Refunds After Innocent Spouse Relief Granted

If a taxpayer pays the couple’s income taxes and is then granted innocent spouse relief for the liability, is the innocent spouse entitled to a refund of the amount paid?  The 9th Circuit Court of Appeals addressed this in Orlock v. Commissioner. Facts & Procedural History The IRS granted the wife innocent spouse relief. Prior to…Continue readingRefunds After Innocent Spouse Relief Granted

Reporting Requirements for ISOs and ESPPs

The IRS has released proposed Regulations to implement the recent changes in Code Sec. 6039. These Regulations require corporations to report the transfer of stock upon the exercise of incentive stock options (ISOs) and by employee stock purchase plans (ESPPs). Pursuant to the changes in Code Sec. 6039, corporations must provide this information to the…Continue readingReporting Requirements for ISOs and ESPPs

Discharging Tax Debts in Bankruptcy: The Three Year Look-Back Period

Bankruptcy is often the best method of resolving unpaid tax debts. The U.S. Tax Court recently addressed one of the rules for discharging unpaid tax debts in bankruptcy in Lehman v. Commissioner, T.C. Summary Opinion 2008-83. Facts & Procedural History On Lehman’s Case In Lehman, the taxpayers initially sought Chapter 13 bankruptcy relief. The taxpayers filed…Continue readingDischarging Tax Debts in Bankruptcy: The Three Year Look-Back Period

Tax Disputes Involving Alimony Payments

If payments qualify as alimony pursuant to federal tax law, the payments may be tax deductible by the payor spouse and included in gross income to the payee spouse.  The opposite is true if the amounts are not alimony for federal tax law.  Whether an expense counts as alimony is frequently the subject of disputes…Continue readingTax Disputes Involving Alimony Payments

The Disqualified Employment Tax Levy

The IRS is generally required to give taxpayers notice of its intent to levy (or take) their property prior to it actually levying on the property.  Congress recently amended the Code to provide the IRS with a new type of tax levy.  This new levy is referred to as a “disqualified employment tax levy” and…Continue readingThe Disqualified Employment Tax Levy

Getting Interest Abated Can be Challenging

The IRS has the authority to abate or remove interest on tax liabilities; however, the process for getting the IRS to exercise this discretion can be challenging. The U.S. Tax Court describes this process in Select Steel, Inc. v. Commissioner, T.C. Summary Opinion 2008-79. Facts & procedural History In Select Steel, the taxpayer was required…Continue readingGetting Interest Abated Can be Challenging

Unpaid Taxes and Assets Held by Third Parties

The IRS has broad powers to collect unpaid tax debts. This power is not unlimited. In Dalton v. Commissioner, T.C. Memo. 2008-165, the U.S. Tax Court looks at one limitation on the IRS’s collection powers, namely, the IRS’s ability to take property that is held by a third party to satisfy the taxpayer’s tax debt.…Continue readingUnpaid Taxes and Assets Held by Third Parties

U.S. International Tax Withholding and Reporting Requirements

Payments made by U.S. citizens and resident aliens (“U.S. persons”) to non-U.S. persons are typically subject to U.S. tax withholding and result in U.S. tax reporting requirements. These requirements can be difficult to understand and a misstep can prove to be very costly. U.S. Tax Withholding Whether a U.S. person is required to withhold tax…Continue readingU.S. International Tax Withholding and Reporting Requirements

The New Tax Return Preparer Penalty

The IRS has the ability to impose penalties on income tax return preparers for certain conduct.  These rules changed last year, which makes it due time to provide an overview of the new rules. A Little Background As mentioned above, Congress amended the Code just over a year ago to beef up the tax return…Continue readingThe New Tax Return Preparer Penalty

Sluggish Economy May Help Taxpayers With Unpaid Tax Debts

The sluggish economy is impacting all of us in one way or another. This is a scary time. Taxpayers who owe unpaid tax debts may feel even more helpless. This is especially true given the IRS’s focus on tax assessment and collection efforts. Coincidentally, taxpayers who find themselves subject to IRS collection action may also…Continue readingSluggish Economy May Help Taxpayers With Unpaid Tax Debts

Innocent Spouse Relief for Ex-Spouse’s Income

Innocent spouse relief can provide a much needed remedy for divorced or separated taxpayers who filed a joint income tax return.  This relief is commonly granted where the income that gave rise to the tax liability was earned by one spouse.  The recent Mapp v. Commissioner, T.C. Summary Opinion 2008-76, case provides an opportunity to consider…Continue readingInnocent Spouse Relief for Ex-Spouse’s Income

Truck Driver Not Entitled to Deductions When Records Destroyed

In Clark v. Commissioner, T.C. Memo. 2007-172, the U.S. Tax Court held that a truck driver who did not file tax returns was not entitled to deduct expenses where his records were destroyed in a fire. Facts & Procedural History  Mr. Clark was a truck driver. He was employed by Jimmy Harris Trucking, Inc., Vandy…Continue readingTruck Driver Not Entitled to Deductions When Records Destroyed

Tax Refund Fraud Committed by Prisoners

The government has limited resources available to detect and prosecute tax fraud. Fraudulent tax refund schemes by prisoners continue to present a compliance burden for the IRS. The United States v. Turturro, 06-12033 (11th Cir. 2007) case provides a good example of this type of fraudulent scheme. Facts & Procedural History Turturro was in prison…Continue readingTax Refund Fraud Committed by Prisoners

Courts Says No Criminal Fraud, IRS Imposes Civil Fraud Penalty

Say you are convicted of a tax crime and the criminal judge finds that your conduct has not risen to the level of tax fraud. Should a civil court later say that this same conduct does in fact rise to the level of tax fraud? In Maciel v. Commissioner, the Ninth Circuit Court of Appeals…Continue readingCourts Says No Criminal Fraud, IRS Imposes Civil Fraud Penalty

Tax Evasion Twist

One way to avoid a tax evasion conviction is to show that the underlying tax is not owed. The recent United States v. Kayser case provides a slightly different twist on this defense. The Court Sets Out The Following Facts From November 1998 to May 2000, A2Z USA, Inc. employed Kayser first as a salesperson…Continue readingTax Evasion Twist

Payroll Taxes: The Single Member LLC Owner (Again)

Many taxpayers do not understand the implications of operating a business as a LLC when it comes to payroll tax liabilities. Apparently even some accounting firms do not fully understand this concept. The recent McNamee v. Dept. of Treasury case involves a six-person accounting firm that was operated as a single member LLC. The accounting…Continue readingPayroll Taxes: The Single Member LLC Owner (Again)

Doctrine of Substantial Compliance

Taxpayers often ask the government and the courts to overlook failure to comply with legal technicalities by making doctrine of substantial compliance arguments. What Is The Doctrine Of Substantial Compliance ? The doctrine of substantial compliance is a legal theory that essentially says that one party should not forfeit his or her rights if he…Continue readingDoctrine of Substantial Compliance

Strategy for Paying Late Employment Taxes

How does the IRS apply partial payments when a trust fund penalty has been assessed?  Can the IRS apply payments to the trust fund portion of the employment taxes or must it apply the payment to the non-trust fund penalty portions? Trust Fund & Non-Trust Fund Tax Employers are generally required to withhold employment taxes…Continue readingStrategy for Paying Late Employment Taxes

Can One Spouse Cause IRS to void Other’s Alimony Deduction?

If a divorce decree says that a payment to an ex-spouse, does that mean that it is alimony the ex-spouse has to report as income for Federal income tax purposes?  And if not, can the ex-spouse who receives the payment request a ruling from the IRS to say that the payment was not taxable to…Continue readingCan One Spouse Cause IRS to void Other’s Alimony Deduction?

Court Cannot Force Taxpayer to Hire Tax Attorney

If someone does not want to hire a tax attorney, can the court force the taxpayer to hire one?  The court addresses this issue in the United States v. Baucom, 486 F.3d 822, 829 (4th Cir. 2007) (and combined United States v. Davis) court case. The Facts & Procedural History Taxpayers Martin Louis Baucom and…Continue readingCourt Cannot Force Taxpayer to Hire Tax Attorney

IRS Tax Attorneys Realign Organization Structure

The IRS Office of Chief Counsel employs the IRS’s own tax attorneys.  These attorneys handle most of the civil tax court matters for the IRS.  The IRS released IRS Office of Chief Counsel Notice CC-2007-012 which says that the Procedure and Administration Section of the Office of Chief Counsel subsidiary legal divisions have been reorganized into…Continue readingIRS Tax Attorneys Realign Organization Structure

City of Chicago Takes Church Property For Un-Owed Taxes

The recent Beth-El All Nations Church case shows just how far state and local tax collectors will go to collect taxes – even when the taxes are not owed. Facts set out by the court: An employee of the City of Chicago mistakenly addressed a notice to Beth-El All Nations Church at 1534 East 63rd…Continue readingCity of Chicago Takes Church Property For Un-Owed Taxes

Florida Department of Revenue Harasses Taxpayer

Some states have a very poor record with regard to collecting taxes via legal means. The State of Florida is one of those states. In the recent In re: Omine case the Eleventh Circuit Court of Appeals details the Florida Department of Revenue’s illegal collection activities. Facts & Procedural History On Omine Case Gregg and…Continue readingFlorida Department of Revenue Harasses Taxpayer

Offer in Compromise: The Coming Storm?

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) makes substantial changes to the IRS offer in compromise program. Most notably, TIPRA includes a provision in which taxpayer submitted offer in compromises are “deemed” accepted by the IRS. The OIC Process  The offer in compromise or OIC program for compromising tax debts for less…Continue readingOffer in Compromise: The Coming Storm?

“We the People Foundation” Loses Court Battle, Wins Publicity

“We the People Foundation” recently lost yet another tax-related court case, but, perhaps wining in court is not really what the group is after. According to the court record, We the People have: engaged since 1999 in “a nationwide effort to get the government to answer specific questions” regarding what plaintiffs view as the Government’s…Continue reading“We the People Foundation” Loses Court Battle, Wins Publicity

Prepaying Taxes Before Bankruptcy Filing

Can you overpay your taxes and then file bankruptcy, with the aim of having the overpayment applied to other tax liabilities post bankruptcy?  The court addressed this in Nichols v. United States, No.?05-15554 (9th Cir. 2007). Facts & Procedural History The taxpayers in the Nichols case overpaid their 2001 state and federal tax liability. The court opinion…Continue readingPrepaying Taxes Before Bankruptcy Filing

Bankruptcy Filing Does Not Prevent Innocent Spouse Relief

Can one spouse prevent the other spouse from  obtaining innocent spouse relief by filing bankruptcy?  The court addressed this question in Kovitch v. Commissioner, 128 T.C. 9 (2007). The Facts & Procedural History The Kovitch’s were divorced. The IRS then issued a notice of deficiency to both spouses for their joint tax liability. Only the wife…Continue readingBankruptcy Filing Does Not Prevent Innocent Spouse Relief

Two Taxpayers Commit Tax Fraud: Should They Get Separate Trials?

While a taxpayer who commits tax fraud is entitled to a hearing, in United States v. Robbins the question is whether the taxpayer is entitled to a separate hearing. Lee Robbins founded Robbins & Associates, which was a bookkeeping and tax return preparation business located in Georgia and Oklahoma. Robbins recruited, hired, and trained Gabriel…Continue readingTwo Taxpayers Commit Tax Fraud: Should They Get Separate Trials?

IRS Obtains Promissory Note: Can it Collect on the Note?

In United States v. Spangler, the Eleventh Circuit Court of Appeals upheld a lower court order requiring a taxpayer to transfer a promissory note to the government so that the note payments would be credited towards the amount of the taxpayer’s court ordered tax restitution. Given that the IRS has a poor track record in…Continue readingIRS Obtains Promissory Note: Can it Collect on the Note?

“Rule of Thumb:” IRS Employees Not Subject to Ethical or Moral Standards

Unlike tax attorneys, IRS employees are not subject to any ethical or moral standards. Take the case of Wormley v. Department of the Treasury. The Wormley case presents the unusual question as to whether an IRS employee should be fired if she is arrested and convicted of assault for “biting off a portion of her…Continue reading“Rule of Thumb:” IRS Employees Not Subject to Ethical or Moral Standards

IRS Incentive to Delay Processing Cases: Extra Tax Penalties & Interest

I think that most citizens would agree that the IRS should not benefit from failing to do its job in a timely manner. The recent United States v. Ryals case provides an example of how the IRS can benefit from denying taxpayer claims and delaying the collection of taxes. Ryals Case Ryals owed taxes for…Continue readingIRS Incentive to Delay Processing Cases: Extra Tax Penalties & Interest

IRS Uses Taxpayer Records to Secure Tax Fraud Conviction

Taxpayers who are being investigated for tax fraud should be very careful about turning over incriminating records to third parties. The recent Yang v. United States case provides an excellent example of how this can be a problem. The Yang brothers and their parents were being investigated by the IRS for tax fraud related to…Continue readingIRS Uses Taxpayer Records to Secure Tax Fraud Conviction

Courts Should Not Rely on Information from the Wikipedia

The Wikipedia is a popular internet encyclopedia that is written and edited online by anonymous individuals. As the popularity of the Wikipedia grows, so too does the perception that the Wikipedia provides accurate and reliable information. For instance, the United States Tax Court cited the Wikipedia today in its Ferguson v. Commissioner opinion. As the…Continue readingCourts Should Not Rely on Information from the Wikipedia

Cash Payments Deposited by Salesman & the Form 8300

Cash-based businesses pose a number of problems for the IRS. They may also be involved in tax fraud. The Form 8300 allows the IRS to track cash payments for this very purpose. Chief Counsel Advice Memorandum 200707001 provides an example involving cash payments deposited by a salesman for a car dealership. Facts & Procedural History…Continue readingCash Payments Deposited by Salesman & the Form 8300

Years Combined for U.S. Tax Court Small Case Limit

The U.S. Tax Court’s rules allow taxpayers to elect small case status to avoid some of the technical litigation rules that they may not be familiar with.  To qualify for small case status, do you combine the amounts from all open tax years in determining whether small case status is available?  The court addressed these…Continue readingYears Combined for U.S. Tax Court Small Case Limit

Tax Court Judge Can Rewrite Facts of Case That He/She Did Not Hear

The tax court released a 400+ page opinion involving the Supreme Court’s ruling in the Ballard v. Commissioner case today.  This case continues the Ballard dispute saga that casts a shadow on whether the U.S. Tax Court is an impartial judicial forum. The Ballard Dispute The readers of this blog will recall the Ballard case…Continue readingTax Court Judge Can Rewrite Facts of Case That He/She Did Not Hear

Tax Attorney Gets Taxpayer Favorable Sentence, Court Says Not So Fast

Tax fraud often results in harsh criminal tax penalties; however, you really never know what a particular tax crime sentence will be until you have your day in court, then the appeals for that sentence, and then possibly the appeals for those appeals. Take for example the case of United States v. Trupin. According to…Continue readingTax Attorney Gets Taxpayer Favorable Sentence, Court Says Not So Fast

U.S. Tax Court Petition Date is Absolute

Some dates are absolute. You miss them, you are out of luck. The deadline for filing a petition with the U.S. Tax Court is one of these dates. Today’s Austin v. Commissioner, T.C. Memo. 2007-11, case provides an example. Facts & Procedural History Austin failed to timely file federal tax returns. The IRS imposed failure…Continue readingU.S. Tax Court Petition Date is Absolute

Prisoners Filing False Tax Returns

There are serious consequences for filing false tax returns.  This can include civil and criminal penalties.  These penalties may not be all that effective of a deterrent for someone who is currently incarcerated, which is evidenced by cases like United States v. Wardell, 05-1492 (10th Cir. 2007). Facts & Procedural History Wardell is a prisoner incarcerated…Continue readingPrisoners Filing False Tax Returns

About the IRS Summons Enforcement Hearing

The IRS has quite a few powers to encourage taxpayers to cooperate. The IRS summons is arguably the most powerful tool the IRS has in its arsenal. While the taxpayer may not agree that the underlying tax is even owed, they still have to comply with the IRS’s summons. The recent United States v. Battle,…Continue readingAbout the IRS Summons Enforcement Hearing

New IRS Tax Lien Regulations Issued

The dreaded IRS tax lien.  Once filed, it can wreak havoc on credit scores.  It can call into question occupational licenses.  Worse yet, it triggers a flood of mail and phone calls from tax resolution companies hawking their services.   About Liens and IRS Liens A lien is a claim to property.  Think of it as…Continue readingNew IRS Tax Lien Regulations Issued

U.S. Tax Court Stipulations are Binding

Details matter when it comes to tax litigation.  This is especially true for cases before the U.S. Tax Court given its unique stipulation or agreement process.  The Mathia v. Commissioner, No. 10-9004 (10th Cir. 2012) case provides a prime example of this. The Facts & Procedural History Mathia was a 8% limited partner in Greenwich Associates.…Continue readingU.S. Tax Court Stipulations are Binding

IRS Interest on Employment Taxes Can be Problematic

Interest imposed by the IRS on tax debts can be problematic, as is highlighted by the recent Scanlon White, Inc. v. Commissioner case. Scanlon White Case In Scanlon White, the IRS took four years to deny the taxpayer’s offer in compromise for its unpaid employment tax liability. The taxpayer requested that the IRS abate the…Continue readingIRS Interest on Employment Taxes Can be Problematic

Congress Works on the IRS Informants Reward Program

The Tax Relief and Health Care Act of 2006 provides a lot of new tax procedure provisions, such as the Section 6702 frivolous “tax submissions” penalty. This Act also set out a number of changes related to the ineffective and poorly administered (according to the U.S. Treasury Inspector General for Tax Administration) IRS informants reward…Continue readingCongress Works on the IRS Informants Reward Program

The Improved Frivolous Return Penalty

The tax penalty for filing a frivolous income tax return has been set so low and its reach so limited that the penalty has not been of much concern to taxpayers. Unfortunately, those days are now gone. The Tax Relief and Health Care Act of 2006 has made sweeping changes to the Section 6702 frivolous…Continue readingThe Improved Frivolous Return Penalty

Taxpayers Cannot Record IRS Telephone Interviews

Sometimes it is nice to have a record of what transpired. This is true even if the recording is never used. Just the fact that the recording is being made, and everyone is aware that it is being made, can change the tone and substance of the meeting. The law allows taxpayers to record meetings…Continue readingTaxpayers Cannot Record IRS Telephone Interviews

Tax Protestor has Constitutional Right to Choose his Tax Attorney

Okay United States v. Nolen is yet another fascinating case (this case will probably make it into the criminal procedure books used in law schools). Nolen addresses the issue as to whether a tax protester has a Sixth Amendment right to choose his own attorney, even if the attorney, unfortunately, insults the court. Facts &…Continue readingTax Protestor has Constitutional Right to Choose his Tax Attorney

The IRS Has the Burden of Proof for Items of Income

Even the IRS sometimes forgets that it has the burden to prove that a taxpayer earned more income than reported. The Allman v. Commissioner case provides an example of what happens where the IRS attorney shows up to court with no evidence of additional income. Facts & Procedural History The taxpayer worked as an employee for…Continue readingThe IRS Has the Burden of Proof for Items of Income

No Tax Penalties for Obscure Tax Forms

Bad facts can create bad law. This describes the law for IRS penalties. The IRS abates or removes penalties at the administrative level for most taxpayers who have good facts. The rest of the cases are litigated–resulting in a lot of court cases where the government wins. It is somewhat rare for taxpayers to prevail…Continue readingNo Tax Penalties for Obscure Tax Forms

5 Things to Prepare for an IRS Audit

The IRS audit rate is quite low. But lucky you, you have received an IRS audit notice. Fun stuff. So what do you do? Or what can you do to prepare? There are several things that you might start with. Before getting into those, let’s stop to think about how the IRS audit process. The…Continue reading5 Things to Prepare for an IRS Audit

IRS “Its All or Nothing” Stance Often Helps Taxpayers

It can be difficult to determine if a person is an employee or an independent contractor. The Rabinowitz v. Commissioner case highlights the difficulties that taxpayers face in making this distinction. Facts & Procedural History  Rabinowitz is an insurance salesman. Rabinowitz asked the IRS and, upon IRS refusal, the U.S. Tax Court to lift a…Continue readingIRS “Its All or Nothing” Stance Often Helps Taxpayers

What Are the Chances of Being Audited?

What are the chances of being audited?  While the IRS does not release many of the factors that it uses to identify taxpayers for tax audits, the IRS does release general statistics that can help gauge an individual’s audit potential – or can they? The IRS Statistics  Looking at the most recent IRS statistics for…Continue readingWhat Are the Chances of Being Audited?

IRS Statistics for Audit and Enforcement Rates

While the IRS does not release many of the factors that it uses to identify taxpayers for tax audits, the IRS does release general statistics that can help gauge a taxpayer’s audit potential.  These statistics help answer the question of “what are the chances of being audited?” IRS Audit Rates Looking at the most recent IRS…Continue readingIRS Statistics for Audit and Enforcement Rates

The IRS’s New Appeals Arbitration Program

The IRS Office of Appeals provides a great forum for resolving IRS tax disputes.  While appeals settles a lot of cases, it doesn’t settle them all.  This is where the IRS arbitration program comes in.  It is for those close cases that almost settled, but didn’t.  The IRS recently released Revenue Procedure 2006-44, which sets out…Continue readingThe IRS’s New Appeals Arbitration Program

Tax Resolution Firm Job Posting: The Industry Needs to be Regulated….

I thought that I would share with you this Craigslist post that one of my clients forwarded to me: TAX RESOLUTION ASSOCIATES ——————————————————————————– Tax resolution associates wanted for Boulder financial company. ATTENTION: YOU DO NOT HAVE TO HIT A $25k OR $30k FOR BONUS!!!!!!!!!!!We pay 15% at $15k, 20% at $20k and 25% at $25k.…Continue readingTax Resolution Firm Job Posting: The Industry Needs to be Regulated….

Interest Abatement: What is a Ministerial Act?

The IRS is authorized to abate or remove interest where there is a ministerial act. Okay, so what does that mean? What is a ministerial act? The Beall vs. United States, 170 F. Supp. 2d 709 (E.D. Tex. 2001), case provides an opportunity to consider this question. Facts & Procedural History The Bealls were limited…Continue readingInterest Abatement: What is a Ministerial Act?

Texas Tax Attorney Contests IRS Bypass Letter

In People’s Source International, LLC v. United States, the IRS issued an Aurora, Texas tax attorney a bypass letter. A bypass letter is a letter that the IRS sends to a taxpayer when the IRS believes that the taxpayer’s tax attorney has failed to respond to IRS requests. The Texas tax attorney contested the bypass…Continue readingTexas Tax Attorney Contests IRS Bypass Letter

Ex-Spouse’s Defense for Tax Discharged in Bankruptcy

What if an ex-spouse who is jointly liable for the tax waits until after the other ex-spouse’s bankruptcy discharge and argues that the taxes were not discharged in bankruptcy as the tax return was invalid?  The court addressed this in Kuhl v. United States, No.?05-6570-BK (2nd. Cir. 2006).   Facts & Procedural History Ms. Kuhl owed the IRS…Continue readingEx-Spouse’s Defense for Tax Discharged in Bankruptcy

Increased Fees for IRS Tax Installment Agreements

The IRS recently reviewed the government cost of processing IRS tax payment installment agreements, which has resulted in the IRS proposing to increase the costs for filing IRS installment agreements. The IRS tax payment installment agreement is one of the remedies of last resort to taxpayers who have outstanding tax liabilities. There are a number…Continue readingIncreased Fees for IRS Tax Installment Agreements

The IRS’s “Last Known Address” Rule

The IRS relies on mail to alert taxpayers of important events.  It also relies on mail to provide notice that is required by the Code.   Given the importance of these alerts and notices, taxpayers are often surprised to find out that there is no requirement that the taxpayer actually receives most IRS notices.  The IRS…Continue readingThe IRS’s “Last Known Address” Rule

IRS Private Tax Debt Collection Agencies

The IRS spends a considerable amount of time and money trying to collect unpaid tax debts. There has been some thought that private collectors would have better results. Congress recently enacted Section 6306 to allow the IRS to assign certain delinquent tax accounts to private collection agencies. The new law and how it is implemented…Continue readingIRS Private Tax Debt Collection Agencies

State vs. Federal Tax Court Litigation

I often hear criminal attorneys say that they always have a good chance to win state criminal cases, but they are almost never able to win in federal criminal cases. The idea seems to be that federal agencies spend a lot more time and effort preparing and gathering evidence against the accused than do state…Continue readingState vs. Federal Tax Court Litigation

Recent Texas Tax Case is an Example of why Taxpayers Should Hire a Tax Attorney

Taxpayers often ask me why they should hire a tax attorney. My response is always that hiring a tax attorney to review and structure your financial affairs can give you some certainty that things are done right, in many cases it can save you significant amounts of tax and later IRS problems, and it can…Continue readingRecent Texas Tax Case is an Example of why Taxpayers Should Hire a Tax Attorney

The IRS Announces an Online Tax Payment Agreement System

The IRS recently announced that it will be launching a system to allow “tax professionals” to apply online for tax payment agreements or tax installment agreements for their clients. IRS Online Pro’s & Cons  While this is a step in the right direction, it does present yet another opportunity to consider whether the IRS should…Continue readingThe IRS Announces an Online Tax Payment Agreement System

Deposits vs. Payments: A Distinction Taxpayers Must Understand Before Making Payments to the IRS

There is a difference between making a payment and a deposit when you pay the IRS.  Blom v. United States, a recent case in the Federal District Court of Pennsylvania, highlights the difference between an IRS tax deposit and an IRS tax payment. Facts & Procedural History Blom’s aunt died and named Blom as the…Continue readingDeposits vs. Payments: A Distinction Taxpayers Must Understand Before Making Payments to the IRS

Missing Form 1099 May Establish Reasonable Cause

If you do not receive a Form 1099 to report income to you and you omit it from your tax return, are you liable for penalties if the IRS later notices the issue and makes an adjustment?  The Mabinuori v. Commissioner, T.C. Summary Opinion 2006-109, case provides an opportunity to consider this question. Facts & Procedural…Continue readingMissing Form 1099 May Establish Reasonable Cause

IRS Looks At Improving Informants Rewards Program

One would think that the IRS using paid informants to identify compliance-challenged taxpayers would generate some controversy. But it really hasn’t. As a new TIGTA audit report reveals, the IRS Informants Rewards Program hasn’t generated much controversy because the program has been so poorly administered. About the IRS Whistleblower Program The informant process begins when…Continue readingIRS Looks At Improving Informants Rewards Program

New Offer in Compromise Legislation

As discussed in a previous post, Congress has been toying with making changes to the IRS offer-in-compromise program. These changes were included in the “Tax Increase Prevention and Reconciliation Act”, which was signed by President Bush on May 17th. New Changes – Offer In Compromise  As such, offers in compromise filed after the magic date,…Continue readingNew Offer in Compromise Legislation

Prisoner Entitled to Collection Due Process Hearing

There are quite a few rights taxpayers have, that are disregarded by the IRS, and there is no remedy when it happens.  As noted in Butti v. Commissioner, TC Memo. 2008-82, the IRS collection due process hearing is not one of those circumstances. The Facts & Procedural History Butti is a former chiropractor that is serving…Continue readingPrisoner Entitled to Collection Due Process Hearing

Abatement of Tax Penalties and Interest

Many unfortunate taxpayers find themselves in the position of owing a tax debt that consists of a small tax liability and a large assessment of tax penalties and interest. In many of these cases the penalties and interest can be substantially larger than the original tax debt. This situation often forces taxpayers to seek the…Continue readingAbatement of Tax Penalties and Interest

Drug Addiction Excuse for Filing Tax Return Late?

Can drug addiction or migraines be an excuse for filing a tax return late? The court addresses this in Jordan v. Commissioner, T.C. Memo. 2005-266, for a life insurance salesman who became addicted to OxyContin prescribed for his severe headaches. Facts & Procedural History Mr. Jordan was a life insurance salesman. Mr. Jordan had a…Continue readingDrug Addiction Excuse for Filing Tax Return Late?

Can the IRS be Friendlier and More Efficient at the Same Time?

The Treasury has been working on stepping up its exam and collections efforts. As a result the IRS appears to be moving back its pre-Revenue Restructuring Act (RRA) of 1998 posture, which was enacted as a result of numerous IRS abuses. Yet, the IRS is still bound by the RRA. Are We Asking Too Much…Continue readingCan the IRS be Friendlier and More Efficient at the Same Time?

The Bankruptcy Abuse Prevention and Consumer Protection Act

For the most part the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 comes into full force on October 17, 2005. The Act contains a number of tax-related provisions, almost all of which are controversial. I will focus on a few of the tax-related provisions. The Bankruptcy Code & How It Works The Bankruptcy…Continue readingThe Bankruptcy Abuse Prevention and Consumer Protection Act

TIGTA Audit Reveals A Few of the Deficiencies in IRS Procedures

In the Revenue Restructuring Act of 1998, Congress provided that taxpayers were to be provided a hearing before the IRS filed a lien or levy on taxpayer property. If filed timely, this involves a collection due process (CDP) hearing; if not filed timely, this involves an equivalency hearing. Typically both hearings are held before the…Continue readingTIGTA Audit Reveals A Few of the Deficiencies in IRS Procedures

Judicial Misstatement: Intentional, Error or Oversight?

Judicial opinions often include sentences that misstate the law. Often these sentences will be picked up by the IRS (and sometimes even taxpayers) years later to support arguments that courts should depart from the law. For example, this quote comes from the District Court for the Eastern District of New York in Johnson Home Care…Continue readingJudicial Misstatement: Intentional, Error or Oversight?

IRS Says Taxpayer’s Payments Were Too High

If the taxpayer submits an installment agreement request that full pays the liability, can the IRS reject the request as the payment amount is too high? The court addresses this in Lites v. Commissioner, T.C. Memo. 2005-206. Facts & Procedural History The taxpayers were a husband and wife. The taxpayer-husband was a financial products salesman…Continue readingIRS Says Taxpayer’s Payments Were Too High

IRS Disclosure of Confidential Information

The IRS is prohibited from disclosing taxpayer information to third parties.  There are a number of exceptions.  But when the laws are violated, the courts can and do award damages to taxpayers.  The Ward v. United States, 973 F. Supp. 996 (Dist. Colo. 1997) court case provides a prime example. Facts & Procedural History The taxpayer owned…Continue readingIRS Disclosure of Confidential Information

IRS Rejects Court Orders, Law and Logic: Modus Operandi or Isolated Case?

Clients often ask me whether the IRS takes steps to slant the facts and law in the governments favor. I often explain that, as with most legal matters, there is really no right or wrong answer until the court makes a final determination and all appeals are exhausted. But when I say this I often…Continue readingIRS Rejects Court Orders, Law and Logic: Modus Operandi or Isolated Case?

Supreme Court Questions U.S. Tax Court’s Rule Violations

The U.S. Tax Court provides a forum for contesting tax assessments and for certain collection matters.  It is the only forum that allows taxpayers to maintain litigation without first paying the tax, etc. that is in dispute.  For many taxpayers, it is the only forum that is available.  This is why it is important for…Continue readingSupreme Court Questions U.S. Tax Court’s Rule Violations

The IRS Should Not be able to Solicit Criminal Information from Non-Lawyer Tax Practitioners

Civil tax cases often turn into criminal tax cases. In those instances the IRS initially investigates the tax crime and then refers the case to the Department of Justice. The IRS efforts to investigate the potential tax crime often require that they obtain information from third parties, such as the taxpayer’s employer, neighbors, and financial…Continue readingThe IRS Should Not be able to Solicit Criminal Information from Non-Lawyer Tax Practitioners

Better than a Soap Opera? Trust Fund Tax Disputes

Businesses often succumb to the temptation to use taxes withheld from employees wages to manage cash flow problems. These “government loans” can prove to be quite costly. Hart v. Commissioner, 19120-12 provides an example. Facts & Procedural History The taxpayer worked for a real estate firm. The firm did not pay its payroll taxes. The…Continue readingBetter than a Soap Opera? Trust Fund Tax Disputes

Evidence That Can be Considered When Applying the Federal Sentencing Guidelines

The federal criminal sentecing guidelines use a point system. Points or levels are assigned to characteristics of individual crimes and individual criminal offenders. The higher the points or levels the higher the sentence imposed. The system is intended to produce uniform and rational criminal sentences. This policy could be undermined by a limitation in the…Continue readingEvidence That Can be Considered When Applying the Federal Sentencing Guidelines

Congress Proposes Changes to the IRS Offer in Compromise Program

The Offer in Compromise (OIC) has proven to be an invaluable tool for taxpayers to resolve tax disputes with the IRS. OICs have allowed taxpayers to come into compliance with our tax laws and they have also allowed the government to collect tax liabilities that would otherwise go uncollected. Yet, Congress has taken a notion…Continue readingCongress Proposes Changes to the IRS Offer in Compromise Program

The Three Offer in Compromise Options

The IRS offer in compromise program is one avenue for settling tax debts for less than the amount owed. There are three different types of offers that can be submitted under this program. The court in Eberhardt v. Commissioner, T.C. Summary 2004-147, addressed each one. The case provides a good overview of how the IRS…Continue readingThe Three Offer in Compromise Options