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…
Tax Articles
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
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…