It is not clear as to what level of conduct justifies the imposition of the $100,000+ foreign bank account reporting (“FBAR”) civil tax penalty. In Bedrosian v. United States, No. 15-5853 (E.D. Pa. 2017), the court considered whether reckless conduct is sufficient given the facts presented in the case. The FBAR Civil Tax Penalty The…
Tax Articles
Court Says Employer Entitled to Worker’s IRS Records
When the IRS determines that independent contractors are taxed as employees, it is up to the employer to show that the IRS determination is incorrect. One way to do this is to show that the workers paid tax even though the employer did not withhold the tax. In Mescalero Apache Tribe v. Commissioner, 148 T.C.…
Computing the Reportable Transaction Penalty
The Section 6707A reportable transaction penalty can be difficult to work with given the more limited avenues for contesting the penalty. The court addressed this in Bitter v. Commissioner, T.C. Memo. 2017-46, in the context of a Section 412(i) plan. Tax advisors have been waiting for an answer to the very question of how to…
Court Decides Transfer Pricing Buy-in Payment Case
The transfer pricing disputes often involve transfers of property offshore. Taxpayers make these transfers so that the post-transfer profits earned from the offshored property are not subject to tax in the U.S. or, in many cases, not subject to tax in the foreign countries either. The U.S. Tax Court recently decided Amazon Inc. v. Commissioner,…
Conviction as a Deterrent for Employment Tax Crimes?
Failing to pay taxes to the government is a crime, including failing to pay employment taxes withheld by employers from employee wages. Employment tax fraud includes cases involving paying employees in cash so there is no record of payments, filing false payroll tax returns, failing to file payroll tax returns, and pyramiding. Pyramiding is particularly…
S Corporation Owner Taxed on Earnings Not Distributed
Taxpayers who own an interest in an S corporation are often not familiar with the tax rules for S corporations. They are often surprised to learn that they have to pay taxes on the business profits even if they do not receive distributions from the business. The court recently addressed this fundamental concept in Dalton…
S Corporation Losses Limited by Tax Basis
One of the benefits of Subchapter S corporations is the ability to have losses flow through from the business’ tax return to the individual shareholder’s tax return. These flow-through losses are limited by the shareholder’s tax basis in the S corporation stock. The court recently addressed this limitation in Tinsley v. Commissioner, T.C. Summary Opinion…
Offer in Compromise Extends IRS Collection Time
When you owe the IRS back taxes, sometimes it is best to simply wait for the IRS’s collection statute to expire. This wait-and-see approach involves waiting to see if the IRS attempts to collect the tax debt. Sometimes the IRS doesn’t even bother to take any action to collect unpaid taxes. To succeed, it is…
Bad Credit Results in No Bad Debt Deduction
When it comes to taking a bad debt deduction, the IRS tends to scrutinize more closely, especially if the loan is from a friend or family member. The courts have developed various factors that they consider in such disputes, including whether the borrower could have secured a loan from a third party. Recently, in Scheurer…
Check Signing Activity Not Sufficient for Trust Fund Penalty
The IRS will often assert trust fund recovery penalties against anyone who signs checks written on the business checking account. The court addressed this in Shaffran v. Commissioner, T.C. Memo. 2017-35, concluding that some check signing activity alone is not sufficient to impose a trust fund recovery penalty. The case provides some insight as to…