Welcome to TaxBlawg, a 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.
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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People are always asking how long the IRS can wait from the time you file your return to conduct an audit of your income and expenses. The simple, most definitive answer is "it all depends," so let's take a look at the rules.
The time in which the IRS must conduct its audit is governed by what's known as a "statute of limitations." That statute doesn't begin to run until you actually file a return. Once you file a return, the IRS has three years from the time the return was filed (or, April 15th of the year in which you file, if it is filed early) to conduct and complete an audit. That means that the IRS has to select your return for examination, conduct whatever level of audit it is going to perform, and either get an agreement from you to an additional amount of tax or a refund, secure an extension of limitations period from you, or issue you a document known as a "Notice of Deficiency" (indicating what it has determined your correct tax liability to be and giving you ninety days to go the United States Tax Court).
If it fails to complete one of these actions within three years, in most situations the proverbial “ballgame” is over and it will be too late for the IRS to assert an additional tax liability for that year. The filing of an amended return does not extend the period in which an audit must take place. As you might expect, however, there are exceptions.
In a recent TaxBlawg post, my colleague Jonathan Prokup discussed the IRS’ intention to begin requesting electronic files as part of taxpayer examinations so that it can analyze the “metadata” contained in those files. One of the concerns raised in the post, as announced in Chief Counsel Advice 201146017, was the possibility that such data in the hands of the IRS may be insecure and therefore potentially susceptible to theft by third-party hackers (which, by the way, could conceivably expose the IRS to damages for disclosure of taxpayer information under IRC § 6103
The Internal Revenue Service on Friday released the final version of the much-anticipated Schedule UTP (and accompanying instructions) as well as additional guidance about changes that had been made the schedule. At the same time, the IRS also announced an expansion of the Compliance Assurance Program (CAP) as well as some other minor matters. In the face of much criticism of the draft Schedule UTP and instructions, the IRS made a numbers of significant adjustments; however, several issues remain unresolved.
As we’ve discussed previously at the TaxBlawg, a minor provision of the Patient Protection and Affordable Care Act – Section 9006, which dramatically expands the requirements for reporting payments on Form 1099 – has become a hot-button issue in Congress. Prior to the law, Form 1099 reporting was not required for payments for goods or (with some exceptions) payments to corporations. Section 9006 expanded the Form 1099 requirement to cover such payments made to a single payee if the payments exceed an aggregate of $600 or more during a calendar year.
Over the summer, the small business lobby called foul, arguing that the expansion imposed an oppressive paperwork burden on small businesses. Consequently, earlier this week, Senate Democrats and Republicans proposed dueling amendments to the Small Business Jobs Act of 2010 to “fix” the expanded Form 1099 reporting requirement of Section 9006. In the eternal spirit of politics, each party’s amendment failed because neither wanted to give the other credit for being the savior of small businesses. Despite the failure of these amendments to Section 9006, the Senate passed the bill this afternoon, foreshadowing its likely enactment in the near future.
Anyone paying attention to the media for the last month or so must be aware of the battle the IRS has waged with UBS in order to obtain information about owners of heretofore “secret” accounts in Switzerland. This is part of an IRS effort to track down tax delinquents who are using overseas accounts to hide their income and assets. A settlement was recently announced whereby the Swiss agreed to reveal a relatively small (in the grand scheme of things) number of the accounts—4,450 versus the 52,000 that the IRS originally alleged—in order to resolve the dispute. At this point, the IRS has its eyes on other foreign institutions and one can be sure that this is not going to be the end of the IRS’ efforts.
The New York Times and Forbes Magazine are reporting on a study by the Transactional Records Access Clearinghouse, a research group affiliated with Syracuse University, which claims to show that the number of audits of corporations reporting assets of $250 million or more has dropped between 2005 and 2009, while audits of smaller companies have increased during that same time.
Believing that the IRS has misallocated its resources, TRAC blames this development on a "perverse quota system" within the IRS. The IRS, however, disputes the study's findings. From the NY Times article ...