IRS Penalties Archives

For the COVID Sick Leave Credit, What is a Real Business?

The COVID pandemic impacted just about every business in the U.S. Right or wrong, Congress acted to prevent the financial fallout. This was accomplished in large part by making refundable tax credits available to businesses and business owners. Small business owners spent 2020 and 2021 and the years that follow trying to claim the tax…

A Customer Paid to Expand Your Factory. Is That Income?

Your business has a big customer. The customer wants more product than your business can make. So the customer offers to pay for a building expansion on your property to allow you to make their product. Your business does not take a dime of that building money. The cash goes straight to the contractor from…

Lose the Hobby Loss Fight, But Save the Farm

Most people who run a side venture know the IRS can be a difficult business partner. It happily takes a cut when the venture makes money. It often refuses to share in the pain when the venture loses money. The hobby loss rules are one of the tools the IRS uses to do this. So…

When One Spouse’s Fraud Keeps the IRS Clock Open for Both

Married couples file a joint tax return because it is usually the easy choice. One return, one signature line for each spouse, one refund or one balance due. The convenience is real. So is the shared responsibility that comes with it. Most people understand that signing a joint return means both spouses are on the…

When a Spouse’s Tax Evasion Conviction Does Not Bind You

A married couple files joint tax returns. Years later, one spouse is criminally convicted of tax evasion. The IRS then comes after both of them for the back taxes and a fraud penalty. Can the spouse who was not convicted fight the fraud finding if she was never charged with anything and never set foot…

An Offer of IRS Appeals Review Can Preclude Judicial Review

The IRS assesses a tax penalty against you or your business. The audit closes and the IRS assesses the penalty. So how do you get a judge to look at it? For most tax disputes, the answer is the U.S. Tax Court. You can go there without first pre-paying the tax. But for certain types…

Can Jury Trial for IRS Penalty be Conditioned on Paying the Penalty First?

There have been a number of court cases that have considered whether various administrative agency determinations violate constitutional jury trial rights. These are often premised on the fundamental promise of American justice that courts should remain open to all. The issue is presented when government agencies require substantial upfront payments before allowing judicial review. One…

Can a Criminal Prosecution Delay a Civil Tax Case?

Imagine that you earned significant income and failed to file tax returns. You later file the tax returns once the IRS caught on to you, but you omitted a large part of your income. The government indicts you on criminal tax evasion charges, and starts an IRS audit. Before the criminal trial, the IRS audit…

Is a Taxpayer Accountable for their Tax Preparer’s Fraud?

Most taxpayers opt to hire professionals to prepare their tax returns. Tax professionals understand the complexities of deductions, credits, and reporting requirements that can overwhelm even sophisticated business owners and investors. Once the tax returns are filed and a few years pass without incident, most taxpayers reasonably assume those tax years are closed forever. But…

Software Failures Can be Reasonable Cause for IRS Penalties

What one expects as data or information a business would commonly capture and maintain has changed dramatically over time. Readers who are older will appreciate this. The truth is that businesses tracked financial ins and outs and a few other items in the 1980s and leading up to the early 2000s. It was the addition…