Second Circuit Decision in Chai v. Commissioner Says No Penalties When the IRS Failed to Obtain Written Approval... [ read ]
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.
TIGTA Recommends That The IRS Pursue More Criminal Employment Tax Cases... [ read ]
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.
New IRS Guidance Outlines the Procedures that Apply When a Taxpayer "Whistle Blows" on their Return Preparer... [ read ]
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.
Address IRS Tax Debts Now, Before a Passport is Revoked... [ read ]
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.
Divorce Final? Not So Fast.... [ read ]
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.
Federal District Court Holds that Taxpayer Showed Reasonable Cause for Abatement of Late-Filing Penalties in Relying on a Tax Professional... [ read ]
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.
Is That a Change in the Wind? The 6th Circuit Rules Against the IRS on the Application of the Substance-Over-Form Doctrine... [ read ]
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.
The Third Court of Appeals in Agri-Plex Finds that a Business Buyer May Not Be Able to Escape Successor Liability for Hidden Tax Liabilities Assessed After Purchase... [ read ]
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.
IRS Launches New Audit Initiatives Targeting 13 Specific Tax Issues... [ read ]
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.
An Update on the Uncertain Fate of the Proposed Section 2704 Regulations... [ read ]
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.
