I once worked with an IRS agent who would only make two types of adjustments. He would make UNICAP/inventory adjustments and meal and entertainment adjustments. If either of these items could be adjusted for a tax return, he would adjust them. It didn’t matter what else was listed on the tax return. It did not…Continue readingMeal & Entertainment: The IRS Auditors “Bread & Butter”
When it comes to technicalities in the tax law, the failure to comply with some technicalities can be overcome. Others cannot. As a general rule, the courts evaluate tax disputes involving technicalities based on the policy underlying the technicality versus fairness for requiring strict compliance. If the policy for the technicality is important, the court…Continue readingDoes an IRS Audit Waive a Defect in Tax Return?
When it comes to income taxes and IRS audits, there are a lot of procedural rules that are counter-intuitive. Even if one thinks they are half-baked, the rules are the rules. They can have serious consequences. The centralized partnership audit regime is an example. Tax advisors often instruct their clients to elect out of the…Continue readingElecting Out of the Partnership Audit Regime
If you ask someone a direct question and the person responds with incorrect information, is the person bound by their misrepresentation? This raises questions of “estoppel,” which apply to most litigants. But does it apply to IRS employees who make a misrepresentation? Put another way, can you rely on statements by IRS representatives? The court…Continue readingCan You Rely on IRS Statements?
IRS agents interact with taxpayers. In doing so, they make misrepresentations as any other human does. Some are unintentional and some are intentional. But what is a taxpayer to do if the IRS agent makes a misstatement and it negatively impacts the taxpayer? The McRae v. Commissioner, T.C. Memo. 2019-163, case touches on this issue.…Continue readingWhen an IRS Agent Makes a Misrepresentation
The attorney-client privilege projects confidential communications with attorneys. It allows the attorney to avoid disclosing protected communications. But what if the attorney voluntarily discloses information and the disclosure is to the IRS about a tax matter? The court addresses this in Gaetano v. United States, No. 19-1122 (6th Cir. 2019). Facts & Procedural History This…Continue readingVoluntary Disclosure to IRS of Privileged Communication
If a third party collects monies for you and send you a report reflecting the monies but the reports show too much income, should you be taxed on the higher income or what you actually received? The Ghadiri-Asli v. Commissioner, T.C. Memo. 2019-142, case addresses this. Facts & Procedural History The taxpayer is a physician.…Continue readingCan IRS Rely on Third Party Reports to Identify Taxable Income?
The IRS only has to mail a notice of deficiency to a taxpayer’s last known address in order to assess or record a tax liability for the taxpayer. This “last known address” rule is often the subject of disputes. The Sadek v. Commissioner, T.C. Memo. 2018-174, case provides an example where information available to the…Continue readingThe IRS Isn’t Charged With Knowledge of Other Federal Agencies
The Transupport, Inc. v. Commissioner, No. 17-1265 (1st Cir. 2018) case involved evidence that was not sufficient to support imposing a penalty, but the same evidence was sufficient to hold the taxpayer liable for the tax. The case provides an opportunity to consider how courts evaluate evidence in tax cases. The Facts & Procedural History…Continue readingImprobable Position by IRS Sufficient to Impose Tax