We have previously written about the court’s position that serial whistleblowers, those who submit more than one whistleblower claim with the IRS, cannot remain anonymous when litigating the right to their whistleblower claims. In Whistleblower 7208-17 v. Commissioner, T.C. Memo. 2018-118, the court confirms that this extends to those who use public information to submit…
Tax Articles
FBAR Not Limited to $100,000, Willfulness Upheld
There have been a number of recent court cases involving foreign bank accounts or FBAR reporting penalties. This is likely due to the significant amount of the penalty and that many do not fully appreciate the amount of liability they face if caught not complying with the FBAR rules. This is one of the most…
When Forged Signatures Suffice: The Tacit Consent Exception
A tax return has to be signed to be valid. But what if the return is signed by someone else? Is a tax return with a forged signature a valid tax return? The court addressed this in Coggin v. United States, No. 1:16-CV-106 (M.D.N.C. 2018). Contents1 Facts & Procedural History2 Tax Return Signature Requirement3 The Tacit…
Avoiding Cancellation of Debt Using Rebates or Refunds
Can taxpayers avoid cancellation of debt income by structuring debt reductions as rebates or refunds? The court touched on this issue in French v. Commissioner, T.C. Summary Opinion 2018-36. Contents1 The Facts & Procedural History2 Cancellation of Debt Income3 Refund or Rebate Concept4 Evidence of a Refund or Rebate The Facts & Procedural History The taxpayers…
Legal Construction: Taxes Tied to Activities
When Congress provides a tax benefit contingent on some activity, there is often a question as to whether the activity can be read broadly to encompass many sub-activities or has to be read narrowly. This impacts the amount of the tax benefit and how difficult it is to comply. Generally, if construed broadly, the tax…
Perception Can Be As Important as Substance in Tax Disputes
Taxpayers voluntarily submit information to the IRS. The IRS not only evaluates the substance of this information, but also the taxpayer’s candor in preparing and providing the information. The perception of candor is just as important as the substance in many cases. The Guess v. Commissioner, T.C. Memo. 2018-97, provides an example of how things can…
Loaning Money to Business Triggers Trust Fund Penalty
You work hard to build a business, you find success over the years, and then you find out that your long term accountant did not remit payroll taxes and you owe a significant balance. What do you do? The recent McClendon v. United States, No. 17-20174 (5th Cir. 2018) case provides some answers. Contents1 The Facts &…
Shareholder Cannot Make S Corp. Separately Stated Item Election
S corporation’s account for separately stated items that flow through to the shareholder’s tax returns. They are computed on page 3 of the Form 1120S and then listed separately on the Schedule K-1. The idea for breaking these items out separately is that they can impact the shareholder’s individual returns differently. That makes sense, but…
The Statutory Employee Classification Post-TCJA
The Tax Cuts and Jobs Act (“TCJA”) made several changes to our tax laws. One such change is that employees are no longer able to deduct unreimbursed expenses incurred as an employee. Given this change, employers and their workers may need to re-evaluate their relationship. For some workers, this may mean re-evaluating whether the worker…
Guaranteeing a Loan for Your S Corporation
In Phillips v. Commissioner, No. 17-14439 (11th Cir. 2018), the court concluded that a judgment against the owner of an S corporation for guaranteeing the business debts does not increase the owners tax basis in the S corporation. This is one area where a little advance planning can go a long way to avoiding a tax…