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Friday, September 29, 2017
Last week the Tax Court issued an opinion in Williams v. Commissioner, T.C. Memo 2017-182. Although it involves small amounts, the opinion teaches a big lesson about the IRS power of offset
Mr. Williams filed his 2013 return reporting $503 of taxable income and withholding of $1,214. So he claimed an overpayment of $711. The IRS accepted his return as filed but did not refund the $711. Instead, it used its offset powers under section 6402(a) to credit that supposed $711 overpayment against Mr. Williams' unpaid tax liabilities from 2011. Later, the IRS audited Mr. Williams' return and proposed a deficiency of $1,403. Mr. Williams' protest to Tax Court was not the usual one. He agreed with the amount of the deficiency, but he thought that since there was not actually an overpayment, per the audit, then the IRS should not have credited that $711 to his 2011 liability but should instead apply it to his 2013 liability. After all, it was part of the wage withholding for 2013. Note that it was to Mr. Williams' benefit to pay off the most recent tax liabilities to increase the chances that the older ones would age out.
Thursday, September 28, 2017
Generally, the Tax Code contains statutory consequences for taxpayers who fail to obey statutory commands. Most of those statutory consequences are in the form of: "Additions to Tax" found in sections 6651-6658; "Accuracy-Related and Fraud Penalties" found in sections 6662-6664; "Assessable Penalties" found in sections 6671-6725; and, of course, all the various criminal and forfeiture statutes found in 7201-7345.
But what about statutory commands imposed on the IRS? It turns out not all such commands carry a statutory hammer. Let me give one example. When the IRS assesses a tax and the tax is unpaid, section 6303 requires the IRS to send the taxpayer notice and demand for the unpaid tax within 60 days of the assessment. But the statute is silent as to what consequence, if any, should occur if the IRS sends the notice and demand later than 60 days. Treas. Reg. 301.6303-1 provides "the failure to give notice within 60 days does not invalidate the notice."
Wednesday, September 27, 2017
I previously blogged about a great panel presentation I attended at the Fall ABA Tax Section Meeting in Austin. The presentation was about how to sue someone under § 7434 for filing a false information return.
This past week one of the panelists, Stephen Olson, has blogged more about this subject here and here. The blogs are worth calling to your attention. He dives a bit deeper into this subject to look at whether an Information Return that states the correct payment amount but is otherwise false and misleading, is sufficient to support suit under § 7434.
Thursday, September 21, 2017
Last week I went to the ABA Tax Section Meeting in Austin and really enjoyed attending a terrific panel on Section 7434. The moderator was Professor Leslie Book, of Villanova School of Law and the presenters were Stephen Olsen, of Gawthrop Greenwood, PC; and Mandi Matlock, of Texas RioGrande Legal Aid Inc., Austin, TX.
Friday, September 15, 2017
In this op-ed in the Washington Post, columnist Catherine Rampell comments on a proposal in the Budget Committee Report 115-240 explaining the current budget legislation. It's a proposal to tighten up processing of tax returns claiming the Earned Income Tax Credit (ETIC). She writes:
Wednesday, September 13, 2017
Congress seems to be on an unceasing quest to undermine effective tax collection (for why I choose those words see my rant here). In what can only be described as yet another boneheaded move, Congress included a provision in the Fixing America’s Surface Transportation (FAST) Act in 2015 that required the Service to out-source collection work to private collection agencies (PCA's).
The current discussion about tax reform is focused on reforming substantive tax law and not tax administration. Last April, however, a group of tax practitioner organizations put out a paper calling for tax administration reform. You can find the proposal on the AICPA website here.
The nine practitioner organizations include the AICPA, the National Association of Enrolled Agents, and the National Association of Tax Professionals. Notably absent from the list of practitioner groups are the main tax lawyer organization, the ABA Section on Taxation.
Monday, September 11, 2017
Broadly speaking, tax administration (as currently structured) consists of two main functions: determining tax liability and collecting the tax liabilities so determined. There is, however, some overlap because taxpayers sometimes have the opportunity during the tax collection process to get a re-determination of the underlying tax liability. The main opportunity comes in the Collection Due Process (CDP) hearing. This is an administrative hearing conducted by the IRS Office of Appeals and is subject to judicial review by the Tax Court. Two recent Tax Court cases — Mohamed v. Commissioner (TC Sum. Op. 2017-69) and Bruce v. Commissioner (TC Memo. 2017-172) — illustrate just how narrow this opportunity is for taxpayers. To me, they teach the take-home lesson that the best shot taxpayers have at getting the most favorable result is to respond early and often to tax notices. Taxpayers who wait are the taxpayers who cry. For a lesson that Mohamed teaches about tax return preparer penalties see Les Book's great post here. More below the fold.
Thursday, September 7, 2017
Now, I have no doubt that readers of this blog are totally compliant in their taxes. And if any happen to be delinquent in their taxes, I have no doubt they are not in the category of delinquent taxpayers who face collection from private collection agencies. But I also suspect many readers have received questions about the program from clients, friends, family members, workplace colleagues, neighbors, and others.
Wednesday, September 6, 2017
The National Taxpayer Advocate Nina Olsen has a blog post here that is well worth your time to read. It's about the Service's automated levy program called FPLP (Federal Levy Payment Program).
One way the Service tries to collect unpaid taxes is by looking for people who owe the delinquent taxpayer money and snagging those payments. That's called a levy. FPLP is a computer program designed to snags payments owed by the federal government to delinquent taxpayers. Now, some people consider it an irony that one hand of the federal government actually sends payments to many delinquent taxpayers who owe the federal government money. Notably, however, FPLP hits what are commonly viewed as "safety net" payments from Social Security and Federal Retirement programs. So other people consider it an irony that one hand of the federal government would partially undo the safety net payments made by the other hand.
Tuesday, September 5, 2017
The Service has put up a very useful and comprehensive webpage titled "Help for Victims of Hurricane Harvey." The page contains excellent information about all the different actions the Service takes in response to a natural disaster and has links to all kinds of useful sites.
The Texas State Comptroller has a similarly useful webpage that describes the state and local tax relief (such as exemption from hotel taxes).
Monday, September 4, 2017
Last week, in Borenstein v. Commmissioner, 149 T.C. No. 10 (Aug. 30, 2017), the Tax Court was asked to apply Section 6511 contrary to its very, very intricate terms. The Court declined to do so. That meant that a taxpayer lost out on a $30k+ refund. Ms. B. had paid about $112k in taxes by the due date of her 2012 return (April 15, 2013), but she did not file the return. While she did get the 6 month extension she still failed to file a return by October 15, 2013. The months went by — 22 of them— before the Service was kind enough in June 2015 to send her an NOD but was unkind in slamming her with an asserted $1.2m deficiency. You know that drill. Ms. B. then quick-like-a-bunny filed a return that September, showing a $79k liability. The Service said "oh, ok, that's good" and accepted her return as accurate. So she now only needed to get her refund, right? Wrong. See below the fold for why.