Welcome to TaxBlawg, a blog resource from Chamberlain Hrdlicka for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention.
Tax practitioners have previously lacked a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.
Chamberlain Hrdlicka Blawgs
In the last article, we focused on overcoming an accuracy penalty when the taxpayer uses and relies on tax preparation software. Let’s see what the “rules of the road” are if he instead relies on professionals.
The case of Curcio v. Commissioner, T.C. Memo 2010-115, decided May 2010, provided a challenging situation. It involved four taxpayers whose companies had participated in a "Section 419 Plan" where they claimed deductions as business expenses for significant life insurance premiums, and the Court rejected the deductions under the Plan. The 419 Plan at issue was created by Daniel Carpenter, a lawyer with experience in tax and employee benefits law. He designed the plan, drafted and approved all amendments, and secured a legal opinion by a separate lawyer. These Taxpayers, however, did not just buy the Plan from him and rely upon his representations.
This is a two-part article intended to cover the challenges facing a taxpayer whose return is audited, producing a tax deficiency, on top of which the I.R.S. asserts a penalty.
First, a little bit of history. Until 1982, outside of situations where the I.R.S. could prove an affirmative attempt to evade tax, the only sanction for errors on returns was the negligence penalty of I.R.C. § 6653(a). That penalty was imposed at the rate of five percent and did not bear any interest, so that in the view of many it was an encouragement for people to play the "audit lottery," since owing the tax, that ...
TaxBlawg’s Guest Commentator, David L. Bernard, is the recently retired Vice President of Taxes for Kimberly-Clark Corporation, a past president of the Tax Executives Institute, and a periodic contributor to TaxBlawg.
In case you missed it, the IRS recently introduced a new approach to its audit management process, called the Quality Examination Process ("QEP"), and is effective for all LMSB corporate tax audits initiated on or after June 1, 2010. This replaces the Joint Audit Planning Process which was developed in partnership with the Tax Executives Institute in 2003. QEP has many of the same features of the 2003 process, but is much more comprehensive and in that respect is an improvement. However, the Joint Audit Planning Process was good in many respects, it was simply never used consistently throughout LMSB.
Surveys of LMSB taxpayers reflected the inconsistent application of the former process, with some reporting that they had never heard of it and others reporting little or no involvement in the development of the audit plan (a primary requirement of the process). This frustrated the leaders within LMSB because they had continuously stressed the importance of the process in their communications to the field. After obtaining input from several constituencies, LMSB decided it was time to come to market with a new and improved process. The question is whether taxpayers will feel that the results are an improvement over their past experiences.
In Tuesday’s confirmation hearings for Supreme Court nominee Elena Kagan, one topic on which there appeared to be agreement between the nominee and the panel was concern about the dwindling number of cases heard by the High Court. In response to questioning from Senator Arlen Specter, Kagan had no explanation for the precipitous decline in the Court’s docket over the last 20 years, but agreed that it has led to an increase in unresolved conflicts among the circuit courts on “vital national issues.”
Quite naturally, those of us in the tax field like to think of our livelihoods as ...