During the course of litigating a tax matter, the IRS may increase the amount of tax, penalties, and interest that it alleges the taxpayer owes. The IRS is typically allowed to do this. If it does, the IRS may have a harder time prevailing on this type of issue. This “new matter” rule was recently…
Tax Articles
Deducting Fringe Benefits for Family Members
Small business owners often look for ways to reduce their taxes. With family businesses, these plans often involve employing the owner’s children. This raises the question of whether a small business owner employ their children as independent contractors and deduct seemingly personal expenses for the children as fringe benefits if the children did in fact…
The Government’s Ability to Recoup Tax Preparation Fees
Tax preparers can grow their businesses in a short period of time by filing fraudulent tax returns. As word spreads about the size of the refunds these preparers are able to secure for their clients, the preparers pick up new clients and increase the amount of fees they earn. These noncompliant tax return preparers are…
Credit for Employment Taxes Reported in Error for Another Entity
If employment taxes are paid by one legal entity but incorrectly reported to the IRS for another legal entity, can the entity that paid the taxes get credit for the payment? The IRS said ‘no;’ the U.S. Tax Court said ‘yes.’ The case is E.C.C.B.A. v. Commissioner, T.C. Memo. 2018-55. Contents1 Facts & Procedural History2 IRS:…
Transferring Property to a Spouse After IRS Lien
There are a number of difficult questions that come up when one spouse has a debt with the IRS and also owns property jointly with their spouse. The question is often whether the spouses can transfer the property to the non-liable spouse. The answer is, maybe. The court recently addressed this in U.S. v. Gerard,…
Applying Tax Overpayments to Later Years is Usually a Bad Idea
Instead of requesting a refund, taxpayers can ask the IRS to hold the overpayment and apply it to the taxpayer’s tax liability for the following year. These tax payment credits can result in significant headaches. The recent Schuster v. Commissioner, No. 17-11647 (11th Cir. 2018) case provides an example of why taxpayers should request refunds…
Establishing Tax Basis in IRA Contributions
Contributions to IRAs are deductible. If not deductible, the taxpayer has basis in his IRA so that this amount is not taxable when taken out of the IRA. The idea is that the taxpayer probably paid income taxes on the money prior to putting it into the IRA and should not be taxed on it…
Failures in Reporting Taxes is Not Tax Obstruction
Does a taxpayer commit a felony offense if they pay a babysitter without withholding taxes, fail to keep receipts for charitable donations, or neglect to provide every record to an accountant? A strict reading of the law would suggest that these actions are felony offense. The U.S. Supreme Court recently addressed this in Marinello v.…
What is a Real Estate Trade or Business?
There are a lot of questions about the new Sec. 199A pass thru deduction. One question is whether real estate will qualify as a trade or business. Since it is not defined in Sec. 199A, general tax law will apply. There are a number of court cases on point. The court recently issued its opinion…
Documenting Real Estate Professional Hours
You buy real estate and hold it for rental income. The real estate produces losses. The losses are increased by various items, such as depreciation deductions, interest expense deductions, etc. You spend the year working on your rental properties and at your part-time job. Can you offset the income from your part-time job with your…