Taxpayers voluntarily submit information to the IRS. The IRS not only evaluates the substance of this information, but also the taxpayer’s candor in preparing and providing the information. The perception of candor is just as important as the substance in many cases. The Guess v. Commissioner, T.C. Memo. 2018-97, provides an example of how things can…
Category: Tax Procedure
Tax Procedure
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Loaning Money to Business Triggers Trust Fund Penalty
You work hard to build a business, you find success over the years, and then you find out that your long term accountant did not remit payroll taxes and you owe a significant balance. What do you do? The recent McClendon v. United States, No. 17-20174 (5th Cir. 2018) case provides some answers. The Facts & Procedural…
Shareholder Cannot Make S Corp. Separately Stated Item Election
S corporation’s account for separately stated items that flow through to the shareholder’s tax returns. They are computed on page 3 of the Form 1120S and then listed separately on the Schedule K-1. The idea for breaking these items out separately is that they can impact the shareholder’s individual returns differently. That makes sense, but…
Court Says No Legal Right to IRS Appeals Review
Note: This article was not updated to account for the Taxpayer First Act. The Taxpayer First Act basically reversed this court case. Does the Taxpayer Bill of Rights create a legal right to have a tax dispute considered by the IRS Office of Appeals? The court recently addressed this question in Facebook, Inc. v. Internal Revenue…
When the IRS Raises A New Matter on the Eve of Trial
During the course of litigating a tax matter, the IRS may increase the amount of tax, penalties, and interest that it alleges the taxpayer owes. The IRS is typically allowed to do this. If it does, the IRS may have a harder time prevailing on this type of issue. This “new matter” rule was recently…
The Government’s Ability to Recoup Tax Preparation Fees
Tax preparers can grow their businesses in a short period of time by filing fraudulent tax returns. As word spreads about the size of the refunds these preparers are able to secure for their clients, the preparers pick up new clients and increase the amount of fees they earn. These noncompliant tax return preparers are…
Transferring Property to a Spouse After IRS Lien
There are a number of difficult questions that come up when one spouse has a debt with the IRS and also owns property jointly with their spouse. The question is often whether the spouses can transfer the property to the non-liable spouse. The answer is, maybe. The court recently addressed this in U.S. v. Gerard,…
Applying Tax Overpayments to Later Years is Usually a Bad Idea
Instead of requesting a refund, taxpayers can ask the IRS to hold the overpayment and apply it to the taxpayer’s tax liability for the following year. These tax payment credits can result in significant headaches. The recent Schuster v. Commissioner, No. 17-11647 (11th Cir. 2018) case provides an example of why taxpayers should request refunds…
Failures in Reporting Taxes is Not Tax Obstruction
Does a taxpayer commit a felony offense if they pay a babysitter without withholding taxes, fail to keep receipts for charitable donations, or neglect to provide every record to an accountant? A strict reading of the law would suggest that these actions are felony offense. The U.S. Supreme Court recently addressed this in Marinello v.…
Freedom of Information Act Reaches Whistleblower Documents
Since its inception, the IRS’s process for paying whistleblower claimants has been widely criticized. Setting aside these criticisms, there have been a number of developments that would-be informants have to consider before submitting IRS Whistleblower claim. The recent Montgomery v. Internal Revenue Service, No. 17-918 (JEB) (Dist. D.C. 2018) adds another factor to consider. It…