IRS Cannot Abate Interest on Employment Taxes

The IRS has a track record of not acting timely. Its failures in this regard are frequent and, sadly, they are expected. The bar has been set so low that we actually expect the IRS to go slow. This can be extremely frustrating for taxpayers and it can even cost taxpayers a considerable amount of…

Taxation of Employer-Provided Education: A Look At Section 127 Plans

Section 127 plans are often overlooked by both employers and employees as a valuable tax benefit. Despite their potential advantages, many taxpayers fail to take advantage of these plans, which allow employers to deduct educational expenses for their employees, up to $5,250 per year, and employees to exclude these amounts from their taxable income. This…

Congress Works on the IRS Informants Reward Program

The Tax Relief and Health Care Act of 2006 makes a number of changes related to the IRS informants reward program. This program has long been ridiculed for being ineffective and poorly administered. Even the U.S. Treasury Inspector General for Tax Administration has said so. The question is whether the sweeping changes will have any…

The Improved Frivolous Return Penalty

The Tax Relief and Health Care Act of 2006 has brought significant changes to the frivolous income tax return penalty under Section 6702. Until now, the low penalty amount and limited reach of this penalty meant that taxpayers did not have to worry about the consequences of filing frivolous tax returns. However, with the changes…

Taxpayers Cannot Record IRS Telephone Interviews in CDP Hearings

Sometimes it is nice to have a record of what transpired. This is true even if the recording is never used. Just the fact that the recording is being made, and everyone is aware that it is being made, can change the tone and substance of the meeting. The law allows taxpayers to record meetings…

Taxing Online Video Game Earnings

The advent of virtual worlds like Second Life and online video games has created a new form of commerce that raises a complex issue for tax professionals: should online earnings from virtual businesses be taxed? The compensation for these businesses is paid in virtual currency, which can be converted to U.S. dollars. While traditional U.S.…

Tax Protestors Has Right to Choose Own Tax Attorney

The Sixth Amendment guarantees criminal defendants the right to choose their own tax counsel, but what happens when that chosen counsel insults the court? The United States v. Nolen, 472 F.3d 362 (5th Cir. 2006) case explores this issue in the context of a tax protester who hired a series of attorneys to resolve his…

IRS Has the Burden of Proof for Items of Income

In tax disputes between taxpayers and the IRS, the burden of proof lies with the IRS to prove that a taxpayer earned more income than reported. The IRS has to have some evidence. These rules are set out in Section 7491, which shifts the burden of proof to the IRS, making it more difficult for…

No Tax Penalties for Obscure Tax Forms

No Tax Penalties For Obscure Tax Forms

The adage ‘Bad facts can create bad law’ applies to IRS penalties, where the agency typically removes penalties for most taxpayers with strong factual support at the administrative level. Court cases lacking strong facts often result in litigation, leading to numerous court cases where the government prevails. While it is uncommon for taxpayers to succeed…