How DOGE Cuts Have Affected the IRS Independent Office of Appeals

The federal workforce reductions associated with the Department of Government Efficiency (DOGE) and the Trump administration's 2025 restructuring efforts have significantly affected the IRS Independent Office of Appeals.

The most important consequence is that Appeals lost approximately 28% of its Appeals Officers, while the average number of cases assigned per officer increased by approximately 73%.

According to the National Taxpayer Advocate's 2025 Annual Report to Congress, these reductions have contributed to growing inventories, longer waits for independent review, and increased pressure on the IRS's administrative tax dispute resolution system.

1. IRS Appeals lost nearly 500 employees

IRS Appeals staffing before and after 2025 reductions

The National Taxpayer Advocate reported that Appeals staffing declined from 1,745 employees in fiscal year 2024 to 1,274 by August 23, 2025. Most departures resulted from deferred resignation and similar voluntary separation programs, rather than direct layoffs.

These losses are particularly significant because Appeals Officers require specialized knowledge of tax law, administrative procedure, settlement hazards, and IRS litigation risks.

2. Appeals Officers are handling substantially more cases

For taxpayers contesting substantial income tax deficiencies, international reporting penalties, or IRS collection actions, the practical concern is that fewer officers must evaluate more cases, potentially extending the time before a conference or settlement.

3. What these reductions mean for taxpayers and tax controversy attorneys

The staffing losses have several important practical consequences.

• Longer assignment periods. Cases may remain in Appeals inventory longer before being assigned to an Appeals Officer.

• Delayed conferences and settlements. Larger inventories can limit the time available to schedule conferences, evaluate evidence, and negotiate resolutions.

• Reduced access to experienced personnel. The departure of experienced officers may affect the handling of complex international tax, valuation, and penalty disputes.

• Greater pressure on alternative dispute resolution. Fast Track Settlement and Post-Appeals Mediation may experience capacity constraints. Some Fast Track cases have extended beyond the 120-day target.

  Skadden

• Greater importance of protecting statutory deadlines. Administrative delays do not automatically extend Tax Court petition deadlines, Collection Due Process deadlines, or refund limitation periods.

These are operational consequences and risks; they do not mean every Appeals case will necessarily be delayed.

4. Have staffing levels recovered in 2026?

The available evidence suggests that Appeals had not fully replaced its staffing losses.

The National Taxpayer Advocate reported tentative FY 2026 plans for 47 external hires and 73 replacement hires, plus limited reversals of voluntary separations. Even if completed, these measures would replace only a portion of the employees lost.

A subsequent TIGTA report also documented that 122 Appeals Operations Support employees received reduction-in-force notices during October and November 2025. Those particular actions were subsequently cancelled following court orders, and affected employees returned to work.

The National Taxpayer Advocate's later workforce figures show Appeals declining from 1,775 employees in January 2025 to 1,263 in December 2025, a 28.85% reduction.

We did not find a verified October 2026 count specifically identifying how many Appeals Officers have been rehired.

5. Recommendations for attorneys handling IRS Appeals cases

For pending or anticipated Appeals matters, I would recommend submitting a comprehensive written protest with supporting evidence at the outset, confirming that the case has actually been transferred to Appeals, and maintaining regular documented status inquiries.

For cases involving large deficiencies, international tax penalties, FBAR matters, or collection enforcement, counsel should independently monitor all applicable statutory deadlines and consider whether an alternative procedural remedy is appropriate rather than waiting indefinitely for administrative assignment.

The staffing reductions do not eliminate Appeals' statutory independence or its obligation to consider eligible cases. However, the documented capacity constraints make proactive case management increasingly important.

Have IRS Tax Problems?

     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)

Sources

1. National Taxpayer Advocate — 2025 Annual Report to Congress, Most Serious Problem No. 4: Independent Office of Appeals (particularly pages 43–54).

2. TIGTA — Snapshot Report: Status of the IRS Workforce as of January 2026.

3. GAO — Management of Agency Reforms and Workforce Planning Needed to Address Severe Risks to Future IRS Operations, March 16, 2026.

4. Skadden — Reshaped IRS: Improved Operational Stability, but Taxpayer Service Challenges Remain, September 2026.

Bottom line: The documented effect of the 2025 workforce reductions on IRS Appeals has been substantial: nearly 30% fewer personnel and markedly higher caseloads. For taxpayers and their representatives, the principal concern is a slower administrative dispute resolution process, particularly for complex matters requiring experienced Appeals personnel.

This subject would also make a timely tax controversy article under the title “DOGE Cuts Leave IRS Appeals Understaffed: What Taxpayers Facing IRS Audits, Penalties, and Tax Disputes Need to Know.”

Foreign Corporation Faces $1.2 Million IRS Tax Dispute: Can Reliance on Tax Professionals Excuse Failure to File U.S. Tax Returns?

A German corporation's dispute with the Internal Revenue Service highlights a potentially costly problem for foreign businesses operating in the United States: failing to understand and comply with U.S. corporate income tax filing requirements.

In Alanod Holding GmbH v. Commissioner, Docket No. 382-26, a German aluminum manufacturer is challenging approximately $1.2 million in federal income tax deficiencies and penalties arising from its 2015 and 2016 tax years.

Alanod contends that its failure to comply with U.S. tax filing obligations resulted from inadequate advice from its professional advisers, rather than intentional disregard of U.S. tax law.

The company maintains that its German management lacked sufficient familiarity with U.S. tax requirements and relied in good faith on qualified professionals who allegedly failed to explain the company's filing obligations, deadlines, and consequences of noncompliance.

The U.S. Tax Filing Obligations of Foreign Corporations

Foreign corporations conducting business in the United States may be required to file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation.

Generally, a foreign corporation engaged in a U.S. trade or business must file Form 1120-F even when it believes its income is exempt from U.S. taxation under an applicable income tax treaty.

The filing requirement is especially important because the consequences of failing to file can extend beyond ordinary late-filing penalties.

1. Loss of deductions and credits under IRC Section 882(c)(2)

One of the most serious potential consequences is the loss of deductions and credits otherwise available in calculating a foreign corporation's U.S. taxable income.

Under Internal Revenue Code Section 882(c)(2), a foreign corporation generally may claim deductions and credits against its effectively connected income only by filing a true and accurate return in the manner prescribed by regulations.

Treasury Regulation §1.882-4 establishes additional filing requirements and provides limited circumstances under which relief may be available.

Consequently, a foreign corporation that fails to file timely U.S. tax returns may face an assessment calculated without deductions that otherwise could have substantially reduced its U.S. income tax liability.

2. Reasonable cause and good-faith reliance

Foreign corporations may seek relief from certain penalties by demonstrating reasonable cause and the absence of willful neglect.

In appropriate circumstances, reliance on a competent tax professional may support a reasonable-cause defense.

However, reliance on professional advice is not automatically sufficient.

Courts generally examine whether the taxpayer selected a qualified adviser, provided the adviser with the necessary facts, actually relied on the advice, and acted reasonably under the circumstances.

3. Reliance on professional advice versus delegation of filing responsibilities

The Supreme Court's decision in United States v. Boyle, 469 U.S. 241 (1985), established an important distinction between reliance on substantive professional tax advice and reliance on another person to perform a filing obligation.

A taxpayer generally cannot avoid a late-filing penalty merely by delegating responsibility for meeting a known filing deadline.

By contrast, reasonable reliance on professional advice concerning whether a return is legally required may present a different question.

This distinction could be particularly important to a foreign corporation whose management claims that its advisers never informed it of an obligation to file a U.S. corporate income tax return.

The Critical Issue: Can Alanod Establish Reasonable and Good-Faith Conduct?

The outcome may depend on the extent to which Alanod can demonstrate that its management acted reasonably in relying on its advisers.

Treasury Regulation §1.882-4(a)(3)(ii) identifies several factors the IRS must consider when determining whether to waive the special filing deadline, including whether the corporation:

• Voluntarily disclosed its failure to file before IRS discovery.

• Was unaware of the protective-return filing procedure.

• Had never previously filed a U.S. corporate income tax return.

• Exercised reasonable diligence but remained unaware of its filing obligations.

• Encountered circumstances beyond its control.

• Had other mitigating or aggravating circumstances.

The regulation also requires the foreign corporation to cooperate in determining its U.S. tax liability.

For Alanod, evidence concerning the qualifications of its advisers, the advice requested and received, management's understanding of the company's U.S. activities, and its response upon learning of the filing requirements could be significant.

Importantly, relief under Treasury Regulation §1.882-4 is distinct from the reasonable-cause defense to penalties under IRC §6651. A taxpayer could potentially prevail on one issue without prevailing on the other.

Why Protective Form 1120-F Returns Matter

Foreign corporations with limited U.S. business activities sometimes conclude that they do not have effectively connected income or that an applicable tax treaty protects them from U.S. income taxation.

However, these conclusions can subsequently be challenged by the IRS.

A timely protective Form 1120-F can preserve the corporation's right to claim otherwise allowable deductions and credits if the IRS later determines that it had taxable U.S. business income.

For example, a foreign corporation that believes its U.S. activities do not constitute a permanent establishment under an applicable treaty may still benefit from filing a protective return.

The IRS expressly recognizes this procedure in its Form 1120-F instructions.

What Foreign Businesses Can Learn From the Alanod Litigation

The Alanod dispute provides important lessons for foreign corporations, international business owners, and their professional advisers.

First, foreign corporations should evaluate U.S. filing requirements before beginning U.S. business operations, not merely after receiving an IRS examination notice.

Second, corporate management should obtain documented advice from qualified U.S. international tax professionals regarding filing obligations, treaty protections, and potential exposure to effectively connected income.

Third, when there is uncertainty about whether a U.S. return is required, a protective Form 1120-F should be considered.

Finally, when a foreign corporation discovers that it failed to file required U.S. tax returns, prompt corrective action may materially affect its ability to obtain relief.

What Happens Next?

Alanod Holding GmbH v. Commissioner illustrates the substantial financial exposure that may result when a foreign corporation fails to comply with U.S. income tax filing obligations.

As of October 30, 2026, the publicly available materials reviewed do not establish a final Tax Court decision in this case. The company's allegations therefore should not be confused with judicial findings, and the precise allocation of the reported $1.2 million between tax deficiencies and penalties has not been independently verified from the petition.

The case underscores a broader principle: Foreign corporations cannot assume that their unfamiliarity with U.S. tax law eliminates their U.S. filing responsibilities. Nevertheless, reasonable and good-faith conduct, including appropriately documented reliance on professional advice, may provide grounds for relief under applicable tax rules.

Facing an IRS Examination or Foreign Corporation Tax Filing Dispute?

Foreign corporations conducting business in the United States may face significant tax assessments, disallowed deductions, penalties, and interest when required returns have not been properly filed.

At Marini & Associates, P.A., our international tax attorneys assist foreign corporations and international business owners with IRS examinations, international tax compliance disputes, penalty defense, and U.S. Tax Court litigation.

If your foreign corporation has received an IRS notice concerning unfiled Forms 1120-F, denied deductions, or substantial U.S. income tax liabilities, obtaining experienced international tax counsel can be essential to evaluating available defenses and protecting your interests.

Have IRS Tax Problems?

     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)

Sources 

1. Bloomberg Law, James Matheson, German Company Blames $1.2 Million Tax Deficiency on Bad Advice, January 15, 2026. Read article

2. Alanod Holding GmbH v. Commissioner, U.S. Tax Court, Docket No. 382-26. U.S. Tax Court docket search

3. Internal Revenue Code §882(c)(2), deductions and credits for foreign corporations.

4. Treasury Regulation §1.882-4(a)(3), filing deadlines and waiver provisions. Regulatory text

5. IRS, Instructions for Form 1120-F, filing obligations and protective returns. IRS instructions

6. Internal Revenue Manual §4.61.14, Guidelines for Handling Delinquent Forms 1120-F and Requests for Waiver. IRS administrative guidance

7. United States v. Boyle, 469 U.S. 241 (1985), professional reliance and late-filing penalties.

This article is intended for general informational purposes and does not constitute legal advice. The discussion of potential defenses is based on general legal principles and reported allegations, not a determination of the merits of Alanod's pending case.

Florida Department of Revenue Corporate Income Tax Audit: How to Protect Your Business and Avoid Costly Mistakes

Receiving an audit notice from the Florida Department of Revenue (FDOR) can be a stressful experience for any business. An audit may result in additional corporate income taxes, interest, and penalties, particularly when auditors question deductions, income allocations, tax credits, or the accuracy of previously filed returns.

However, an audit notice does not necessarily mean your business has violated Florida tax law or owes additional taxes.

With proper preparation, experienced representation, and a clear understanding of Florida's corporate income tax laws, businesses can protect their rights, minimize potential assessments, and effectively challenge unfavorable audit findings.

1. Understanding Florida Corporate Income Tax Audits

Unlike the federal government, Florida does not impose an individual income tax. However, Florida generally imposes corporate income tax on corporations and certain other entities conducting business, earning income, or existing in Florida.

The Florida corporate income tax rate is generally 5.5%, subject to applicable exemptions and statutory adjustments.

The FDOR conducts corporate income tax audits to determine whether businesses have correctly calculated and reported their Florida taxable income.

An audit may focus on several issues, including:

• Underreported or improperly allocated business income.
• Incorrect apportionment of income among multiple states.
• Improper deductions or adjustments to federal taxable income.
• Unreported income attributable to Florida business activities.
• Incorrect application of Florida corporate income tax credits.
• Failure to file required Florida corporate income tax returns.
• Intercompany transactions and related-party expense deductions.
• Federal income tax adjustments that affect Florida taxable income.

Businesses operating in multiple states may face particularly complex audits involving nexus, apportionment, and the proper allocation of income to Florida.

2. Why Was Your Business Selected for an Audit?

The FDOR uses several methods to identify businesses for examination. These include:

• Information obtained from the Internal Revenue Service.
• Discrepancies between federal and Florida corporate income tax returns.
• Information exchanged with other states.
• Computerized audit selection.
• Analysis of previously filed tax returns.

An audit may be triggered by discrepancies in reported income, deductions, or apportionment calculations. However, some businesses are selected through routine compliance programs rather than suspected wrongdoing.

Important: An FDOR audit can sometimes result in no additional tax liability or even identify an overpayment that entitles the taxpayer to a refund.

3. What Should You Do When You Receive an FDOR Audit Notice?

The first steps taken after receiving an audit notice can significantly influence the outcome.

Step 1: Carefully Review the Audit Notice

Determine the specific tax periods under examination, the tax type involved, the requested records, and any response deadlines.

Confirm whether the audit concerns corporate income tax, sales and use tax, or another Florida tax obligation.

Step 2: Contact an Experienced Florida Tax Controversy Attorney

Before providing extensive financial records or making substantive representations to the auditor, consider obtaining advice from an attorney experienced in Florida state tax audits.

An experienced tax attorney can evaluate the legal issues, communicate with the FDOR, coordinate document production, and protect the business's procedural rights.

Step 3: Gather and Review Relevant Documentation

Commonly requested records include:

• Federal Forms 1120 and Florida Forms F-1120.
• Financial statements and general ledgers.
• Federal and Florida depreciation schedules.
• Supporting documentation for deductions and tax credits.
• Apportionment schedules and supporting records.
• Documentation of related-party transactions.
• Correspondence concerning prior federal or state tax adjustments.

Before producing records, businesses should reconcile the relevant tax returns to their accounting records and investigate material discrepancies.

Step 4: Establish a Controlled Audit Response Process

Designate one person or a professional representative to coordinate communications with the FDOR.

Maintain copies of documents submitted, record all information requests, and confirm significant communications in writing.

Avoid providing incomplete explanations, unsupported estimates, or unrelated financial records without first determining their relevance to the audit.

4. Common Issues in Florida Corporate Income Tax Audits

Multistate Income Apportionment

One of the most significant issues for corporations operating in multiple states is determining how much income is taxable in Florida.

Florida generally uses a three-factor apportionment formula, weighted as follows:

Apportionment factor	Weight
Property	25%
Payroll	25%
Sales	50%

Special rules and alternative apportionment methods may apply.

Errors in determining where sales occur, where employees perform services, or where property is located can materially affect the amount of income attributed to Florida.

Federal and State Tax Differences

Florida corporate income tax generally begins with federal taxable income, subject to Florida-specific adjustments.

An auditor may examine whether the corporation correctly accounted for federal-to-state differences, including depreciation, additions, subtractions, and other statutory adjustments.

Related-Party Transactions

Payments between affiliated businesses may receive additional scrutiny, particularly where expenses reduce income subject to Florida taxation.

The FDOR may examine the economic substance, supporting documentation, and applicable statutory treatment of intercompany arrangements.

Corporate Tax Credits and Loss Carryovers

The Department may review whether the business properly calculated and substantiated tax credits, deductions, and available net operating loss carryovers.

Businesses should maintain documentation supporting the amount, origin, and permitted use of each claimed tax benefit.

5. How Long Can the Florida Department of Revenue Go Back?

Florida's general tax assessment limitation period is three years, subject to statutory exceptions and rules governing when that period begins.

Longer periods may apply when required returns were not filed, when returns were substantially incorrect, or when other statutory exceptions apply.

Businesses should not assume that an audit covering older tax years is automatically invalid. Instead, the applicable statute of limitations should be carefully evaluated, including whether any extensions or exceptions apply.

6. What Happens If the Auditor Proposes Additional Taxes?

At the conclusion of the examination, the FDOR generally provides its findings and proposed adjustments.

The taxpayer should carefully review the auditor's workpapers, calculations, factual assumptions, and legal conclusions.

Potential errors may include:

• Incorrect inclusion of income attributable to another state.
• Improper disallowance of legitimate deductions.
• Failure to recognize allowable Florida adjustments.
• Misapplication of apportionment rules.
• Mathematical errors or duplicate adjustments.
• Incorrect calculation of interest or penalties.

A proposed assessment is not necessarily the final amount the business must pay.

Businesses may have opportunities to provide additional evidence, request reconsideration of particular adjustments, or formally challenge the Department's conclusions.

7. How to Challenge an FDOR Corporate Income Tax Assessment

Florida provides administrative and judicial procedures for disputing proposed tax assessments.

Informal Protest

A taxpayer generally has 60 days from the date the Notice of Proposed Assessment is issued to submit a written informal protest. A timely extension request may be available.

The protest should identify the disputed adjustments, explain the relevant facts, cite applicable legal authority, and provide supporting documentation.

The Department's Informal Dispute Resolution process provides an opportunity for review outside the courts.

Formal Administrative or Judicial Challenge

Depending on the circumstances, taxpayers may pursue a formal administrative hearing or judicial action.

The general deadline for initiating a formal challenge directly from a Notice of Proposed Assessment is 120 days. Different deadlines apply following an informal protest and subsequent Department decision.

Formal proceedings may also involve requirements concerning payment of uncontested amounts or security for contested taxes.

Warning: Missing an applicable protest or litigation deadline can result in a final assessment and the loss of important appeal rights.

An attorney should review the actual notice and applicable procedures before selecting a protest strategy.

8. Can Florida Corporate Income Tax Penalties Be Reduced or Eliminated?

In appropriate circumstances, penalties may be subject to waiver or compromise under Florida law.

Potential grounds may include reasonable cause, depending on the specific facts and statutory requirements.

Businesses should distinguish between the underlying tax liability, penalties, and interest. Each may be governed by different rules.

A well-supported request for penalty relief should explain the circumstances that caused the noncompliance and include relevant evidence.

Merely disagreeing with an assessment does not automatically establish a basis for penalty relief.

9. Five Costly Mistakes Businesses Should Avoid During an FDOR Audit

Mistake #1: Ignoring the Audit Notice

Failure to respond may lead to an assessment based on the information available to the Department.

Mistake #2: Providing Records Without Reviewing Them

Unreconciled records or incomplete explanations can create unnecessary disputes and additional audit questions.

Mistake #3: Accepting the Auditor's Conclusions Without Independent Review

An auditor's interpretation of Florida tax law may be challenged when supported by relevant facts and legal authority.

Mistake #4: Missing Protest Deadlines

Businesses that fail to act within the prescribed deadlines may lose their ability to challenge the assessment.

Mistake #5: Waiting Until the Assessment Becomes Final to Obtain Legal Representation

Early legal involvement can help identify substantive tax issues, preserve evidence, and establish an effective defense strategy.

10. Why Experienced Tax Litigation Counsel Matters

A Florida corporate income tax audit is not simply an accounting exercise. It can involve complex questions of statutory interpretation, constitutional limitations on state taxation, administrative procedures, and tax litigation.

For businesses with substantial proposed assessments, multistate operations, or complex corporate structures, experienced legal representation can be especially important.

Tax controversy counsel can assist with reviewing audit findings, challenging improper adjustments, negotiating disputed assessments, seeking penalty relief, and representing taxpayers in administrative or judicial proceedings.

Facing a Florida Department of Revenue
Corporate Income Tax Audit?

Don't Wait Until A Proposed Tax Assessment
Becomes Final To Protect Your Business.

At Marini & Associates, P.A., we represent businesses and taxpayers in federal and state tax controversies, including tax audits, administrative disputes, and tax litigation.

Whether your business has recently received an FDOR audit notice, is responding to an ongoing examination, or needs to challenge a proposed assessment, obtaining experienced legal guidance early can make a significant difference.

Sales Tax Problems Require
an Experienced Sales Tax Attorney 

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)

  

James P. Sweeney Esq - State and Local tax counsel 

Mr. Sweeney is a Tax Attorney with 40 years of experience in the areas of Tax Law, both Federal & State, including Representation before the IRS and various State Taxing Agencies.

Mr. Sweeney is an accomplished attorney with a distinguished career that includes a rich background in tax law and a remarkable tenure at Arthur Andersen's State and Local Tax Practice, including serving as the Northeast Region Practice Leader and a National Office subject matter expert, where he shared a wealth of experience and expertise in State and Local Tax law.

Disclaimer: This article provides general information and is not intended as legal or tax advice. Florida tax laws and administrative procedures may change. The appropriate response to an audit depends on the specific facts, applicable tax periods, and notices issued.

 

Some Nonresidents with U.S. Assets Must File Estate Tax Returns

Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.

U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held the certificates abroad or registered the certificates in the name of a nominee.

Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds.

Having prepared several nonresident alien estate tax returns (form 706NA) for aliens who died owning property in the US with a value in excess of $60,000, I am aware that many attorneys/accountants who prepare tax returns in this somewhat limited area are not familiar with a number of tax savings devices which are not intuitively obvious. 

 The most obvious device for reducing tax, is a tax treaty or convention between the United States and the country from which the decedent originated or was domiciled. Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where applicable.

However, this will not cover most countries since there are approximately 193 countries in the world and the treaties encompass about 20 of these countries. The bulk of the countries covered by treaty are in Europe, England, and Canada. The treaties themselves are very poorly written and difficult to understand so I would recommend that when you do use such a treaty, you also look at the interpretation of the treaty created by the Treasury Department so that mere humans can understand the incomprehensible. 

Beyond treaties, there were a number of devices which exist, the purpose of which is to reduce the federal estate tax. The most prevalent of these is offered in section 2106, IRC, where one is invited to, by verifying the value of the gross estate outside the United States, take apportioned deductions for debts and expenses incurred worldwide by the decedent or his estate. Very critical to remember is the fact that the IRS must believe your depiction of the non-US assets and their fair market value. Many people come to me and said that they want to use a zero figure for the gross estate outside the United States and that the IRS will have to live with it. Wrong! If the IRS has even a scintilla of suspicion about the purported foreign assets or their value, the IRS will simply disallow all the debts and expenses.    

At that point, if you wish to continue to pursue the deductibility of the debts and expenses, you are required to prove both the expenses themselves and the fair market value of the assets which means, words that you don't like to hear, an IRS audit!  It is much easier to try to verify the value of the foreign assets as part of your due diligence and avoid a confrontation with an estate tax attorney.  

Community property is an area with rich rewards for the tax preparer; it is also very poorly understood. If the decedent lived in a country in which the presumption of marriage is community property of assets, all assets (except gifts and inheritances) obtained by the wedded couple become community property. When one of them dies, irrespective of title, one half of the assets are excluded from the estate since they are legally the property of the other person. Generally the IRS is somewhat skeptical about this claim so if I have an estate from which I wish to exclude a portion based on community property, I generally get an opinion of law from counsel in the country where the marriage occurred.  

The marital deduction-since the 1990s, the IRS is not allowed a marital deduction for property passing to a nonresident alien spouse. The criteria for this was that in virtually every instance, the nonresident alien would receive the assets, tax free, and leave the US, paying no tax on assets which had been sitused in the United States. Ergo, no more marital deduction. To try to soften this blow, Congress, in section 2056A, created the qualified domestic trust. The qualified domestic trust basically allows assets passing through a special trust to a nonresident alien spouse to qualify for a marital deferral. Each time the spouse removes assets from the trust, he/she, is required to file a form 706QDT. 

Executors for nonresidents must file an estate tax return, Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000. 

However, if the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). See Unified Credit (Applicable Credit Amount) Section in Publication 559, Survivors, Executors, and Administrators, and the Form 706NA Instructions for more information.

Have a US Estate Tax Problem? 

Estate Tax Problems Require
an Experienced Estate Tax Attorney 

Contact the Tax Lawyers at 
Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243).

 

 

Florida Sales Tax Audit Survival Guide

Receiving notice of an impending Florida sales tax audit can be daunting, but understanding the process and taking the right steps can help you navigate it successfully. Surviving a Florida sales tax audit requires careful preparation and professional assistance. Here's a comprehensive guide to help you navigate the process:

Understanding the Audit Process

A Florida sales tax audit is typically triggered when a business's exempt sales ratio is out of line with industry norms, or through random selection. The Florida Department of Revenue (DOR) will investigate potential violations of Florida tax law, focusing on whether your business failed to remit all collected sales tax.

Notification and Preparation

The DOR initiates the audit process by issuing form DR-840, a Notice of Intent to Audit Books and Records. This notice will indicate that the audit will commence 0 days from the issue date, although it cannot begin earlier than 60 days after the notice date.

Key steps upon receiving the notice:

1. Hire an experienced tax professional immediately.
2. Use the 60-day "homework" period to prepare for the audit.
3. Organize all relevant documentation to present a clear picture of your business's tax compliance.

Types of Audits

The DOR conducts two types of sales tax audits:

1. Desk Audit: Conducted at a DOR office.
2. Field Audit: Performed at your place of business.

What to Expect During the Audit

The auditor will compare your annual federal tax return to sales and use tax returns to identify any discrepancies. They will examine:

• Fixed assets and commercial rent (subject to sales tax)
• Sample months to test exempt sales
• Federal income tax returns
• Florida tax returns  
• General ledgers and journals
• Depreciation  schedules 
• Property records 
• Cash receipt and disbursement journals
• Purchase and sales journals
• Sales tax exemption or resale certificates 
• Documentation to verify amounts entered on tax returns

Post-Audit Process

After reviewing all records, the auditor will issue a DR-5 (Notice of Intent to Make Audit Changes). You have 0 days to request a review of the results.

Tips for Surviving the Audit

1. Hire a professional: An experienced tax professional can help navigate the complex audit process and minimize potential assessments.
2. Be prepared: Organize all relevant documentation before the audit begins.
3. Understand your rights: The DOR cannot force you to begin the process or turn over information in less than 60 days.
4. Be cautious: While auditors may seem helpful, remember they are not your friends. Avoid inviting them to your workplace unnecessarily or giving them access to electronic records beyond the scope of the audit.
5. Know the timeline: The DOR can typically audit a business for a three-year period, or longer if you didn't file returns or filed substantially incorrect returns.

Remember, a Florida sales tax audit can range from a minor inconvenience to a serious issue with potentially grave consequences. With proper preparation and professional guidance, you can navigate this process successfully and minimize any potential negative outcomes.

Have a  Florida Sales Tax Problem?

Sales Tax Problems Require
an Experienced Sales Tax Attorney 

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)

  

James P. Sweeney Esq - State and Local tax counsel 

Mr. Sweeney is a Tax Attorney with 40 years of experience in the areas of Tax Law, both Federal & State, including Representation before the IRS and various State Taxing Agencies.

Mr. Sweeney is an accomplished attorney with a distinguished career that includes a rich background in tax law and a remarkable tenure at Arthur Andersen's State and Local Tax Practice, including serving as the Northeast Region Practice Leader and a National Office subject matter expert, where he shared a wealth of experience and expertise in State and Local Tax law.