Proposed Changes to Gift and Estate Tax Provisions... [ read ]
On September 13, 2021, the House Ways and Means Committee issued a series of proposals for consideration for the payment of the Biden Administration's desired $3.5 Trillion infrastructure Bill. The final legislation will likely look very different than the proposals as issued on Monday. Nevertheless, they are instructive as to the way things may develop over the next few months.
The Hidden Danger of Filing a Tax Court Petition, Part II... [ read ]
In an earlier blog post, I discussed the hidden danger of filing a Tax Court petition, i.e., that the IRS can raise new issues, including new penalties. In the case referenced in the prior blog post, Wegbreit v. Commissioner, T.C. Memo. 2019-82, the Notice of Deficiency included a 20% negligence penalty, the taxpayer filed a Tax Court petition and after the IRS filed its answer and conducted some discovery, the IRS amended its answer to include 75% civil fraud penalty.
Court Agrees with Taxpayer and Quashes Summonses to Third-Party Record Keeper... [ read ]
In a rare win for a taxpayer, a federal district court in Idaho turned down an IRS request to enforce third-party summonses for information and granted the taxpayers' motion to quash the summonses. The court said the IRS failed to properly notify the taxpayers of its intent to contact a third party during the course of the examination and therefore, the summonses was not enforceable.
TIGTA Says the IRS Should Be Pursuing Taxes From S Corporation Owners... [ read ]
The tax treatment of compensation to S-Corp owners has reared its head again in an August 11th report issued by the Treasury Inspector General for Tax Administration (TIGTA). As long as I have practiced tax law, tax treatment of distributions to S corporation shareholders has been an issue with no clear answer. Not surprisingly, the TIGTA report says the IRS should be doing more to examine distributions to S corporation owners.
The Magical Metamorphosis of S Corporations Through an F Reorganization... [ read ]
Whether to implement a reincorporation of an S corporation, from say California to Texas, or to pave the way for an S corporation asset sale to a buyer taxed as a partnership, an F reorganization can be a tax efficient tool to achieve those objectives, among others.
IRS-The 10 Deadly Sins... [ read ]
I've been practicing tax law for more than 30 years helping businesses and individuals resolve disputes with the IRS and I can't tell you how many times a new client has complained about how they were mistreated by the IRS and that IRS employees can do whatever they want because they have lifetime employment. In 1998, in response to the congressional testimony regarding perceived IRS abuse of taxpayers, Congress enacted the 1998 Revenue Reform Act (RRA 98) which, many of us will recall, was intended to make for a kinder and gentler IRS. Taxpayers became "customers" and tax professionals became "partners". I'll leave for another post my thoughts about RRA 98 and whether the IRS became kinder and gentler. What I am addressing today is Section 1203 of RRA 98, a list of 10 actions by an IRS employee that can result in automatic termination of employment, with appeal only to the IRS Commissioner, i.e., the Ten Deadly Sins.
Musing While Waiting on Hold for Someone at the IRS to Answer My Question... [ read ]
Trying to work out a client's IRS issues these days can be frustrating for the client and the tax professional. You can't throw a stone without hitting a story about delays and problems the IRS is having. I was recently waiting on hold with the IRS hoping to find someone who could help me find out the status of my client's refund claim. While I listened to the "wonderful" hold music that is on a 30 second loop and hoped I would not a get a "courtesy" hang up, I started doing some web surfing and stumbled onto the Taxpayer Advocate Service webpage. At the very top of the TAS webpage is the following: "Refund delayed? Our ability to help may be limited" and a link to a page detailing why the TAS may not be able to help with a delayed refund. Not a good sign.
Tax Court Petitions and Premature Assessment... [ read ]
When a taxpayer does not agree with tax adjustments proposed by an IRS examiner, the IRS sends the taxpayer a Notice of Deficiency, which gives a taxpayer 90 days to file a petition with the U.S. Tax Court to dispute the proposed adjustments. If the taxpayer files a timely petition, the IRS cannot assess the proposed tax until the case is resolved by the U.S. Tax Court. If a taxpayer does not file a tax court petition, the IRS assesses the tax and the taxpayer is contacted by the IRS collection division for payment.
IRS Statute of Limitations and Civil Fraud... [ read ]
On July 26th, U.S. Tax Court Judge Lauber issued an opinion in George S. Harrington v. Commissioner, upholding the IRS' determinations that the taxpayer fraudulently underreported his offshore income and the civil fraud penalty applied. There is nothing particularly unique about the case but it includes a very good discussion of the factors the court will consider when the IRS proposes a civil fraud penalty and the resulting impact on the statute of limitations.
Taxpayer's Penalty Defense Gets Boyled (Boiled?)... [ read ]
In previous blog posts I have discussed the late filing penalty and the reliance on a tax professional defense to the penalty. We discussed the reliance defense with respect to a late estate tax return and with respect to late e-filed returns .