The Section 6707A reportable transaction penalty can be difficult to work with given the more limited avenues for contesting the penalty. The court addressed this in Bitter v. Commissioner, T.C. Memo. 2017-46, in the context of a Section 412(i) plan. Tax advisors have been waiting for an answer to the very question of how to…
Category: Tax Procedure
Tax Procedure
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Conviction as a Deterrent for Employment Tax Crimes?
Failing to pay taxes to the government is a crime, including failing to pay employment taxes withheld by employers from employee wages. Employment tax fraud includes cases involving paying employees in cash so there is no record of payments, filing false payroll tax returns, failing to file payroll tax returns, and pyramiding. Pyramiding is particularly…
Offer in Compromise Extends IRS Collection Time
When you owe the IRS back taxes, sometimes it is best to simply wait for the IRS’s collection statute to expire. This wait-and-see approach involves waiting to see if the IRS attempts to collect the tax debt. Sometimes the IRS doesn’t even bother to take any action to collect unpaid taxes. To succeed, it is…
Check Signing Activity Not Sufficient for Trust Fund Penalty
The IRS will often assert trust fund recovery penalties against anyone who signs checks written on the business checking account. The court addressed this in Shaffran v. Commissioner, T.C. Memo. 2017-35, concluding that some check signing activity alone is not sufficient to impose a trust fund recovery penalty. The case provides some insight as to…
Relying on Tax Attorney for Filing Deadline is Reasonable Cause
It is clear that one cannot rely on a tax attorney to file a tax return for purposes of removing penalties if the return is not filed. But can you rely on an attorney if the attorney provides advice as to the wrong date for filing? The court addresses this in Estate of Hake v.…
Planning for Tax Refunds in Bankruptcy
The In re Porter, No. 16-11831-BFK (E.D. Va. 2017) case serves as a timely reminder that taxpayers who have unpaid tax debts and who are expecting sizable tax refunds may benefit from timing the filing of their bankruptcy cases. Facts & Procedural History The taxpayer filed her 2014 tax return on April 4, 2016. The…
How to Challenge an Invalid IRS Notice of Deficiency
The IRS is required to send taxpayers a notice of deficiency before it can assess additional tax. The notice itself has to put the taxpayer on notice that the IRS made a determination that there was a tax deficiency (i.e., an amount owed), the tax year, and the amount. A notice that does not include…
Does Withholding on Wages Convert the Wages to a Tax?
The U.S. Bankruptcy Court recently considered whether amounts withheld from wages in excess of the amount of the income tax liability owed is a refund of tax or a refund of wages. The case is In re Crutch, No. 15-44523-cec. (E.D.N.Y. 2017). The case is a reminder to those taxpayers who are considering bankruptcy that…
No Reasonable Cause Defense for Some Trust Fund Penalties
The IRS is serious about unpaid employment taxes. The trust fund recovery penalty can be used to collect these taxes. This penalty makes a business tax liability a personal liability. With most penalties, the penalty can be abated for reasonable cause. But what about the trust fund penalty? Can it be abated for reasonable cause?…
Post Office Tracking Data Can Result in Tax Disputes
There have been a number of tax cases involving disputes as to when tax documents are mailed to the government. In Tildon v. Commissioner, No. 15-3838 (7th Cir. 2017), the court considered a dispute that turned on whether U.S. Postal Service tracking data is a “postmark made by the U.S. Postal Service.” The Facts and…