Tuesday, May 31, 2022

No Undue Duress To Void a Signed Form 872 Consenting to Extend the SL In Order To Obtain an Appeals Hearing


According to Procedurally Taxing, in Evert v. Commissioner, T.C. Memo 2022-48, the Tax Court addressed a statute of limitations defense raised by petitioner.  Petitioner had signed a Form 872 consenting to the extension of the statute of limitations on assessment; however, she argued that she did so under duress which invalidated the consent.  

The Court found that the consent was valid and, therefore, the notice of deficiency was timely issued.  While duress arises regularly in the joint return context, it also comes into play regularly in the consent context and particularly with unrepresented taxpayers.

The IRS selected Ms. Evert’s 2015 and 2016 returns for exam.  She disagreed with the results of the examination and filed an administrative appeal upon receipt of the 30 day letter. 

The court provided a paragraph of explanation of the Appeals Officer’s (AO) background.  Because the actions of the AO stood at the heart of the case, the background material assists in understanding the case.  He was former military, former SSA hearing officer, former attorney in private practice and former FBI agent before joining Appeals.  His background became important because his credibility was important in deciding whether he exerted undue pressure on Ms. Evert to sign the extension form.


The AO reached out to petitioner to schedule a conference and to gather information she might provide in support of her case.  She was somewhat slow in providing information.  Her case ended up on a report in Appeals showing cases in which the statute of limitations on assessment would expire in nine months and the AO decided that obtaining a statute extension would best serve this case. (
For most Examination cases, there must be at least 365 days remaining on the statute of limitations when a case is received by Appeals (FAQ #12).


So, the AO wanted closure or more time on the statute of limitations and Ms. Evert wanted more time to respond to the request for information.  Each side needed something but the IRS had what some might consider the upper hand since it could issue the notice of deficiency if its comfort level dipped too low.  To gain more time to work with Appeals, Ms. Evert signed the consent form.  Did the pressure to do so exceed the normal pressures that exist in this situation?  That’s what the Court has to decide.

The burden to show that the AO obtained the consent by duress falls on Ms. Evert.  The Court quoted from an old Board of Tax Appeals case, Diescher v. Commissioner, 18 B.T.A 353, 358 (1929) to define duress.

In Diescher the Court found that the taxpayer signed the waiver under uress because the IRS threatened to impose the fraud penalty if he did not sign.  The Tax Court has also held on numerous occasions that simply advising a taxpayer that an assessment will occur without a consent to extend does not rise to the level of duress.

Here, the court found that petitioner failed to meet her burden.  The AO simply informed her that he would close her case without a consent holding open the statute.  In finding this the Court accepted the testimony of the AO as credible and found petitioner’s testimony about statements made by the AO too vague to overcome the AO’s credible testimony about his actions.  The Court distinguished Diescher because it found no evidence that the request to sign the consent was coupled with a threat of the imposition of a penalty of the taxpayer withheld consent.

Cases challenging agreements whether the consent to extend or some other type of agreement put a relatively heavy burden on the taxpayer seeking to show the signing resulted from some wrongdoing on the part of the IRS. 

Have an IRS Tax Problem?


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Japanese Tax Audit Leads to IRS $11.6M FBAR Assessment


According to Law360, a Japanese businessman and legal resident of the U.S. owes almost $11.6 million in penalties and fees for failing to report dozens of bank accounts he maintained in Japan for over a decade, the U.S. told a Hawaii federal court.

Osamu Kurotaki willfully failed to file Reports of Foreign Bank and Financial Accounts from 2011 to 2013, the government said Thursday in a counterclaim to a February complaint filed by Kurotaki. He also failed to report income he had earned from his overseas companies, according to the government.

Kurotaki Said In His February Complaint That He Was Not Aware Of His Obligation To File FBARs And Did Not Understand The Implications Until An Audit In Japan.

He claimed his tax preparer did not discuss the requirement with him. The Internal Revenue Service did not obtain the necessary supervisory approval before imposing the penalties, according to Kurotaki, and the agency improperly included balances in his penalties.

However, Kurotaki deliberately failed to report income from real estate and apparel companies he operated in Japan, Hong Kong, Thailand and the U.S., the government said in its counterclaim. He also had a financial interest in 42 foreign bank accounts in 2011, 36 in 2012 and 32 in 2013, the government said.

Kurotaki disregarded numerous indications that he had to report his foreign accounts, the government said. 

He Received Notices From His Tax Preparer That There Were Penalties For Failing To Report, According To The Government.


 He Also Ignored An "FBAR Client Letter" From His Preparer Informing Him Of The Requirement And Inviting Him To Discuss Any Questions About It.

Kurotaki never disclosed his accounts to his tax preparer, the government claimed. Instead, he signed and returned a tax form to his preparer omitting a page that asked for his foreign account information, according to the government.

He eventually filed delinquent FBARs for 2011 and 2012 but failed to include all his accounts, the government said. He timely filed a 2013 form but it, too, failed to list all his accounts, according to the government.

People are typically obliged to disclose foreign accounts if their balances exceed $10,000 by using FBARs, which are filed annually and are due in April. Compliance penalties are steeper for willful violations than nonwillful violations.

Do You Have Undeclared Offshore Income?

 
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Friday, May 27, 2022

IRS Appeals Update - Presented at ABA Tax Meeting

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

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

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

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

Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


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




 


Wednesday, May 25, 2022

Taxpayers Can Now Track Refunds For Past Two Years


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


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


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

 

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

 

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

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

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

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

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

About the ‘Where’s My Refund?’ tool

This helpful tool, accessible on IRS.gov or the IRS2Go mobile app, allows taxpayers to track their refund through three stages: 
  1. Return received.
  2. Refund approved.
  3. Refund sent. 

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

 

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


Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


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




 





Friday, May 20, 2022

IRS Reverses Position on FDII Calculation

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

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

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

Have an International Tax Problem?
 

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Thursday, May 19, 2022

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

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

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

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

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

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

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

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

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


Have an International Tax Problem?
 

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