Tax Blog/Blawg

On August 11, 2011, TIGTA published a report entitled ‘”Efforts to Address the Compliance Risk of Underreporting of S Corporation Officers' Compensation are Increasing, but More Action Can Be Taken.”  At the outset, TIGTA properly identified part of the problem:  there are S corporations – some owned by one individual and others owned by groups – where the officers perform work and do not pay themselves compensation. 

The S corporation is a “pass through,” so that its income would be passed through and be reported by the Officer.  However, this technique has the effect of ...

The undersigned has been practicing in the United States Tax Court since May 1971, and has seen many changes, such as the evolution of the very simple Tax Court Rules of Practice during 1973 into the Tax Court Rules of Practice and Procedure when the Court added provisions with regard to summary judgment as well as discovery.  The Tax Court, and its predecessor – the Bureau of Tax Appeals, were originally created to give taxpayers the opportunity to challenge determinations of deficiencies in taxes, and occasionally secure overpayments when in fact they were appropriate.  Over time ...

I suspect that the answer of most readers will be "why would I want the IRS to find me in any event?" In fact, I can recall one client who actually asked me to have him removed from what he described as "the IRS mailing list."

Believe it or not, while it's always nice to be left alone, there are situations where it is important that the IRS have your correct address. For instance, what if there's a refund you're due, and the IRS is about to send you a check? Similarly, if you are in an audit or owe the IRS money, there are a variety of notices that the Internal Revenue Code requires the IRS to send to your "last known address," and if it sends them to that address, but you do not receive them, you will miss the opportunity to respond, as the law does not require that you actually receive the documents for them to be effective.

In any given year, a person is likely to send one or more of a fairly standard variety of items to the IRS. Tax returns, payments, responses to inquiries, and claims for refund are the most frequent but certainly not an exhaustive list. I've even known of some people who have sent "thank you notes" to IRS employees who seem to have gone above and beyond the call of duty to assist them. That said, how do you know the IRS actually received what you sent? This is not an idle question, as the IRS' failure to timely receive some of those items can result in serious problems for a taxpayer, ranging from ...

With the new Democratic Administration coming in as well as concerns for the next round of assistance for folks hurt by the pandemic, we are hearing more support for an increase and expansion of the Earned Income Tax Credit.  Although basically in favor of this, I have some mixed emotions.

As far as the “good” is concerned, I think it’s terrific that Congress is taking into consideration the needs of the working poor, the families where there are one or two persons working 1 to 3 jobs, just to make ends meet, and usually falling short.  Without trying to demonize the folks who are not ...

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 ...

Well for starters, the IRS 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 ...

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 15^th of the year in which you file, if it is filed early) to conduct and complete an audit.  That means that the IRS ...

Have you ever played darts?  Where the dart hits the board is very important to your score, but some rookies are happy if their dart hits the board at all.  That would be a fair characterization of The Inspector General for Tax Administration’s (“TIGTA”) January 21, 2020 report entitled “IRS Should Better Identify Noncompliant Exempt Orgs.”

In this report, TIGTA is very much like a rookie darts player, who declares himself a winner because his first dart hit the board.  In this regard, the Report is accurate about one thing:  the IRS does have problems identifying non-compliant ...

The Inspector General for Tax Administration, TIGTA, is in the news regularly.  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 about which it can publish a critical report.  Lately, it seems that TIGTA has been publishing an average of one a week, virtually all of which have been critical of the performance of the Internal Revenue Service.  Two of my favorites, however, deserve some close examination and cause this writer to ...