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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource 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. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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  • Posts by George W. Connelly, Jr.
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    George Connelly is recognized as one of the leading federal tax litigators in the United States.  His practice focuses on IRS audit, collection and criminal matters including civil and criminal tax litigation matters, for clients ...

Hardly a day goes by when some politician or editorial person doesn't suggest that we don’t need the IRS or should simply do away with it.  Most of them come in connection with suggestions for changing the tax system to something like a national retail sales tax.  What these people fail to understand, and this writer is not challenging the sincerity of their views, is that without the IRS, our tax gap would explode geometrically.  We call our system a “voluntary” one, but we remain short of “volunteers”: there are simply too many people and businesses who don’t get around to filing ...

The Inspector General for Tax Administration, TIGTA, has been in the news a lot lately. In addition to tracking down misbehaving IRS employees and misbehaving representatives, an important role of this organization seems to be examining every aspect of the operation of the Internal Revenue Service and publishing a critical report about it. Lately, it seems that TIGTA has been publishing an average of two a week, virtually all of which have been critical of the performance of the Internal Revenue Service. Two recent ones, however, deserves some close examination and cause this writer ...

The Tax Court recently issued a Summary Opinion, Malonzo v. Commissioner of Internal Revenue, T.C. Summ. Op. 2013-47, involving an individual who was underwater on her mortgage, and who abandoned the property, subsequent to which the mortgage loan was foreclosed.  She took no formal steps to transfer title or provide the lender with notice of her intention to abandon the residence, but just stopped making payments.  The residence was later resold by the lender who sent her a Form 1099-A, Acquisition or Abandonment of Secured Property, reflecting as income the outstanding balance of ...

The IRS employs many lawyers and employees of the IRS Office of Chief Counsel are its principal legal staff who number 1560, of whom about 550 work in the IRS National Office in Washington, while the balance work in offices around the country.  They provide legal advice to the Commissioner of Internal Revenue and the local IRS offices, and they act as the lawyer for the Commissioner of Internal Revenue in all Tax Court cases.  In addition, some are specially designated to assist United States Attorneys in bankruptcy, summons enforcement and other civil cases.

In 1998, a Chief Counsel’s ...

Previous Blawg articles have cautioned my readers about the problems they can face if they do not take care of their Federal employment taxes, ranging from collection action against their business, to the trust fund recovery penalty being asserted against individuals determined to be “responsible officers.”  Since Federal agencies are also required to pay employment taxes for their employees, it is only fair to wonder if the IRS is dealing as harshly with them.  The answer warrants a letter to your Congressman.

On September 5, 2012, the Treasury Inspector General For ...

Well for starters, it won’t be very happy!  Beyond that, the IRS has several avenues it can pursue.

In extreme situations, such as where a taxpayer owes a considerable sum of money and has not filed for several years, the IRS may consider pursuing criminal liability under I.R.C. § 7203, which makes it a misdemeanor to “willfully” fail to file a Federal Income Tax Return.  This is rarely applied unless a pattern of three consecutive non-filing years are present, but potentially any single willful failure to file could result in this prosecution.  There is a six year statue of ...

Obviously, there will be “nothing” to do unless the business owes taxes or has not filed all its tax returns.  These comments are prompted by the fact is that the IRS has just issued a Manual Administration Supplement No. 855 to instruct its employees about how to proceed in the case of insolvency proceedings.

If the company files bankruptcy, the IRS will file a Proof of Claim and, depending upon the nature of its claim—is a Federal Tax Lien filed?are the taxes assessed?—it will proceed to pursue its rights based on its priority relative to other creditors.  If the proceeding is ...

Noooo!  But the IRS does seem to be getting more rational in a couple of respects.

On May 18, an IRS Associate Area Counsel for Philadelphia explained that the IRS may send warning letters in lieu of asserting penalties for failure to file a Form TD F 90-22.1, also known as an FBAR.  This will occur in situations where the IRS concludes a letter would be “sufficient to bring the individual into compliance.”  The speaker indicated that the IRS Office of Chief Counsel reviews every proposed FBAR penalty to ensure “that adequate facts exist to support the proposed assessment.”  The ...

Recently, the IRS issued "Tax Tip 2012-39" regarding important issues concerning mortgage debt forgiveness.  While anyone capable of reading this Blawg is capable of pulling that up from the IRS website and reading it, no action should be undertaken without making sure your tax professional has covered the positives and negatives of doing so.

Right now, a lot of people are "under water" on their home mortgage, and faced with possible foreclosure, short sale, or other transactions in which their mortgage debt is partly or entirely "forgiven" during this tax year.  There are several ...

In February, the IRS published its annual "Dirty Dozen" listing of tax scams to caution taxpayers about problems they may face in this filing season.  They range from self-inflicted—too good to be true—to situations where third parties prey upon the unsuspecting.

Several are fairly common and familiar, ranging from reporting income that was not earned in order to maximize refundable credit, claiming excessive fuel tax credits, or simply claiming deductions one did not incur.  So are the time-worn tax protester arguments that have been thrown out by the courts.  There are ...