving such property and a disqualified person is indirect self-dealing and the self-dealing taxes may be imposed on such transactions. However, there is an exception for transactions occurring during the administration of an estate or revocable trust.
The Art of IRS Penalty Defense
By Joel N. Crouch on April 24, 2015
Joel Crouch was a speaker at a tax conference in Lufkin sponsored by First State Bank and Trust. Mr. Crouch’s topic was “The Art of IRS Penalty Defense”. Mr. Crouch made the same presentation to the Dallas chapter of the American Association of Attorney-CPAs. A copy of the outline from the presentations is at the following link The Art of IRS Penalty Defense.
The Perfect Storm: Has the Tide Turned Against Offshore Tax Evasion?
By on March 2015
The government is building momentum in its effort to turn the tide against offshore tax evasion. With the fall of Swiss bank secrecy, the rise of the Foreign Account Tax Compliance Act (“FATCA”), and an increasingly global push for cross-border transparency, we are truly entering a new era: an era marked by international cooperation. The government, with its net now cast wider than ever, is poised to haul in a big catch.
The past five years have seen an unprecedented movement towards transparency and international cooperation. A growing number of countries have signed on to information exchange agreements, such as FATCA. Super-national organizations—such as the Organization for Economic Cooperation and Development (OECD), G20 and the European Union—have pushed, with much success, for more effective disclosure agreements. Government prosecution efforts have led to the collapse of Swiss bank secrecy. The capstone on the effort has been the Internal Revenue Service’s voluntary disclosure program—a program that has, by most accounts, been wildly successful, bringing forward as many as 50,000 Americans and infusing over $6.5 billion in taxes, penalties and interest back into federal coffers over the past five years.
To read more about the development of FATCA, the IRS voluntary disclosure program, and the government’s war on offshore tax evasion, click here.
The material contained within Meadows Collier Tax Blog - MC Talks Tax and any attached or referenced pages, has been written or gathered by Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P., for information purposes only. It is not intended to be and is not considered to be legal advice. Transmission is not intended to create and receipt does not establish an attorney-client relationship. Legal advice of any nature should be sought from legal counsel.