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…
Tax Articles
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…
5 Things to Prepare for an IRS Audit
The IRS audit rate is quite low. But lucky you, you have received an IRS audit notice. Fun stuff. So what do you do? Or what can you do to prepare? There are several things that you might start with. Before getting into those, let’s stop to think about how the IRS audit process. Contents1…
Documenting a Non-Compete Allocation
The importance of planning and documenting transactions is a critical aspect of tax law that can impact taxpayers across various industries and transactions of all sizes. It is a lifesaver when the IRS attacks. Documenting transactions can help taxpayers provide evidence of the details of the transaction, such as the parties involved, the terms of…
The IRS’s Strategic Litigation Approach: One Case at a Time
In the complex landscape of tax law, the IRS plays a significant role in shaping and enforcing tax laws and regulations. One of the key strategies employed by the IRS is the careful selection of cases to litigate, particularly when previous decisions have favored taxpayers. By patiently waiting for the right set of facts to…
The Hobby-Loss Grouping Rules
The IRS is not a government agency. It does not have to earn a profit. It does not even have to be concerned about keeping basic books and records. Unlike the standard that it imposes on even the smallest of business taxpayers, the IRS cannot produce anything close to a simple profit and loss statement…
The Section 44 Small Business Disabled Access Credit
The Section 44 small business disabled individuals tax credit provides a tax incentive to comply with the Americans With Disability Act of 1990 (“ADA”). There is very little guidance for the tax credit, which makes it hard for taxpayers to plan for this tax incentive. The recent Arevalo v. Commissioner, No.05-61129 (5th Cir. 2006), case provides an…
What Are the Chances of Being Audited?
The fear of being audited by the Internal Revenue Service (“IRS”) looms large for many taxpayers. The IRS releases general statistics regarding audits, but how much do these numbers truly reveal about an individual’s chances of being audited? This article will delve into the most recent IRS statistics, explore their implications, and provide an informed…
IRS Statistics for Audit and Enforcement Rates
While the IRS does not release many of the factors that it uses to identify taxpayers for tax audits, the IRS does release general statistics that can help gauge a taxpayer’s audit potential. These statistics help answer the question of “what are the chances of being audited?” IRS Audit Rates Looking at the most recent IRS…
Late Section 475(f) Election and Section 9100 Relief
Those who are traders in securities or commodities can make a mark-to-market election. This election can allow the trader to immediately deduct losses each year and avoid the wash sale rules. But many traders do not know about this election and only learn of it after it is too late to benefit from it. Even…