We often get questions as to whether IRS agents can contact various third parties during the course of an IRS audit. The general rule is that IRS agents can in fact contact third parties. And they sometimes do. The ability to do this is limited and it does not exempt IRS agents from the confidentiality…
Tax Articles
Can U.S. Tax Court Order IRS to Make Refunds?
There are a number of forums for litigating tax disputes, such as the U.S. Tax Court. There are pros and cons associated with bringing suit in each forum. Taxpayers often pass on litigating cases in the U.S. Tax Court in cases when they are seeking a refund of an amount in excess of the amount…
Evidence for Excluding Settlement Award from Income
Settlement payments paid to compensate a taxpayer for his physical sickness or injury are not taxable. Can you prove physical sickness or injury by showing that the payments were not for an economic harm? The court addressed this in George v. Commissioner, T.C. Memo. 2016-156. Contents1 Facts & Procedural History2 The Exclusion for Physical Injuries or…
Grouping Nonpassive Activities Under the PAL Rules
Taxpayers are often surprised to learn that some losses may not be netted against gains in the current tax year. This is often due to the passive activity loss and material participation rules. The IRS National Office addressed these rules in TAM 201634022, in the context of whether two businesses should be grouped together and…
IRS Audit Adjustments That Change Accounting Methods
Given the potential for the adjustments to trigger extremely large tax liabilities, accounting method changes made by the IRS on audit can be doomsday scenarios for unwary taxpayers. In Nebeker v. Commissioner, T.C. Memo. 2016-155, the court addressed a common situation where the IRS makes an adjustment on audit that is an accounting method, but…
Duty Applied to IRS Lawsuit to Collect Unpaid Taxes
Contents1 Duty of Consistency in Suit to Collect Unpaid Taxes2 Facts & Procedural History 3 The Duty Of Consistency 4 The CDP Request – Valid? Duty of Consistency in Suit to Collect Unpaid Taxes Many tax cases are won or lost based on tax procedure issues. The U.S. v. Holmes, Civil Action No. 4:15-cv-00626 (S.D. Texas 2016),…
What Facts are Needed to Abate Penalties?
The IRS is authorized to abate penalties for reasonable cause. There is no set of standard facts or factors that show reasonable cause. Taxpayers have made various arguments, with the IRS and courts rejecting most of them. How bad does life have to be for there to be reasonable cause? The court addresses this in…
Start-Up Expense Limitation
Contents1 The Start-Up Expense Limitation: Starting a Business in Retirement2 Facts & Procedural History3 Start-Up or Pre-Opening Expenses4 Factors Indicating a Trade or Business Had Started5 Business Revenues6 Advertising and Solicitations7 Evidence of a Business Plan8 Start-Up Expense Election The Start-Up Expense Limitation: Starting a Business in Retirement There are several occupations where highly skilled…
IRS Collections for U.S. Military Personnel
Contents1 Military Tax Rights under the SCRA2 Military Tax Rights Under the SCRA3 IRS and State Tax Collections4 IRS and State Tax Collection Statutes5 IRS and State Tax Penalties and Interest6 Who Does the SCRA Cover? Military Tax Rights under the SCRA Judicial and administrative proceedings are temporarily suspended for those serving in the United…
Unmarried Taxpayers Can Claim Mortgage Interest Deduction
Mortgage Interest Deductions for Unmarried Couples In Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015), the court addressed the rule that limits the deductibility of interest on home mortgages and home equity loans. This rule limits the amount of interest that can be deducted on mortgages in excess of $1 million and home equity…