Shifting the Burden of Proof to the IRS... [ read ]
In a prior blog post, I discussed the burden of proof in a tax controversy and how in most situations, the taxpayer has the burden of proof. In this post, I will discuss how a taxpayer can shift the burden of proof to the IRS. While the result of most cases does not turn on which party has the burden of proof, it is my experience that the willingness of IRS counsel to discuss a reasonable settlement increases if the IRS has the burden of proof.
Burden of Proof in Tax Cases... [ read ]
A search of the IRS website for "burden of proof" turns up the following statement: "The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them. Generally, taxpayers meet their burden of proof by having the information and receipts (where needed) for the expenses. You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Additional evidence is required for travel, entertainment, gifts, and auto expenses."
Latest on IRS Criminal Investigations... [ read ]
In a prior blog post, we discussed some of the items of interest in the 2018 IRS Criminal Investigation Division's 2018 Annual Report released in November 2018. In recent weeks, there have been a few additional items of interest involving IRS Criminal Investigation (CI).
Have You Checked the Validity of That S Election Recently? (Relief Alternatives Available For No S Election, Invalid Elections or Inadvertent Terminations).... [ read ]
Recurring problems with many S corporations include the untimely discovery of a failure to timely file an S election, filing of an inadvertently invalid election, or inadvertent termination of a previously valid S election. Often times many years will have passed before discovery of an ineffective or inadvertently terminated S election. Absent relief, the termination of an S election can have severe consequences, particularly where the corporation has been making regular distributions. Because this is a pervasive problem under the election requirements of Subchapter S, Congress granted the IRS the power under section 1362(f) to waive invalid or inadvertently terminated S elections provided that certain requirements are satisfied.
Even Nonwillful FBAR Penalties Sting: Court Imposes Penalty on "Per Account" Rather Than "Per Return" Basis... [ read ]
How does one FBAR return filing give rise to 13 penalties? Ask the federal district court of California, which recently upheld the IRS' imposition of separate non-willful penalties against 13 foreign accounts disclosed on a single late FBAR return. The court's decision raises the stakes for taxpayers looking to quietly report their foreign interests to the IRS and debunks the common notion that the non-willful FBAR penalty applies on a per-year basis.
The IRS Private Letter Ruling: When 100% Tax Certainty (or 100% Tax Relief) is a Must... [ read ]
A structured transaction with lots of zeros behind the dollar sign? A fatal planning misstep discovered too little too late? Or an IRS election that everyone thought was made but somehow slipped through the cracks? Enter the IRS private letter ruling.
Newly-Announced IRS Audit Campaigns Continue Trend of IRS Enforcement in the Areas of International and Captive Insurance... [ read ]
The IRS Large Business and International (LB&I) 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." Through these campaigns, the IRS is focusing its examinations on specific issues in an effort to channel the development of tax issues into the hands of those agents that have the most knowledge and training in that particular subject matter. Among the tax issues that are the subject of these new audit campaigns are captive service providers (focusing on transfer pricing), offshore private banking (focusing on unreported income) , and Form 5471 foreign corporation reporting (focusing on "loose-filed" forms). To date the IRS has announced a total of 53 campaigns.
IRS Completes Two-Week Blitzkrieg on Employment Tax Noncompliance, with More Action to Come... [ read ]
The Internal Revenue Service just announced the results of a national two-week campaign to combat employment tax crimes featuring visits to nearly 100 businesses showing signs of potential serious noncompliance and taking several dozen legal actions against suspected criminals. Roughly two dozen more enforcement actions are planned in the weeks following the two-week campaign as well. Will your client be next?
Double Tax?! IRS Prevails in Disallowing Deductions to Insured and Taxing Premium Income to Captive in Latest Tax Court Win Against Section 831(b) Microcaptive... [ read ]
The IRS just won its third consecutive battle in its war against Section 831(b) microcaptive arrangements with the Tax Court's decision in Syzygy Ins. Co., et al vs. Commissioner released on April 10, 2019. Although the Tax Court refused to impose penalties, it otherwise handed a landslide victory to the IRS, sustaining the tax deficiency against the insured businesses based on disallowed premium deductions while at the same time taxing those identical premiums as income to the microcaptive. This decision will serve to embolden an already-confident IRS in its audit campaign against microcaptives, increasing the importance of early strategizing with trial counsel. Will your client's current, or proposed, microcaptive arrangement pass muster?
Senate Finance Committee Launches Tax Investigation of Conservation Easements... [ read ]
On March 27th, the Senate Finance Committee launched an investigation into conservation easements by sending letters to 14 people involved in easement transactions. The letters ask for copies of appraisals, promotional materials and internal documents. The senators are also requesting investors' names and addresses, along with information about promoters' fees.