Unlike tax laws that establish a specific amount due, bankruptcy laws define what is not due. These conflicting policy objectives can lead to unique outcomes in cases of unpaid taxes. For instance, what happens to taxes held by the IRS but not yet applied to a future tax liability when a taxpayer overpays their taxes…
Tax Articles
Bankruptcy Filing Does Not Prevent Innocent Spouse Relief
There are often times when different government agencies with different clients and missions are at odds with one another. This is frequently true when it comes to the IRS and the bankruptcy trustee. The IRS is tasked with protecting the government fisc. The bankruptcy trustee is tasked with protecting the estate for the benefit of…
Two Defendants & Tax Fraud: Should They Get Separate Trials?
The U.S. legal system affords taxpayers who commit tax fraud the right to a hearing, but what about the right to a separate hearing? What if one is put on trial with a co-defendant who is particularly offensive or, perhaps worse yet, one who is more innocent than another? United States v. Robbins, 220 F.…
IRS Says When a Grape is No Longer a Grape
The tax law is filled with artificial distinctions and deadlines that often don’t match up with the way businesses actually operate. One area where this is particularly true is in the realm of capitalization. Capitalization rules allow taxpayers to calendar expenses and treat them differently depending on the phase of a project or manufacturing process.…
One Ticket or Two? Withholding Tax on Small Lottery Winnings
Winning the lottery can be a dream come true for many, but it can also trigger a number of tax-related complexities. This includes everything from income tax on the sale of lottery payments to substantiating lottery costs and losses. The IRS frequently challenges these issues on audit. One of these complexities arises when it comes…
Sale of Lottery Payments: Capital or Ordinary?
The IRS is always waiting for taxpayers to have windfalls as the tax on these one-time events is significant. Lottery winnings are no exception, as they are treated as income from gambling and subject to ordinary income tax rates, which can be as high as 38% or more depending on the amount won. But what…
Court Preempts IRS by Taking Taxpayer Property
In some cases, courts may take shortcuts to ensure that justice is served. While these shortcuts can be effective in obtaining the desired outcome, they can also raise concerns about fairness and due process. One such case is United States v. Spangler, 224 F. App’x 890 (11th Cir. 2007), where a trial court ordered the…
“Rule of Thumb” for Reporting IRS Employee Misconduct
The ethical and moral standards for IRS employees are not as stringent as those that are imposed by non-government agencies. There are however some minimal standards that apply, which are in addition to remedies for misstatements by IRS employees. The IRS Restructuring and Reform Act of 1998 was enacted to improve taxpayer rights and service,…
The Impact of IRS Inefficiency on Tax Collections
The IRS has a reputation for being relentless when it comes to collecting taxes. However, what happens when the agency fails to do its job in a timely manner? What happens when the IRS delays working on cases? Can the IRS benefit from delaying the collection of taxes and denying taxpayer claims? Can the IRS…
Navigating the Taxability of Defamation Awards
The taxability of compensation for personal injuries unrelated to lost wages or earnings has been a topic of uncertainty, especially after the Murphy decision. The IRS may request the Supreme Court to resolve this issue if it is not successful in the upcoming rehearing of Murphy. Recently, the Ninth Circuit Court of Appeals solidified its…