Friday, June 24, 2022

Comm'r Disagrees With Criticism of IRS Audit Rates & IRS' Additional Funding Needs

On May 19, 2022 we posted IRS Audits Have Plummeted in the Last Decade - According to GAOwhere we discussed that the GAO published a report on trends in IRS audit rates, audit results, and resources used for audits across individual taxpayer income levels. (GAO-22-104960) and that IRS examining or auditing a decreasing proportion of individual tax returns, concern has been raised over "the potential for declining taxpayer compliance, as well as whether IRS is equitably selecting taxpayers for audit, as audit rates for higher-income taxpayers have decreased more than audit rates for lower-income taxpayers." 

Now according to Law360, IRS Commissioner Chuck Rettig said on Thursday, June 23, 2022, that claims the agency audits more poor people than wealthy ones are wrong and harmful to tax administration, renewing his pushback against criticism of the agency's audit rates.

When Audit Rates Of Earned Income Tax Credit Claims
Are Compared Against Those For Taxpayers With Incomes
Over $1 Million, 


Audit Rates For The Wealthy Are In Fact Higher,

Rettig said during the New York University School of Professional Studies Tax Controversy Forum held in New York City and online. Claims to the contrary are damaging to tax administration, he said.


He also said anyone looking at data objectively and "not with a narrative trying to take down the IRS or tax administration" would see the agency historically audits about 7% to 8% of taxpayers with incomes over $10 million. 


Rettig's Comments Follow The IRS Saying In May
That It Audited 5.8% Of Returns Reporting $10 Million
Or More In Income For The 2017 Tax Year, 
Compared With 21.5% Of Such Returns For 2010. 

The agency said at the time that resource constraints hindered its ability to monitor the wealthy. 

The Transactional Records Access Clearinghouse, a data research organization based at Syracuse University, also said in a report that the IRS audits low-income taxpayers five times higher than everyone else based on fiscal year 2021 data. 


Rettig Was Asked About That Research During A
House Ways And Means Subcommittee Hearing In
March And Called The Findings Completely False.


The data research organization asked Rettig to retract his statement that the organization's findings were totally false, and said the organization bases its reporting on data the agency provides. 

Just as Rettig blasted criticism of the agency's audit rates Thursday, he ripped people who say the agency doesn't need more money.

"Those who say IRS doesn't need additional funding, they have a different agenda," he said. "Their agenda should be for this country."

The agency needs sustained multiyear funding, Rettig said. Although lawmakers 
passed legislation that provided the agency a $675 million increase through September, about $350 million of that will be used for "maintaining current status" for the agency and contracts, he said.

"So we got let's say a $375 million boost, try to take $375 million and fill the holes in a ship that have existed for more than 10 years because there was not adequate funding," he said. "Why do we have trouble providing consistent, significant multiyear flexible funding to the Internal Revenue Service?"
 

 

Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


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or 
Toll Free at 888 8TAXAID (888-882-9243)
 


 

Thursday, June 23, 2022

Author of Tax-Dodging Guides Agrees To $540K Judgment In FBAR Case


According to
Law360, the author of several tax-dodging guides agreed to pay more than half a million dollars in penalties for failing to report overseas bank accounts he maintained in Asia, according to documents filed in federal court i
n the case of U.S. v. Kelly, case number 3:21-cv-03043, in the U.S. District Court for the Northern District of Texas.


The author, Nickolas J. Kelly, will pay $540,000 plus
late payment penalties, collection costs and interest for his willful failure to report at least five (5) accounts under his
company's name, Superdrive Publishing Ltd.,

according to documents filed on June 21, 2022.

In 2014, Kelly maintained interest in three accounts at HSBC in Hong Kong, one account at Kasikorn Bank in Thailand and one at the Bank of China in mainland China that had an aggregate balance exceeding $10,000, the government alleged in court documents. 

By January 2021, Kelly Owed Nearly $540,000 In
FBAR Penalties, According To The Complaint.


On Superdrive's website, articles written by Kelly advise on how to avoid reporting assets to the government, with titles including "The Hong Kong Offshore Business Guide," "How to Own Your House and Car Anonymously" and "How to Be a Free Man," according to court documents.

Have an FBAR Penalty Problem?  
 
 

 Contact the Tax Lawyers at 
Marini& Associates, P.A. 
 
 
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www.TaxAid.com or www.OVDPLaw.com 
or 
Toll Free at 888-8TaxAid (888) 882-9243





Wednesday, June 22, 2022

Return Processing Backlog Addressed by Taxpayer Advocate's Mid-Year Report To Congress


National Taxpayer Advocate Erin M. Collins today released her statutorily mandated mid-year report to Congress. The report expresses concern about continuing delays in the processing of paper-filed tax returns and the consequent impact on taxpayer refunds. At the end of May, the agency had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million over the same time last year.

“The IRS has said it is aiming to crush the backlogged inventory this year, and I hope it succeeds,” Collins wrote. 

“Unfortunately, At This Point The Backlog Is Still Crushing
The IRS, Its Employees, And Most Importantly, Taxpayers.
As Such, The Agency Is Continuing To Explore
Additional Processing Strategies.” 

More than 90% of individual income taxpayers e-file their returns, yet last year, about 17 million taxpayers filed their returns on paper. Some choose to file on paper. Some have no choice because they encounter e-filing barriers, such as when they are required to file a tax form or schedule the IRS cannot accept electronically. Before the pandemic, the IRS typically delivered refunds to paper-filers within four to six weeks. Over the past year, refund delays on paper-filed returns have generally exceeded six months, with delays of 10 months or more common for many taxpayers.

Forms 1040 are just one component of the paper tax returns processing backlog. Millions of business tax returns and amended tax returns (both individual and business) are also filed on paper. The overall backlog has increased by 7% over the past year as shown in the Figure 1.

Figure 1: Status of Unprocessed Paper Tax Returns Comparing Weeks Ending May 22, 2021, and May 27, 2022

Figure 1

The IRS Has Publicly Committed To Reducing Its
Paper Tax Return Backlog To A “Healthy” Level
By The End Of The Year, But It Has Not Provided
A Definition Of “Healthy.”

“Historically, the IRS has paid refunds resulting from paper-filed returns within four to six weeks,” Collins wrote. “From a taxpayer perspective, returning to a four-to-six-week refund delivery period is a reasonable definition of ‘healthy.’”

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)
 

 




Responsible Party Penalty Not Eligible For Innocent-Spouse Relief


The U.S. Tax Court held in 
Chavis, 158 TC No. 8, that an IRS appeals officer correctly determined, after a collection due process (CDP) hearing, that the petitioner wasn’t eligible for “innocent spouse” relief because her Trust Fund Recovery Penalty (TFRP) didn’t arise from any liability shown on a joint federal income tax return. 

Angela Chavis and her husband were officers of a corporation that failed to remit withheld payroll taxes to the IRS. The agency issued Angela Chavis a Letter 1153, Notice of Trust Fund Recovery Penalty, informing her that it proposed to assert a TFRP against her.

Letter 1153 includes detailed instructions about the steps to take in order to appeal the proposed assessment and the issues that would be considered during an appeal. The letter also warned: "If we do not hear from you within 60 days from the date of this letter... we will assess the penalty and begin collection action."

When Chavis didn't file an appeal to challenge the proposed assessment, the IRS assessed TFRPs totaling $146,682. The IRS followed up the assessment by issuing Chavis a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing. Chavis timely requested a CDP hearing.

During the CDP hearing Angela Chavis sought to challenge her liability for the TFRPs. The appeals officer explained that Chavis couldn't challenge her liability for the TFRPs because she received Letter 1153, and didn't file an appeal challenging the liability before the IRS assessed the penalties.

Then, Chavis requested "innocent spouse" relief under Code Sec. 6015. However, the appeals officer determined that such relief isn't available for TFRP liabilities.

Finally, Chavis asked the IRS to place her account in currently not collectible (CNC) status and that the IRS withdraw the lien. The appeals officer considered Chavis' collection alternatives but determined that Chavis didn't qualify for either one.

Chavis submitted a Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals, together with supporting financial information. Based on this information, an IRS collection specialist determined she could pay $1,685 a month toward the TFRP liability and, therefore, didn't qualify for CNC status. 

The appeals officer issued a Notice of Determination (NOD) sustaining the IRS's lien filing and Chavis timely petitioned the Tax Court for review of the NOD.

According to the Tax Court, the appeals officer correctly determined that Chavis couldn't challenge the TFRPs in a CDP hearing because Letter 1153 afforded her a prior opportunity to challenge the penalties, which she failed to do. As a result, she couldn't challenge her liability for the TFRPs at a CDP hearing or in the Tax Court.

In addition, the Tax Court said the appeals officer properly determined that Chavis wasn't eligible for innocent-spouse relief because her TFRP liability didn't arise from any liability shown on a joint federal income tax return.

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, June 21, 2022

SC To Hear FBAR Penalty Limit Case - $10,000 Per Year or Per Account?

On April 5, 2022 we posted 3 Groups Urge Supreme Court To Review Non-Willful FBAR Penalty, where we discussed that whether a foreign bank account reporting penalty is assessed Per Unreported Account or Per Unfiled Form should be determined by the U.S. Supreme Court, tax and business groups said, arguing a circuit split on the issue warrants high court intervention.

In amicus briefs filed on April 1, 2022, the U.S. Chamber of Commerce, Center for Taxpayer Rights and American College of Tax Counsel told the Supreme Court it should resolve the divergent findings by two appeals courts on the proper application of the penalty for a person or business' nonwillful failure to disclose foreign accounts.

The U.S. Supreme Court decided on June 21, 2022 to hear a dispute over the maximum penalty for failing to disclose foreign bank accounts to the IRS in a case that could resolve the limits of a $10,000 penalty for undeclared accounts. The case is Alexandru Bittner v. U.S., case number 21-1195, in the U.S. Supreme Court.

The justices will weigh in on the dispute between Alexandru Bittner and the federal government, who disagree over the proper application of the $10,000 penalty for a nonwillful failure to disclose foreign bank accounts, according to an order list

While the Ninth Circuit has decided that the penalty for a nonwillful failure to disclose foreign accounts is assessed on a per-form basis, the Fifth Circuit found in Bittner's case that the penalty is imposed for each unreported account.

Have an FBAR Penalty Problem?  
 
 

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