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…
Category: Tax Procedure
Tax Procedure
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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…
Transferring Property Owned by Taxpayer With Unpaid Taxes
Buyers have to be careful when purchasing property subject to an IRS lien. The recent United States v. Urioste, No. 4:15-CV-1787-VEH (N.D. Ala 2017) considered the situation where a business purchased and improved real estate that was encumbered by an IRS tax lien. Facts & Procedural History The case relates to the tax liabilities of Mr.…
Taxpayer Retains Right to Tax Refund Claims Despite Bankruptcy Discharge
The bankruptcy-tax rules can present a number of opportunities. In Martin v. United States, Case No. 3:13-CV-03130 (C.D. Ill 2017), the court concludes that the taxpayers retained the right to sue the IRS for substantial tax refunds for taxes that were overpaid prior to their bankruptcy, despite having discharged their debts in bankruptcy. Bankruptcy &…
Proof of Cash on Hand to Abate Failure to Pay Penalty
The failure to pay penalty is one of the most commonly assessed penalties. The penalty does not apply and can be abated or removed if the taxpayer can establish that the failure to pay is due to reasonable cause and not to willful neglect. But how do you establish reasonable cause? In C1 Design Group, LLC…
Continuation Theory: Collecting Taxes Owed by Prior Business
If a business has or expects to have a significant debt, it may transfer its assets and/or operations to a new business entity to try to avoid the debt. There are a number of non-tax cases where the courts have addressed this. The courts generally apply a “continuation” theory in these cases which asks whether…
Getting Out of IRS Adjustments Agreed to on Audit
Taxpayers often regret agreeing to IRS audit adjustments. These agreements are not necessarily final when the paperwork is signed. The taxpayer typically still has time to change their mind. In Sandoval Lua v. United States, No. 2016-1313 (5th Cir. 2016), the court considered a case where the taxpayer changed his mind, but failed to act…
Bankruptcy Court Rejects IRS Plan to Sell Residence
Bankruptcy can be a great way to get rid of older tax debts. The bankruptcy process is supposed to provide a fresh start. The In re Christensen, 15-29773, 15-29783 (2016 Bankr. D. Utah), case is an example where the IRS attempted to use the bankruptcy process not to provide a fresh start, but to collect…
Judicial Review for Trust Fund Recovery Penalties
Taxpayers who are assessed trust fund recovery penalties need to take note of the U.S. Tax Court’s recent decision in Anderson v. Commissioner, T.C. Memo. 2016-219. The decision highlights a potential foot fault they may make when trying to resolve their trust fund recovery penalties at the IRS administrative level. Facts and Procedural History The…