IRS Appeals Update - Presented at ABA Tax Meeting

According to Procedurally Taxing, Keith Fogg observed during the ABA Tax Section Meeting that the panel offered a couple slides about Appeals inventory that might be of value to readers interested in what’s happening in Appeals. 

The first slide presented shows the cases coming into Appeals over the past three years.  The slide shows a sharp dip as a result of the pandemic.  Exam cases accounted for two thirds of the drop in case receipts between FY 2019 and FY 2020.  It’s not surprising given the sharp drop off in exam activity.  Because exam cases constitute such a large percentage of Appeals receipts, this area of drop has a bigger impact even though almost all types of receipts dropped. 

The second slide shows staffing as well as receipts and closures over the last three years.  Here, cycle time provides the most eye-catching number.  Cycle time on cases more than doubled between FY 2018 and FY 2021.  This gives a real view of the impact of the pandemic on operations.

The panel talked about the challenges of working from home.  Many Appeals employees were working from home before the pandemic and had the capability to do so, unlike employees in many IRS functions, but the pandemic broke information supply chains making case processing much more difficult in some instances. 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

Taxpayers Can Now Track Refunds For Past Two Years

In IR-2022-109 dated May 25, 2022, The Internal Revenue Service made an important enhancement to the “Where’s My Refund?” online tool this week, introducing a new feature that allows taxpayers to check the status of their current tax year and two previous years’ refunds. 

Taxpayers Can Select Any Of The Three Most Recent
Tax Years To Check Their Refund Status.

They’ll need their Social Security number or ITIN, filing status and expected refund amount from the original filed tax return for the tax year they’re checking.

 

Previously, “Where’s My Refund?” only displayed the status of the most recently filed tax return within the past two tax years. Information available to those calling the refund hotline will be limited to the 2021 tax return.

 

Using “Where’s My Refund?”, taxpayers can start checking the status of their refund within:

• 24 hours after e-filing a tax year 2021 return.
• Three or four days after e-filing a tax year 2019 or 2020 return.
• Four weeks after mailing a return.

The IRS reminds taxpayers that Online Account continues to be the best option for finding their prior year adjusted gross income, balance due or other type of account information.

“We encourage those who expect a refund, but requested an extension, to file as soon as they’re ready. We process returns on a first-in basis, so the sooner the better,” said IRS Commissioner Chuck Rettig. “There’s really no reason to wait until October 17 if filers have the relevant information to file now. Free File is still available for extension recipients to use to prepare and file their federal tax return for free.”

Electronic filing is open 24/7 and the IRS continues to receive returns and issue refunds. Once taxpayers have filed, they can track their refund with “Where's My Refund?”

About the ‘Where’s My Refund?’ tool

This helpful tool, accessible on IRS.gov or the IRS2Go mobile app, allows taxpayers to track their refund through three stages: 

1. Return received.
2. Refund approved.
3. Refund sent. 

The tool is updated once a day, usually overnight, and gives taxpayers a projected refund issuance date as soon as it’s approved.

 

It’s also one of the most popular online features available from IRS. The “Where’s My Refund?” tool was developed in 2002 and was used by taxpayers more than 776 million times in 2021.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

IRS Reverses Position on FDII Calculation

According to Law360, the Internal Revenue Service updated internal guidance for how the agency should account for deferred compensation expenses for purposes of calculating the deduction available for foreign-derived intangible income. (FDII)

Companies that claim the FDII deduction should account for deferred compensation expenses, or DCE, by applying them in the taxable year when they claim the deduction even if those expenses relate "to personal services performed for the taxpayer" in years prior, according to the IRS memo dated May 3, 2022 and published May 6, 2022

The memo is a reconsideration of a generic legal advice memo, or GLAM, that the IRS issued in 2009 indicating DCE could be accounted for in years prior to the taxable year for when a deduction was claimed under Internal Revenue Code Section 199. Section 199 was repealed by the 2017 Tax Cuts and Jobs Act.

Have an International Tax Problem?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation Contact Us at:

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).



US Is World's Best Tax Haven & Location For Hiding Income

On May 30, 2018 we posted The Us Is Now The 2nd Largest Tax Haven And Is Scheduled To Be Blacklisted By The Eu!, where we discussed that the U.S. is the world’s second-largest tax haven, behind Switzerland and just ahead of the Cayman Islands, according to a report released May 15, 2018. 

Now according to the Tax Justice Network the U.S. is considered the best country in the world in which to hide income from tax and government authorities, according to this year's index unveiled on Tuesday May 18, 2022 listing the most financially secretive jurisdictions.

The U.S. has risen to the top of the index that identifies jurisdictions "most complicit in helping individuals to hide their finances from the rule of law," according to the Tax Justice Network, a U.K.-based organization that says its goal is to fight injustice in tax systems.

The Financial Accountability and Corporate Transparency, or FACT, Coalition held a panel discussion to discuss the latest annual TJN index with officials from both organizations and Global Financial Integrity, a research group based in Washington, D.C.

A statement from the FACT Coalition suggested that the U.S. position at the top of the index is due to "unaddressed loopholes and lax rules in U.S. anti-money laundering and tax laws."

The U.S. was considered the second-best jurisdiction in which to hide money based on the Tax Justice Network's 2020 data, but the FACT Coalition said the U.S. has since taken steps to try to improve its anti-money laundering enforcement. Those include enacting legislation known as the Corporate Transparency Act, which will establish reporting requirements for certain beneficial owners.

That legislation is designed to create a national beneficial ownership registry, and to combat, to the broadest extent possible, the proliferation of anonymous shell companies that facilitate the flow and sheltering of illicit money in the U.S.

Although that legislation has been enacted, the entirety of implementing regulations has yet to be issued by the U.S. Treasury Department, the coalition noted in its release. Treasury issued the first set of rules on the CTA in December.

Have an International Tax Problem?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation Contact Us at:

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).



IRS Audits Have Plummeted in the Last Decade - According to GAO

The Government Accountability Office published a report on trends in IRS audit rates, audit results, and resources used for audits across individual taxpayer income levels. (GAO-22-104960)

With the IRS examining or auditing a decreasing proportion of individual tax returns, concern has been raised over "the potential for declining taxpayer compliance, as well as whether IRS is equitably selecting taxpayers for audit, as audit rates for higher-income taxpayers have decreased more than audit rates for lower-income taxpayers," the GAO said.

According to the report, from tax years 2010 through 2019, audit rates of individual income tax returns decreased for all income levels. On average, the audit rate for these returns fell to 0.25% from 0.9%. "IRS officials attributed this trend primarily to reduced staffing as a result of decreased funding," the report noted.

The Biggest Decrease in Audit Rates Was Found Among
Taxpayers With Incomes of $200,000 and Above!

"These Audits Are Generally More Complex And Require Staff's Review" While "Lower-Income Audits Are More Automated, Allowing IRS To Continue These Audits Even With Fewer Staff."

The GAO found that "generally" the IRS still audited higher-income taxpayers at higher rates than lower-income taxpayers. "However, the audit rate for lower-income taxpayers claiming the earned income tax credit (EITC) was higher than average. IRS officials explained that EITC audits require relatively few resources and prevent ineligible taxpayers from receiving the EITC," the report said.

From fiscal years 2010 through 2021, the majority of the additional taxes recommended by the agency came from taxpayers with incomes below $200,000. The report noted that additional taxes recommended per audit rose as taxpayer income increased.

"The average number of hours spent per audit was generally stable for lower-income taxpayers but more than doubled for those with incomes of $200,000 and above," the GAO said. 

So what happened to to the IRS Wealth Squad? 

According to Law360, Rep. Bill Pascrell, D-N.J., who chairs the House Ways and Means Committee's Oversight Subcommittee, said the GAO's report raises concerns about the national tax system and called for lawmakers to implement a more fair tax regime. Pascrell requested the report ahead of a subcommittee hearing on taxpayer fairness that representatives for the GAO are scheduled to testify at on Wednesday, May 25, 2022.

"Over The Last Decade, Accountability For The Wealthiest Tax Cheats Has Plummeted So Far It Almost Hits The Floor," Pascrell Said In A Statement.

"I worry well-off taxpayers are not going to be pursued at the rate things are going."

While audit rates decreased most for higher-income taxpayers, the IRS still generally audits them at higher rates compared to their lower-income counterparts, the GAO said. Even though audits of taxpayers claiming the EITC resulted in higher amounts of recommended additional tax per audit hour compared with most income groups, the audit rate for those taxpayers didn't top that of the highest-income taxpayers, according to the report.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

White House Says Wealthiest Families Paid Average 8% Tax

According to Law360, the wealthiest 400 American families paid an average 8% tax rate on income earned from 2010 through 2018. The estimates, crafted by economists from the Office for Management and Budget and the White House's Council of Economic Advisers, included income from unsold stock in its computation of the average tax rate on the wealthiest families in the U.S. 

When That Unsold Stock Is Accounted For, The Average Income Tax Rate For The Wealthiest Families Is 8%, With A Possible Range Of 6% To 12%, The White House Said In An Online Post.

The White House made the case for increasing tax rates on capital gains income and dividends, as well as partially eliminating a tax break for inherited assets known as stepped-up basis, in order to close the gap between taxes paid by wealthy Americans and the less wealthy. The step-up in cost basis raises an heir's basis in an inherited asset so the heir doesn't owe capital gains on its appreciated value, and President Joe Biden has proposed to partly chip away at that advantage.

The estimates from the OMB and CEA economists relied on figures from the IRS and the Federal Reserve as well as Forbes Magazine, according to the White House. The wealthiest 400 families paid $149 billion in federal income taxes for 2010 through 2018, paid roughly $46 billion in state and local taxes during the same period and earned roughly $1.8 trillion in income.

The analysis noted that the estimates are lower than similar figures released by the Congressional Budget Office, the Joint Committee on Taxation and the U.S. Department of the Treasury. For instance, the JCT has estimated that tax rates for families earning at least $1 million is 26%, according to the analysis.

But these groups largely exclude unrealized capital gains from their computations, the analysis said. For people making $100,000 to $200,000 in income this year, the JCT estimated they'd pay a roughly 16% tax rate on earnings including income, employment and excise taxes. 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

IRS Appeals Taking Twice as Long to Close Cases in 2021

 
According to Law360, it took the Internal Revenue Service nearly twice as long to close out appeals cases in fiscal year 2021 compared with the agency's progress in fiscal year 2018, according to data an IRS official shared Friday.

The speed at which the agency closed nondocketed appeals cases languished to 372 days on average in 2021, according to statistics that Andy Keyso, head of the Independent Office of Appeals, shared at the American Bar Association Section of Taxation's May meeting, held in person in Washington, D.C., and online. That rate, the agency's so-called cycle time, was 194 days on average in fiscal year 2018 for nondocketed cases, or those not filed in Tax Court.

"I'm troubled by the increase in cycle time, but I'm not defeated by it," Keyso said at the conference. "I believe that it is reversible, and we will reverse it here as we get people back into the offices."

The Delay In Processing Appeals Cases Can Largely Be Attributed To Two Phenomena Outside The Agency's Control, There Was The 35-Day Government Shutdown That Ended In

January 2019 And The Coronavirus Pandemic That Rocked The Agency And The Country Beginning In March 2020. Keyso Said.

In a review of the data, it becomes clear that the delays are not the result of appeals officers taking longer to work cases, Keyso said, but instead are a result of a bottleneck in the system involving the cases' workflows.

"When you analyze the hours people are spending on their cases and the actions that are causing the delay, you can see how it really is that the delay is caused by the movement of the case and the difficulties there," he said.

The Workflow Bottleneck Should Be Alleviated When
Agency Employees Return To Their Workplaces En Masse,

Keyso Said. That Transition Should Be Completed By
The End Of June, According To Agency Officials.

Still, the delays have caused frustration for taxpayers and their representatives, Jennifer Breen, partner at Morgan Lewis & Bockius said during the panel discussion, who noted that in her experience, it's taking the agency even longer than a year to close cases. For instance, the agency still hasn't resolved a series of protests that were filed in 2019, Breen said.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)