Thursday, May 20, 2021

TIGTA Offers Senators Cure For Reducing The Tax Gap

J. Russell George, the Treasury inspector general for tax administration, testified before a Senate Finance Committee panel on May 11, 2021 to address the persisting problem of the tax gap.

The title given to the hearing was "Cl
osing the Tax Gap: Lost Revenue from Non-Compliance and the Role of Offshore Tax Evasion."

At the outset of his testimony, George made clear the issue warrants serious and immediate attention. "Finding effective solutions to address the tax gap and its components would yield substantial additional tax revenue," he said.

The tax gap is defined as the difference between the estimated amount taxpayers owe and the amount they voluntarily and timely pay for a tax year. The gross tax gap, which is the amount that is owed by taxpayers before collections resulting from IRS enforcement actions and other late taxpayer payments are taken into account, is estimated to be $441 billion annually, George noted.

According to George, the underreporting of income taxes comprises the largest component of the tax gap at $352 billion annually. Individual taxpayers are responsible for the largest share of the underreporting tax gap at $245 billion. 

The Amounts Attributable To Nonfiling and Nonpayment of Taxes Are $32 Billion And $39 Billion, Respectively.

However, Russell waved a cautionary flag in his testimony. "The tax gap estimates are generally outdated because they are for tax years of a decade earlier, so their usefulness may be limited," he said. "Recently, the IRS commissioner testified that he believes the annual tax gap is at least $1 trillion," George added.

George offered a series of recommendations which, in his opinion if taken together, would significantly improve tax compliance, including: 

  • more effectively prioritizing high-income taxpayers; 
  • a stronger impetus by the IRS Large Business and International Division to identify corporate non-compliance; 
  • addressing the negative impact of Internet platform companies on tax compliance; 
  • dealing with the ongoing problem of adequate resources for IRS and its potential impact on enforcement revenue (he highlighted the reductions in most types of examinations and the nonpayment of taxes owed); and 
  • improving international tax compliance.

Have IRS Tax Problems?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at: or
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TaxBit Selected By the IRS to Help Catch Crypto Tax Evaders

On March 24, 2021 we posted Some Cryptocurrency Investors Are Receiving A New Round of Letters From The Internal Revenue Service, where we discussed that the letters are a fresh signal that the IRS is increasing its focus on cryptocurrency tax compliance, after first being slow to stay abreast of the growing industry and on April 5, 2021 we posted In a 2nd Crypto Summons the Judge Orders US To Justify Broad Doc Request, where we discussed that the IRS found 5 US taxpayers used this cryptocurrency for their noncompliance, combined with a dearth of third-party reporting in cryptocurrency generally, has led the IRS to believe that there are more Kraken users who aren't compliant with their cryptocurrency tax reporting obligations, the government said.

Now the IRS recently selected TaxBit, subcontracting under DPI Inc., to provide data analysis and tax calculation support for taxpayers with cryptocurrency. TaxBit provides tax automation software to enterprises, consumers, and government entities.

"This is a milestone moment for the cryptocurrency industry. It indicates regulators are embracing the asset class, but doing so in a way that ensures a straightforward approach to conform with existing regulations. We believe this is an important step for the enablement of widespread cryptocurrency adoption." Austin Woodward, Co-Founder and CEO of TaxBit.

TaxBit’s Tax Automation Software Is Already Being Used By Companies, Consumers And Other Government Agencies, But The Deal With The IRS Represents A Major Step In Demonstrating How Seriously The IRS Is Taking Tax Compliance For Users Of Digital And Virtual Currencies Like Bitcoin, Ether And Dogecoin.

TaxBit Will Soon Be Working With The IRS,
And Its Reports Will Be Shared Not Only With The IRS,
But With The Taxpayers Themselves, As Well As The CPAs
And Attorneys Who Represent Them During Audits.

The IRS has been cracking down on cryptocurrency users who fail to report their gains, adding a question to the top of the 1040 form in recent years asking if any time during the previous year, they received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency. 

The agency won a high-profile court case in 2018 against the popular crypto exchange Coinbase to get access to their customer information through John Doe summonses. Last week a federal court in California authorized the IRS to serve a John Doe summons on another popular cryptocurrency exchange, Kraken, and its owner Payward Ventures. TaxBit could be finding itself poring over the information made available through these efforts. However, much of it will come from the standard processes used by the IRS for selecting returns that set off red flags for further examinations and audits.

TaxBit will be helping the IRS scrutinize returns going back several years. “It really is case by case,” said Wilks. “These really can range from 2016 or 2017 and forward. Typically, if you think about an IRS audit cycle, they don’t start auditing taxpayers until usually a couple of years after they’ve filed, so these are not necessarily audits that are coming from 2020 or 2019 activity. These are really from the last few years.”

The Software Should Help Automate The Process
For IRS Auditors of Determining How Much Money
Was Made From Crypto Transactions.

It Will Generate A Report That Will Go To The IRS,
and In Turn To Taxpayers.

 “They’re just looking to get an accurate view of the gains and losses,” Wilks explained. “If you imagine a CPA trying to get through a million lines of data and calculating gains and losses using a FIFO methodology or something, that would take an unrealistic amount of time, so the idea is that we have technology that can do that in a matter of minutes. 

But beyond that we have CPAs and attorneys who work here and who can then look at that information and we can get further insights into what may be missing. This report is provided to the IRS, but it’s also reported to the taxpayer, so it’s a resource on both sides to help them make sure that they’re getting a complete picture.”

Taxpayers, As Well As Their Accountants and Attorneys,
May Start Seeing The Reports As Soon As Next Year.

TaxBit expects  to start receiving the initial data and to begin sending the reports by early next year. “We’re Actually Expecting Them Any Day Now At This Point, So It Will Be Within The Next 12 Months,” Said Wilks.

Have an IRS Cryptocurrency Tax Problem?

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

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




Wednesday, May 19, 2021

US Taxpayers Still Hold $2T Abroad In Tax Havens!

According to Law360, U.S. taxpayers could hold as much as
$2 trillion in assets in low-tax haven jurisdictions, a top research and analytics officer at the Internal Revenue Service said during a Senate hearing. IRS Analytics Officer Barry Johnson told a Senate Committee on May 11, 2021 that "the Tax Gap attributable to International Activities, Specifically Overseas Accounts, could be quite large."

He testified that the agency has yet to develop reliable statistics on foreign offshore evasion, but that information collected through the Foreign Account Tax Compliance Act for the 2017 tax year shows that U.S. taxpayers hold $3.7 trillion abroad. More than half of that, or $2 trillion, is held in "what the OECD considers to be tax haven countries," he said.

IRS Commissioner Chuck Rettig recently testified that the annual tax gap, or the difference between the taxes owed and what is collected, could exceed $1 trillion. Republican lawmakers are challenging Rettig on that number, pointing to the agency's official estimate of $441 billion. 

President Joe Biden is pushing to boost the IRS enforcement budget, contending that it will yield a collection of new revenue that will help pay for his $2 trillion infrastructure plan. 

Johnson said that while the official IRS figure on the tax gap hasn't changed, he believes Rettig's estimate is a reasonable update, given factors such as the rise of the gig economy and the use of microcaptive insurance for evasion.

Treasury Inspector General for Tax Administration J. Russell George, also testifying on May 11, 2021, said the IRS faces challenges in international tax compliance. 

He Cited A 2018 TIGTA Report That Found The Agency Wasn't Adequately Enforcing FATCA Rules, Despite Spending More Than $380 Million To Carry Out The Law.

"The IRS can more effectively reduce the tax gap by developing compliance strategies for the changing domestic and global economies, and using its resources and information reporting more effectively," he said.

Do You Have Undeclared Income
from a Tax Haven

Is Your Name Being Handed Over to the IRS?
Want to Know if the OVDP Program is Right for You? 

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

for a FREE Tax Consultation contact us at: or 
Toll Free at 888-8TaxAid (888) 882-9243

Friday, May 14, 2021

Form 706 NA Deceptive Simple?


For those of you whose practice involves international tax, I would like to take this opportunity to explain the deceptive simplicity of the form 706 NA. 

You must have a client who is a nonresident alien who dies. He/she owns US situs assets so you look at section 2014 of the Internal Revenue Code; you correctly determine that since these assets exceed $60,000 in value, the estate is required to file a form 706NA which is the form analogous to a 706 in the hands of a nonresident alien. The form itself is deceptively simple-two pages-what kind of problems can this create? Once you start reading the form, you realize that to complete it properly, you may have to incorporate almost every schedule which appears in a 706. 

The deceptive part of the form occurs when you are trying to determine which of decedent’s US assets (based on section 2014) are taxable by the United States.
The United States has more than 20 tax treaties or conventions with foreign countries designed, for the most part, to eliminate double taxation. It is critically important for you, the preparer, to determine which, if any, treaties may exist to reduce the tax liability of your client.
The IRS, on its website, has a list of the countries which currently  share estate tax treaties/conventions with the United States. Even this provides only a partial clue.
Example- You have a client who was a German who lived in Brazil. Since the decedent was a German citizen,  you make the assumption that treaty benefits will be available to his/her estate. Not always so. Some of the treaties base their benefits on decedents who are domiciliaries of but not necessarily citizens of a particular country. Ergo, you learn that the estate of the German client domiciled in Brazil cannot utilize the benefit of the German treaty.
Additionally, since some treaties are predicated on domicile while others are predicated on both domicile and citizenship, you may find yourself in an anomalous situation where you have more than one treaty you can elect to apply. In this particular case, use the treaty which best suits your client.
As a rule, the 20 or so treaties are generally address estates of decedents who were citizens of Europe, England or Canada. There are no treaties with South or Central America or Africa. Remember, however, that some treaties are based on citizenship, not domicile. Therefore the estate of an English citizen domiciled in Sudan could benefit by the UK tax convention. 

The benefits as well as the applications of the treaties very widely. This is a result of the fact that these treaties were negotiated over various periods of years from the 1950s to the year 2000. The treaties themselves must be read carefully. They are, for the most part, extremely poorly drafted and difficult to fathom. In the case of confusion, look up the meaning of what the treaty means in a publication called the technical explanations of treaties which are a little bit better written but still no works  of Shakespeare. Remember, if you fail to utilize an existing treaty and it costs your client a significant amount of money, you may become involved with your insurance carrier. For those of us who are attorneys, remember the hornbook, Prosser On Torts.  As I recall, and it's been a while, the first topic addressed is “negligence, the basis of liability”. If you fail to find and utilize an existing treaty, you are negligent and potentially headed for big trouble. 

Some of you feel that the IRS will find incorrect your failure to utilize an estate tax treaty. Not so. First of all, not all estate tax returns are selected for examination, so if the return you filed failing to utilize a treaty is not examined, there is no way that treaty benefits will inure your to your client's estate.  Second, even if the estate is examined, it is not the job of the auditing attorney to tell you that you failed to utilize a treaty. Utilization of a treaty is not mandatory. Therefore, if you file the 706NA utilizing the situs rules of section 2014, the IRS agent will merely agree with your situs depiction and not discuss the availability of the treaty.  

If you feel that you are able to utilize one of the existing treaties, you are required to use a form 8833. In this form you explain which treaty you are using, why you feel it is applicable to your particular situation, and determine the treaty benefits of utilizing the treaty. 

Over my 32 years as a senior attorney with the IRS in the international estate tax forum, I audited perhaps 1,800 to 2,000 706 NA's. Utilization of the treaty benefit was not frequent, and I recall situations where some estates could have benefited to the tune of roughly $1 million in tax savings.  

Need Help Preparing Form 706 NA?
Estate Tax Problems Require 
an Experienced Estate Tax Attorneys

Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).

Ten Facts About Tax Expatriation - Part II

On May 11, 2021 we posted Ten Facts About Tax Expatriation - Part I, where we discussed that whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off.

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.
We also discussed in Ten Facts About Tax Expatriation - Part I:

1. Uncle Sam taxes income worldwide. 

2. Expatriating means really leaving.

3. The old 10-year window is closed.

Herein will discuss 7 more, of the 10 things you need to know about Expatriation:
(set forth below and in one subsequent blog posts)

4. Big changes came in 1996.
Thirty years later, in 1996, after the Forbes story on "The New Refugees" created a stir, Congress tried again. As part of the Health Insurance Portability and Accountability Act of 1996 (otherwise known as HIPAA), Congress added a presumption of tax avoidance if an expatriate's five-year average net income tax exceeded $100,000, or if the expatriate's net worth was $500,000 or more (both adjusted each year for inflation). But people could--and with the help of skilled lawyers did--rebut the presumption, and the IRS still had to show tax avoidance in most cases.

5. Tax avoidance is now irrelevant.
In 2004 (in the American Jobs Creation Act), Congress threw out the tax avoidance motive test altogether, imposing 10 years of U.S. tax on U.S. source gross income and gains on a net basis if you left the country for any reason. However, Congress increased the threshold for determining who was subject to this expatriation tax. An individual was only subject to the expatriation tax if he had an average net annual income tax for the five years preceding expatriation of $124,000, or if he had a net worth of $2 million or more on the date of expatriation. (If you expatriated on or after June 17, 2008, under the new Section 877A, there is a higher net worth threshold--currently $145,000 of annual net income tax for 2010.)

In some cases, even if you're below these thresholds, you'll get taxed. For example, expatriates must certify their past U.S. tax compliance by filing an IRS Form 8854. Any expatriate who fails to certify compliance with U.S. federal income tax laws for the five taxable years preceding expatriating is subject to the expatriate income tax even if he didn't meet the income tax liability or net worth tests.
Plus, later U.S. visits can be expensive if you expatriated before June 17, 2008 (and Internal Revenue Code Section 877 applies). In that case if an expatriate comes back to the U.S. for more than 30 days in any year during the 10 years following expatriation, that person is considered a resident of the U.S. for that whole tax year. That means the person would again be subject to U.S. tax on his worldwide income, not just his U.S.-source income. Ouch!

This 30-day rule does, however, have an exception for any days (up to a 30-day limit) that the individual performed personal services in the U.S. for an employer (who is not related). This exception only applies if that individual either had certain ties with other countries or was physically present in the U.S. for 30 days or less for each year in the 10-year period on the date of expatriation or termination of residency.

6. There are special rules for long-term residents.
It's easy to define who is or is not a U.S. citizen, but the term "long-term resident" isn't quite so clear. A long-term resident is a non-U.S. citizen who is a lawful permanent resident of the U.S. in at least eight years during the 15-year period before that person's residency ends. A "lawful permanent resident" means a green card holder. However, a person is not treated as a lawful permanent resident for purposes of this eight-year test in a year in which that person is treated as a resident of a foreign country under a tax treaty, and does not waive the treaty benefits applicable to the residents of that country. Caution: holding a green card for even one day during a year will taint the whole year.

7. There's an exit tax for expatriations on or after June 17, 2008.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (generally known as the Heroes Act) changed the method of taxation for those who became expatriates on or after June 17, 2008, adding even more complexity and usually higher U.S. taxes. If you are a U.S. citizen or long-term resident who expatriates on or after June 17, 2008, you will be deemed (for tax purposes) to have sold all of your worldwide property for its fair market value the day before you leave the U.S.! All that gain is subject to U.S. tax at the capital gains rate. Plus, all your gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code.
Put differently, you get all of the bad parts of the tax code, and none of the good. That would include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121 of the Internal Revenue Code) and many other rules. The exit tax is like an estate tax, in the sense that everything that would be part of your estate will be subject to income tax on unrealized gains as of the day before you expatriate, as if you sold all your assets the day before leaving. In effect this is Congress' way of making sure your assets don't escape the estate tax entirely through expatriation.

"Should I Stay or Should I Go?"

Need Advise on Expatriation? 

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

For a FREE Tax Consultation at:
or Toll Free at 888-8TaxAid ( 888 882-9243)  


Swiss Life & Affiliates Admits to Conspiring with U.S. Taxpayers to Hide Assets & Income in Offshore Accounts

The Department of Justice today filed a criminal information charging Swiss Life Holding AG (Swiss Life Holding), Swiss Life (Liechtenstein) AG (Swiss Life Liechtenstein), Swiss Life (Singapore) Pte. Ltd. (Swiss Life Singapore), and Swiss Life (Luxembourg) S.A. (Swiss Life Luxembourg), collectively, the “Swiss Life Entities,” with conspiring with U.S. taxpayers and others to conceal from the IRS more than $1.452 billion in offshore insurance policies, including more than 1,600 insurance wrapper policies, and related policy investment accounts in banks around the world and the income generated in these accounts. 

The Justice Department also announced a deferred prosecution agreement with the Swiss Life Entities (“the Agreement”) under which they agreed to accept responsibility for their criminal conduct by stipulating to the accuracy of the Statement of Facts attached to the Agreement. The Agreement requires the Swiss Life Entities to refrain from all future criminal conduct, enhance remedial measures, and continue to cooperate fully with further investigations into hidden insurance policies and related policy investment accounts. 

Further, As Part of Today’s Resolution, The Swiss Life Entities Agreed To Pay Approximately $77.3 Million To The U.S. Treasury, Which Includes Restitution, Forfeiture of
All Gross Fees, and a Penalty Component.

If the Swiss Life Entities abide by all of the terms of the Agreement, the government will defer prosecution on the information for three years and then seek to dismiss the charge. 

“Swiss Life today is held responsible for creating and marketing specially designed insurance products to U.S. tax evaders seeking a new way to hide their offshore assets, in light of heightened Justice Department and IRS tax enforcement efforts,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. 

“Financial Enablers Here And Abroad,
And The Taxpayers Seeking Their Services,

Should Know That We Will Continue
To Identify And Unmask Such Schemes.”

As they admit, Swiss Life and its subsidiaries sought out and offered their services to U.S. taxpayers to help them become U.S. tax evaders,” said U.S. Attorney Audrey Strauss for the Southern District of New York. “The Swiss Life Entities offered private placement life insurance policies and related investment accounts to U.S. customers, and provided services that concealed the policies and other assets from the IRS. Indeed, the Swiss Life Entities saw U.S. authorities’ stepped-up offshore tax enforcement as an opportunity to pitch themselves to tax-evading U.S. customers as an alternative to Swiss banks. Under the terms of today’s agreement, Swiss Life will turn over more than $77 million and be required to continue to cooperate with the United States in identifying U.S. tax evaders.” 

“The successful resolution of this investigation is an important victory for the American taxpayer for two primary reasons,” said Chief James C. Lee of the IRS Criminal Investigation. “First, the recovery of more $77 million owed to the U.S. government sends an unequivocal message that offshore evasion is still a high priority of IRS Criminal Investigation. Secondly, this agreement further requires Swiss Life Entities to continue to cooperate with the government and does not shield them from future civil or criminal sanctions, which should put every entity engaged in offshore evasion on notice.

According to documents filed on May 14, 2021 in Manhattan federal court: 

Swiss Life Holding is the ultimate parent company of the Swiss Life group of companies (Swiss Life), a Switzerland based provider of comprehensive life insurance and pension products for individuals and corporations, as well as asset management and financial planning services. From 2005 to 2014, Swiss Life through affiliated insurance carriers in Liechtenstein (Swiss Life Liechtenstein), Luxembourg (Swiss Life Luxembourg), and Singapore (Swiss Life Singapore), (collectively, the PPLI Carriers) maintained approximately 1,608 Private Placement Life Insurance (PPLI) policies. The PPLI Carriers’ issuance and administration of those policies (colloquially known as “insurance wrappers”) and the related investment accounts were often done in a manner to assist U.S. taxpayers in evading U.S. taxes and reporting requirements and concealing the ownership of offshore assets. 

Swiss Life engaged in other misconduct with respect to U.S.-related policies: 

  • U.S.-related PPLI Policies were funded or terminated through asset transfers from/to an account maintained by a third party associated with the policyholder, such as an offshore law firm or intermediary. 
  • Swiss Life PPLI personnel assisted U.S. taxpayers in establishing and maintaining Swiss Life PPLI policies in the name of a foreign relative with the effect of obscuring the U.S. nexus of the assets used to fund the policy or to repatriate the U.S. taxpayer’s undeclared assets through a sham death payout. 
  • Certain U.S.-related PPLI Policies issued by Swiss Life Liechtenstein involved transfers of physical gold, other precious metals, or precious gemstones into or out of the policy investment account, presumably for the purpose of avoiding detection by U.S. authorities. 
  • The PPLI Carriers allowed policyholders to designate an authorized recipient – typically the policyholder’s asset manager or other foreign representative – to receive policy documents and custodian investment account statements, rather than having those documents sent directly to the policyholder. 
  • Certain Swiss Life Liechtenstein personnel promoted the use of Swiss Life products to turn U.S. taxpayers’ undeclared or so-called “black” money into so-called “white” money by parking the funds in a Swiss Life insurance policy until the clock had run on the perceived statute of limitations for tax offenses. 
  • Corporate premium bank accounts were also misused as a transitory account to help conceal the movement of U.S. clients’ funds. 
Under today’s resolution, the Swiss Life Entities are required to continue to cooperate fully with ongoing investigations and affirmatively disclose any information they may later uncover regarding U.S.-related insurance policies and related policy investment accounts. The Swiss Life Entities are also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2008, and Dec. 31, 2019. The Agreement provides no protection from criminal or civil prosecution for any individuals.

Swiss Life Holding will pay a total of $77,374,337, which has three parts. First, Swiss Life Holding has agreed to pay $16,345,454 in restitution to the IRS, which represents the approximate unpaid taxes resulting from the Swiss Life Entities’ participation in the conspiracy. Second, Swiss Life Holding has agreed to forfeit $35,782,375 to the United States, which represents the approximate gross fees (not profits) that the Swiss Life Entities earned on the penalized insurance policies and related policy investment accounts between 2002 and 2014. Finally, Swiss Life Holding has agreed to pay a penalty of $25,246,508. 

The penalty amount takes into consideration that:

  1. Swiss Life conducted a robust internal investigation, 
  2. Supplied client related data
  3. Facilitated the acquisition by the Justice Department of information relating to custodian banks, asset managers, and other entities and individuals related to Switzerland, Liechtenstein, and Singapore, and 
  4. Otherwise meaningfully assisted the department’s cross-border tax enforcement efforts
  5. In addition, Swiss Life conducted extensive outreach to current and former U.S. clients to confirm historical tax compliance, and to encourage disclosure to the IRS when policyholders’ historical tax compliance issues had not yet been resolved. 
  6. Swiss Life further implemented remedial measures to protect against the use of its services for tax evasion in the future.

  Do You Have Undeclared Income from an Offshore PPLI?

Is Your Name Being Handed Over to the IRS?
Want to Know if the OVDP Program is Right for You? 

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

for a FREE Tax Consultation contact us at: or 
Toll Free at 888-8TaxAid (888) 882-9243

Thursday, May 13, 2021

1st TC Case on Innocent Spouse Relief and Newly Discovered Evidence

In an oral finding of fact and opinion in Momoudou Fatty v. Comm., Docket No. 3787-20S, the Tax Court has denied a taxpayer's petition for innocent spouse relief. The Court said, in one of the first cases to come after a change in Code Sec. 6015(e)(7)'s scope of review, that evidence given under oath and subject to cross-examination was "newly available evidence."

Individuals who are married may file a joint return with their spouse. (Code Sec. 6013(a)) Generally, spouses filing a joint Federal income tax return are jointly liable for the tax shown on the return. (Code Sec. 6013(d)(3))

However, in some situations, a joint return filer can avoid joint liability by qualifying for innocent spouse relief under Code Sec. 6015.

For petitions or requests for innocent spouse relief filed after June 30, 2019, any review of a determination under Code Sec. 6015 will be reviewed de novo by the Tax Court and will be based on: 

  1. the administrative record established at the time of the determination, and
  2. any additional newly discovered or previously unavailable evidence. (Code Sec. 6015(e)(7))
Prior to July 1, 2019, Court's could not review the evidence mentioned in (2).

Ms. and Mr. Fatty had filed a joint return, but later Mr. Fatty sought innocent spouse relief.

When Mr. Fatty applied for innocent spouse relief, he was not able to give sworn testimony, and neither he nor Ms. Fatty was subject to cross-examination.

The Tax Court, in denying Mr. Fatty innocent spouse relief, said that this is one of the first cases to come after the June 30, 2019 change to Code Sec. 6015(e)(7)

The Court took the opportunity to review newly discovered or previously unavailable evidence. In this case, the Court said that the evidence that Ms. and Mr. Fatty gave under oath and subject to cross-examination was "newly available evidence" because, when Mr. Fatty applied for innocent spouse relief, he was not able to give sworn testimony, and neither party was subject to cross-examination.

But the Court also cautioned that it "was not deciding this for all future cases," as the case was an S case. Presumably, the Court was saying that it was not making a binding decision on the Tax Court that evidence given under oath and subject to cross-examination is always "newly available evidence." 

Have IRS Tax Problems?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

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