An interesting recent Tax Court decision seems to indicate that taxpayers have clear autonomy with regards to judicial review as well as retracting judicial review of “seriously delinquent tax debt.”
In Pugh v. Commissioner, the IRS certified Pugh to the Secretary of State under I.R.C. § 7345 as an individual with a “seriously delinquent
For some time, the IRS has cautioned taxpayers about filing false or fraudulent ERC claims. More recently, on September 14, 2023, the IRS issued a News Release, IR-2023-169, indicating that it would no longer process ERC claims from September 14, 2023, through “at least” December 31, 2023. Significantly, this only relates to new ERC
A hearing is scheduled for September 11, 2023 for interested persons and organizations to provide testimony on proposed regulations on the timing and approval process for penalties. Section 6751(b) provides that:
No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.
The timing of when the approval is required by Section 6751(b) has been the subject of significant litigation. The Second Circuit in Chai v. Commissioner concluded that Congress enacted section 6751(b) to “prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle.” This has caused a lot of litigation in both the Tax Court and U.S. District Courts such that there are currently two different standards on timing of when such supervisory approval is required. If supervisory approval is to meet the goal of not being used as an unfair “bargaining chip” it must be required before such unwanted behavior can occur. Many groups have submitted comments asking for supervisory approval to be done earlier in the examination process than the proposed regulations require and that approval be done by a direct supervisor and not just anyone with penalty approval rights within the IRS.
For some time, promoters have shopped around an arrangement known as a “section 643(b) trust,” known alternatively as a “non-grantor, irrevocable, complex, discretionary, spendthrift trust.” On August 9, 2023, IRS Chief Counsel issued a Memorandum that shoots down many of the contentions raised by the promoters relating to the tax benefits of these arrangements. The full Memorandum can be found here. Taxpayers who have entered into these types of arrangements should take careful note of the IRS Chief Counsel Memorandum and should discuss its implications with a tax professional.
Section 2301 of the CARES Act, as amended, permits employers to claim employee retention credits (“ERCs”) if they meet certain requirements. Under one of those requirements, an employer may claim an ERC if the employer’s trade or business operations were fully or partially suspended due to a federal or state COVID-19 governmental order (the “Business Suspension Test”).
Deadlines are important, particularly in federal tax law. Many taxpayers are aware, for example, of the significant penalties that the IRS may impose upon them for failure to timely file an income tax return or timely pay all taxes owed. But fewer taxpayers have an understanding or appreciation for the deadline rules associated with filing a timely petition with the United States Tax Court.
The IRS, like the rest of society, has faced several challenges as a result of the pandemic. Some of those challenges are still lingering, such as funding, backlog, lack of guidance and inexperienced auditors. Efforts to fix these problems are underway but will take time. As taxpayer advisors, it’s important to recognize the limitations in
Many people, myself included, can sometimes be accused of poor penmanship. As our paperwork becomes more and more electronic, we write less and less down with pen and paper. However, a recent decision from the tax court may be sending more supervisors at the IRS to penmanship classes. The taxpayers, Gregory and Simone Colbert, were assessed income tax deficiencies and associated accuracy related penalties. The Colberts admitted the deficiencies but disputed the interest and penalties.
On June 21, 2022, the United States Supreme Court agreed to hear a dispute involving split decisions among the circuit courts on non-willful penalties. The Fifth Circuit parted ways with the taxpayer friendly decision of the Ninth Circuit that non-willful penalties are capped at $10,000 per FBAR filing instead of the $10,000 per unreported bank account argued by the government. District courts in New Jersey, Connecticut, California, and Texas had all ruled in the taxpayer’s favor that non-willful penalties were capped at $10,000 per form as well. The case headed to the Supreme Court is United States v. Bittner, where a taxpayer friendly decision from the District Court reduced the $2.7 million penalty to $50,000 based on a $10,000 per form cap on non-willful FBAR penalties. The Fifth Circuit reversed the favorable district court decision and held that the “$10,000 penalty cap therefore applies on a per-account, not a per-form basis.”
In some federal tax disputes, if at first you don’t succeed you may not get to try again. A recent Fifth Circuit decision confirms issue preclusion when the parties and the issue are truly the same. See ETC Sunoco Holdings, LLC v. United States, No. 21-10937 (5th Cir. June 8, 2022). Sunoco sought a refund in the Court of Federal Claims for tax years 2005 through 2008, arguing that they should be permitted a deduction of their costs of goods sold as an excise tax expense even though it did not technically reduce the company’s excise-tax liability. The Court of Federal Claims disagreed. See Sunoco, Inc. v. United States, 908 F.3d 710, 715 (Fed. Cir. 2018). Sunoco then sued again, five years later, for alleged overpayments from tax years 2010 and 2011 but filed suit in the Northern District of Texas instead. Jurisdiction in tax disputes can often be brought in the Federal District Court with local jurisdiction or the Court of Federal Claims that has national jurisdiction. Therefore, jurisdictionally, this was proper. However, District Courts can choose not to hear the case if they conclude that the doctrine of issue preclusion applies.