Tuesday, April 13, 2021

IRS Appeals Now Requires Virtual Conferences For Taxpayers Who Request an Face to Face Conference

The IRS Independent Office of Appeals (“Appeals”) has issued a procedural memo,  AP-08-0321-0009: Memorandum for Required Use of Virtual Conferences, that requires Appeals employees to offer a virtual conference to taxpayers who request an in-person conference that can't be accommodated. Offering a virtual Appeals conference previously wasn't required in this situation. 

Most taxpayers with an active tax controversy can request a conference with Appeals to try to settle their tax controversy. (Code Sec. 7803(e)(4))

This new procedural memo requires Appeals employees to offer taxpayers a “virtual conference” in certain circumstances. 

For example, an Appeals employee is required to offer and conduct a virtual conference if the taxpayer (or their representative) has requested one. In addition, the Appeals employee should offer a virtual conference if the taxpayer (or their representative) has requested an in-person conference, but that request can’t be accommodated by Appeals.

Prior to COVID, Appeals would generally hold an in-person conference if a taxpayer requests one. However, Appeals stopped conducting in-person conferences at the beginning of the COVID-19 pandemic and has not yet resumed holding them. 

Appeals employees are not required to offer a virtual conference when a taxpayer (or their representative) has requested a phone or correspondence conference. In this case, the Appeals employee should use their judgment and experience to determine whether to voluntarily offer a virtual conference to that taxpayer. 

If the taxpayer declines the offer of a virtual conference, then the Appeals employee should continue with normal case processing procedures.

The Memo notes that this procedural deviation doesn't replace in-person conferences when Appeals begins holding them again. Appeals will still hold in-person conferences when Appeals can accommodate them and such conferences are appropriate. 

This guidance is effective as of March 22, 2021and will be incorporated into IRM 8.6.1 within two years of this date.

Have an IRS Tax Problem?


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or 
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Abusive Micro-Captive Insurance Arrangements Participants Are Urged to Exit These Arrangements By The IRS


Internal Revenue Service officials on April 9, 2021 urged participants in abusive micro-captive insurance arrangements to exit these transactions as soon as possible (
IR-2021-82). 

The IRS Has Stepped Up Examinations of These Arrangements And Has Recently Won Yet Another Case In U.S. Tax Court
That Such Arrangements Are Not Eligible
For The Tax Benefits Claimed.

On March 10, 2021, the U.S. Tax Court held in Caylor Land & Dev. v. Commissioner, T.C. Memo. 2021-30 (2021), that yet another micro-captive arrangement failed to qualify as insurance for federal tax purposes. This decision follows several earlier Tax Court decisions that also confirmed the IRS’s determinations that certain micro-captive arrangements were not eligible for the claimed federal tax benefits. In Caylor, the Tax Court also sustained the IRS’s determination of accuracy-related penalties and rejected the taxpayer’s claim of reliance on tax advice.

Taxpayers who engaged in abusive micro-captive transactions are once again encouraged to consult an independent tax advisor prior to filing their 2020 tax returns. Taxpayers should consider exiting the transaction and not reporting deductions associated with abusive micro-captive insurance transactions.

“In multiple cases before the courts, judges have held that these ‘fanciful’ and ‘unreasonable’ arrangements don’t add up to insurance in the commonly accepted sense,” said IRS Commissioner Chuck Rettig. “I strongly urge participants in these arrangements to get independent legal advice separate from those who helped steer them into these abusive arrangements.”


In Notice 2016-66, the IRS advised that micro-captive insurance transactions have the potential for tax avoidance or evasion. The notice designated transactions that are the same as or substantially similar to transactions that are described in the notice as “Transactions of Interest.” The notice established reporting requirements for those entering into such transactions on or after Nov. 2, 2006 and created disclosure and list maintenance obligations for material advisors.

In March and July 2020, IRS issued letters to taxpayers who participated in a Notice 2016-66 transaction alerting them that IRS enforcement activity in this area will be expanding significantly and providing them with the opportunity to tell the IRS if they've discontinued their participation in this transaction before the IRS initiates examinations. Early responses indicate that a significant number of taxpayers who participated in these transactions have exited the transaction.

Have an IRS Tax Problem?


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

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

The IRS Independent Office of Appeals - A Closer Look

In the latest issue of A Closer Look, Andrew Keyso, Chief of the Independent Office of Appeals, discusses what taxpayers can do if they disagree with an IRS audit or collection decision. 

I’d Like To Remind Taxpayers That They Can Have Their Case Reviewed By An Appeals Officer Who Is Independent Of The IRS Compliance Function That Made The Initial Determination In Their Case. I’m A Big Believer In A Strong Appeals Function Within The IRS,” Said Keyso.

Appeals is an independent function within the IRS, completely separate from the compliance functions responsible for collecting and assessing taxes. Appeals provides an informal forum for taxpayers who disagree with an IRS determination. Our job is to resolve tax disputes without litigation, where possible, consider each case fairly and impartially and improve public confidence in the integrity and efficiency of the IRS.

We do this by listening to taxpayers, understanding both sides (taxpayers and IRS compliance), independently evaluating all arguments and available information and identifying appropriate settlement options. 

We Have An Overall Staff Of Approximately
1,240 Employees, Mostly Appeals Officers
And Settlement Officers.

An Appeals Officer typically handles matters involving audit-related issues like penalties or additions to tax. For some complex matters, Appeals Officers may work as a team with other Appeals Officers. A Settlement Officer typically handles matters involving collection matters like whether the IRS followed proper procedures when imposing a lien or proposing a levy for unpaid taxes.

In Appeals, we work with taxpayers informally to settle tax disputes without a formal court hearing and, in most cases, without the need to hire someone to represent them. We provide taxpayers a meaningful opportunity to be heard, regardless of their educational or economic status, background or English language proficiency. In fact, the Taxpayer First Act of 2019 gives taxpayers the right to come to Appeals to dispute most IRS Compliance determinations.

Appeals is unique within tax administration, because we have the authority to compromise the amount of tax owed to resolve a dispute. 

How to Request an Appeal

Typically, appeal rights become available following a compliance action by IRS that could include an audit, penalty assessment or notice of a collection action. If you receive an IRS notice and your case is eligible for an appeal, the notice will explain your appeal rights. At that point, if you disagree with the IRS determination, you can request an appeal. The next step is to write down, either in a formal protest or simple statement, the issues with which you disagree and why. 

It’s important to remember that you should make your appeal request with the IRS compliance person who worked your case. That employee then will be able to send your appeal request, along with your case file, to Appeals. Taxpayers can also come to appeals after filing a petition in the United States Tax Court to dispute the IRS compliance action.

The Appeals Process

Once your case arrives in Appeals, we will assign it to an Appeals Officer or Settlement Officer depending on the type of case. Our goal is to have the assigned Appeals employee contact you by mail or telephone within approximately 30 days of receiving your case; however, it is taking longer these days due to pandemic-related delays and other resource constraints. 

To evaluate your case, the Appeals Officer will fully consider your position and arguments along with the administrative case file from the IRS compliance person who worked your case. You may request to view the non-privileged part of the Compliance file prior to meeting with Appeals. One of the most helpful things you can do is provide all relevant facts, documents and other information supporting your position to the IRS compliance person working your case before it comes to Appeals. 

Appeals Officers and Settlement Officers try to resolve cases after holding a taxpayer conference or by correspondence. But, some complex cases may take more than one conference to resolve. As mentioned earlier, Appeals may also consider the "hazards of litigation" or the probable outcome if your case were to go to court.


Andy Keyso Appeals Quote


The scope and nature of our review depends on the type of case. But in all cases, the Appeals Officer or Settlement Officer will listen to your concerns and review any information or comments you present before making a final decision. 

If your case results in a decision you feel is unfavorable, we will explain the reasons for our decision and any additional options you may have. If you agree to settle your case in Appeals, we may provide you with an agreement form to sign. If you are unable to settle your case in Appeals, you may be entitled to dispute the IRS determination in the Tax Court or another Federal court. 

Recently, for non-docketed examination or collection appeals, the entire process, from the time your case is received in Appeals to the time it is resolved or closed in Appeals, takes on average 7 or 8 months.

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) 

Appeal Court Upholds IRS Summons For Cannabis Business Docs

According to Law360, a Michigan federal court correctly dismissed a suit by cannabis business owners seeking to quash a third-party summons issued by the IRS requesting their companies' records because the summons aided a criminal investigation, the Sixth Circuit said Friday.

A three-judge panel determined that the summons issued to a data software company by the Internal Revenue Service seeking financial records of the various cannabis businesses that Kimberly and Richard Gaetano owned were valid to determine whether they underreported their federal taxes, according to its opinion.

The summons was essential to the agency's criminal investigation into whether the couple owed federal taxes, and the IRS proved that the summons met exceptions to the notice requirement under Internal Revenue Code Section 7609, U.S. Circuit Judge Ralph B. Guy Jr. said in the opinion.

"In sum, because the exception in Section 7609(c)(2)(E) applies, the bar of sovereign immunity remains, and subject-matter jurisdiction does not exist," Judge Guy said.

During the criminal investigation of the couple, the IRS issued a summons to the owners of Portal 42 LLC, a data software company that provides point-of-sale systems for cannabis businesses, of which the Gaetanos were clients. The summons sought the Gaetanos' records held by Portal 42 from the beginning of 2015 to Sept. 1, 2019, according to the opinion, and the couple wasn't notified of the summons by the IRS.

The Gaetanos filed suit against the IRS in 2019, requesting that the summons be quashed because they should have been notified under Section 7609, and argued that the summons was issued in bad faith.

During the lower court proceedings, the couple conceded that Portal 42 wasn't a third-party recordkeeper that required the IRS to notify the Gaetanos under an exception to Section 7609, and the IRS testified that it was investigating whether the Gaetanos underreported their federal taxes for their cannabis businesses.

The Michigan federal court determined that the IRS met the exceptions under Section 7609 that allowed the summons to be issued without notice to the Gaetanos and dismissed the couple's suit. The Gaetanos appealed that ruling, arguing that the criminal investigation conducted by the IRS was invalid because no quarterly tax period ends on Sept. 1, according to court documents.

In Its Opinion, The Sixth Circuit Affirmed That The Lower Court Correctly Determined The Summons Was Connected To The IRS’ Investigation Into Whether The Gaetanos Underreported Their Federal Tax Liability,
Per An IRS Agent’s Affidavit.

The couple also failed to prove how the summons was required to meet a four-factor test established by the U.S. Supreme Court in its 1964 decision in U.S. v. Powell stipulating when a summons is valid.

In its Powell ruling, the Supreme Court stipulated that an agency must state a legitimate purpose for seeking information outside its possession that is relevant to an investigation and proper administrative procedures must be followed.

In the Gaetanos' case, the IRS agent's testimony alone most likely would have satisfied the Powell standard, but the lower court didn't have to address the issue because it correctly dismissed the suit for a lack of jurisdiction under Section 7609, the appeals court said.

"We cannot proceed to the Powell test when Section 7609 does not confer jurisdiction over this action," Judge Guy said. "As such, the Gaetanos have placed the cart before the horse."

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 Reminds Taxpayers That FBAR Deadline Remains April 15 - However There Is An Automatic Extension to October 15

As an IRS practitioner you may have seen Issue Number IR-2021-83 Stating that the IRS reminds holders of foreign Bank accounts that the FBAR deadline remains April 15:


The FBAR is an annual report, due April 15 following the calendar year reported and the extension of the federal income tax filing due date and other tax deadlines for individuals to May 17, 2021, does not affect the FBAR requirement. 

However, you’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.

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) 






Tuesday, April 6, 2021

IRS Certification of Seriously Delinquent Tax is Not Unconstitutional


The Tax Court has determined in 
Rowan, (2021) 156 TC No. 8that the IRS properly certified to the Treasury Secretary that a taxpayer’s tax debt was “seriously delinquent.” The Tax Court found that Code Sec. 7345 does not run afoul of the Fifth Amendment Due Process Clause or the Universal Declaration of Human Rights because it merely provides for the certification of certain tax-related facts; it does not restrict in any manner the right to international travel.

IRC Sec. 7345 authorizes the IRS to send to the Treasury Secretary a certification that an individual has a “seriously delinquent tax debt.” With certain exceptions, a “seriously delinquent tax debt” is an individual’s unpaid, legally enforceable federal tax liability, which has been assessed and which is greater than $50,000 (adjusted for inflation) and with respect to which the IRS has filed a Notice of Lien (for which the collection appeals rights have been exhausted or lapsed) or issued a Levy. (IRC Sec. 7345(b)). 

IRC Sec. 7345(d) requires the IRS to contemporaneously notify a taxpayer of any certification. Once IRS notifies a taxpayer that a Code Sec. 7345(a) certification has been made, the taxpayer may challenge that certification in a civil action filed either in the Tax Court or in a federal district court. The court first acquiring jurisdiction over a certification challenge has sole jurisdiction over that action. (Code Sec. 7345(e)(1))

For more than two decades, Dr. Robert Rowan (“Rowan”) failed to pay his federal taxes. Rowan, a U.S. citizen, is a medical doctor licensed to practice in California. He frequently travels to developing countries to offer medical services free of charge to populations that would not otherwise have access to adequate medical care. He also has family members in Singapore and mainland China, where he travels for personal reasons.

After Rowan ran up a $474,846 unpaid tax bill, which the IRS tried to collect without success, the IRS certified to the Treasury Secretary that he had a seriously delinquent tax debt (“certification”). In turn, the Treasury Secretary notified the SOS of the certification. 

Rowan held a valid passport when the certification was made, and as of August 2020, the SOS had not taken any action to revoke Rowan’s passport. 

When Rowan received notice of the certification, he petitioned the Tax Court to determine that the IRS’s certification of his tax debt as "seriously delinquent" was invalid.

Rowan claimed that IRC Sec. 7345 is unconstitutional because it infringes on the right to international travel and, therefore, violates the Due Process Clause of the Fifth Amendment to the U.S. Constitution. Rowan also claimed that IRC Sec. 7345 violated his human right to travel under the Universal Declaration of Human Rights (UDHR). 

The IRS responded that it did not err in certifying Rowan’s tax liabilities as seriously delinquent tax debt because: (1) IRC Sec. 7345 is constitutional; (2) UDHR can't be used to invalidate IRC Sec. 7345; and (3) his tax debts are enforceable.

In This First Case To Consider The Merits of a IRC Sec. 7345 Certification, The Tax Court Agreed With The IRS
That It Did Not Err In Certifying Rowan’s Tax Liabilities
As Seriously Delinquent Tax Debt.

The Tax Court rejected as meritless Rowan’s claims that Code Sec. 7345 is unconstitutional because it infringes on his right to international travel.

The Court held that a plain reading of the text of IRC 7345 shows that it doesn’t impose any restriction on international travel, but merely provides a way for the IRS to certify the existence of a seriously delinquent tax debt and for the Treasury Secretary to transmit that certification to the SOS. All passport-related decisions are left to the SOS and the SOS’s authority to revoke a passport doesn’t derive from IRC Sec. 7345, so IRSec. 7345 doesn't restrict the right to international travel.

Similarly, the Court summarily rejected Rowan’s arguments regarding the UDHR. Because IRSec. 7345 does not impose a limit on the right to travel, the UDHR's protection of the right to travel as a "human right" cannot provide any ground for invalidating the IRS’s certification of Rowan's tax debt as seriously delinquent under IRSec. 7345.

Finally, the Court found that the IRS produced Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for Rowen’s tax years at issue. These and other documentation in the record showed that the period of limitations on collection remained open for all relevant years. Therefore, Rowan's tax debts were enforceable. 

The Court noted that the constitutionality of the authority granted to the SOS by FAST Act section 32101(e) was not an issue in the case and, therefore, the Court expressed no view on that issue.

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) 



Source  

Thomson Reuters

TIGTA Reports That the IRS is Swamped with a Backlog of Unprocessed Returns Going Back to 2019


TIGTA Issued a report entitled Results of the 2020 Filing Season and Effects ofCOVID-19 on Tax Processing Operations which found that unprocessed individual returns, as well as the additional returns and correspondence in the Error Resolution, Rejects, and Unpostables functions and the Accounts Management inventory, include returns, etc. for taxpayers who still have not received their tax year 2019 tax refunds.

As of December 25, 2020, the IRS had more than 11.7 million paper-filed individual and business returns that still needed to be processed. The backlog of returns, correspondence, and other types of work resulting from the pandemic has and will continue to have a significant impact on the associated taxpayers. For example, the unprocessed individual returns, as well as the additional returns and correspondence in the Error Resolution, Rejects, Unpostables functions and the Accounts Management inventory, include taxpayers who have yet to receive their Tax Year 2019 tax refunds. 

The IRS’s ability to resolve these backlogs could be affected by the need to divert resources to issue additional Economic Impact Payments or an unforeseen closure of IRS Tax Processing Centers due to the pandemic. The ability of these taxpayers to contact the IRS to receive updated information about the status of their refunds is a further challenge as staffing issues continue to hinder the IRS’s ability to provide adequate customer service. 

Much of The Work Performed at The IRS’s Tax Processing Centers is Not Conducive To a Telework Environment.


This work includes the receiving, sorting, and distributing of mail and the processing of paper tax returns, which requires manually inputting information from the tax return into IRS systems, correcting errors, and corresponding with the taxpayer, if needed. 

As of November 14, 2020, the IRS had more than 2.9 million pieces of unopened mail and 4.7 million individual paper tax returns to process. In addition, the IRS had more than 600,000 returns in its Error Resolution inventory, nearly 3.7 million cases in its Accounts Management inventory, and more than 1.3 million returns in its fraud program inventories as of this same period. 

When the IRS closed its offices nationwide, it stopped answering 81 of its 87 toll-free taxpayer assistance telephone lines and closed all 358 Taxpayer Assistance Centers. In addition, 10,792 of the 11,014 Volunteer Income Tax Assistance/Tax Counseling for the Elderly partner sites remained closed as of May 24, 2020. The IRS had reopened 80 of its toll-free telephone lines as of November 5, 2020, and 263 of its Taxpayer Assistance Centers as of November 16, 2020. 

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) 



Monday, April 5, 2021

Court Approves John Doe Summons Seeking Identities of U.S. Taxpayers Who Have Used Cryptocurrency

According to the DoJ , a federal court in the District of Massachusetts entered an order on April 1, 2021 authorizing the IRS to serve a John Doe summons on Circle Internet Financial Inc., or its predecessors, subsidiaries, divisions, and affiliates, including Poloniex LLC (collectively “Circle”), seeking information about U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020.  “Those who transact with cryptocurrency must meet their tax obligations like any other taxpayer,” said Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. 


The IRS is Seeking The Records of Americans
Who Engaged in Business With or Through Circle,
A Digital Currency Exchanger Headquartered in Boston.

“The Department of Justice will continue to work with the IRS to ensure that cryptocurrency owners are paying their fair share of taxes.”

“Tools Like The John Doe Summons Authorized Today
Send The Clear Message To U.S. Taxpayers That The IRS
Is Working To Ensure That They Are Fully Compliant
In Their Use Of Virtual Currency,”

Said IRS Commissioner Chuck Rettig.

“The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions. We will enforce the law where we find systemic noncompliance or fraud.” 

Cryptocurrency, as generally defined, is a digital representation of value. Because transactions in cryptocurrencies can be difficult to trace and have an inherently pseudo-anonymous aspect, taxpayers may be using them to hide taxable income from the IRS. 

In The Court’s Order, U.S. Judge Richard G. Stearns
Found That There Is A Reasonable Basis For Believing
That Cryptocurrency Users May Have Failed
To Comply With Federal Tax Laws.

The court’s order grants the IRS permission to serve what is known as a “John Doe” summons on Circle. The United States’ petition does not allege that Circle has engaged in any wrongdoing in connection with its digital currency exchange business. Rather, according to the court’s order, the summons seeks information related to the IRS’s “investigation of an ascertainable group or class of persons” that the IRS has reasonable basis to believe “may have failed to comply with any provision of any internal revenue laws[.]” According to the copy of the summons filed with the petition, the IRS is requesting that Circle produce records identifying the U.S. taxpayers described above, along with other documents relating to their cryptocurrency transactions. 

The IRS issued guidance regarding the tax treatment of virtual currencies in IRS Notice 2014-21, which provides that virtual currencies that can be converted into traditional currency are property for tax purposes. The guidance explains that receipt of virtual currency as payment for goods or services is treated as income and that a taxpayer can have a gain or loss on the sale or exchange of a virtual currency, depending on the taxpayer’s cost to purchase the virtual currency (that is, the taxpayer’s tax basis). 

According to Law360, a number of observers have expected federal agencies to ramp up cryptocurrency-related enforcement this year. The DOJ released its crypto enforcement framework in October, and in December, the U.S. Treasury Department's financial crimes unit proposed a rule that would require institutions to submit transaction reports verifying the identities of customers transferring convertible virtual currencies such as cryptocurrencies worth more than $10,000 in a single day.

The 
Financial Crimes Enforcement Network cited national security concerns related to illicit finance as justification for the proposed rule, but the rule has been met with considerable pushback from the industry.

David A. Hubbert, acting assistant attorney general for the DOJ's Tax Division, emphasized that tax compliance is also in the agency's sights.

"Those who transact with cryptocurrency must meet their tax obligations like any other taxpayer," Hubbert said in a statement. "The Department of Justice will continue to work with the IRS to ensure that cryptocurrency owners are paying their fair share of 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)