Tax Blog/Blawg

During a webinar the other week regarding the impact of the Mayo Foundation decision on taxpayers, I discussed the effect of Mayo on taxpayers’ decisions to take positions that are contrary to IRS rules or regulations.  Part of that discussion examined the 20-percent accuracy-related penalty that can be imposed on such positions under Code section 6662.

As our readers may know, if a taxpayer takes a position on a return that is contrary to an IRS rule or regulation, the taxpayer may avoid the imposition of the accuracy-related penalty by following the requirements of Treas. Reg. § 1.6662-3.  In general, that regulation provides that, when a taxpayer takes a position contrary to a regulation, the penalty for disregarding rules or regulations does not apply if (i) the position is disclosed on “a properly completed and filed Form 8275-R,” (ii) the position represents a “good faith challenge” to the validity of the regulation, and (iii) the taxpayer has a reasonable basis for the position.  Treas. Reg. § 1.6662-3(a), (c)(1), (c)(2).

At the end of the webinar, an audience member asked whether the requirement to disclose a position on Form 8275-R included a position that was contrary to a revenue ruling.  As so often happens in tax law, the answer creates as many questions as it resolves.  Because one person’s question is likely shared by others, it seems appropriate to discuss the issue in a blawg post.

Anxious tax departments can rejoice!  By a 87-12 vote, the Senate passed legislation repealing the Form 1099 provision, which was included in health care reform.

Currently, Forms 1099 are required for payments of more than $600 to unincorporated service providers.  The health care reform bill expands this requirement for 2012 to goods as well as services and applies to all types of vendors.  Senate passage of the bill, which previously cleared the House, sends the bill to President Barack Obama for his signature.  Once signed into law, the additional information reporting ...

Five days ago, this would have seemed like just another April Fools'  Day joke, but it is apparently quite real.  Via the Washington Times, an excerpt:

There's at least one government function some taxpayers might not miss in a government shutdown: IRS tax audits.

A senior administration official, briefing reporters on potential effects of a shutdown, said "the performance of tax audits will be shut down or suspended for this period."

Overall, the official said he expects about 800,000 government employees to be furloughed if Congress and the president aren't able to agree on spending ...

For the last several years, the Internal Revenue Service has been increasing the number of "correspondence" audits that it conducts. There seems to be an assumption that it costs less and requires less manpower than field or in-person audits, and that assumption is doubtless true. However, there is a real question about the quality of such examinations and in particular IRS follow-up.

Since no later than 2007, various groups have been complaining to the IRS that correspondence audits were not being administered professionally. The principal complaint was that the IRS was issuing ...

On March 29, 2011, the IRS published Notice 2011-28 which provides interim guidance on informational reporting to employees of the cost of their employer-sponsored group health plan coverage. This informational reporting is required under § 6051(a)(14) of the Internal Revenue Code. This provision was enacted as part of the Affordable Care Act to provide useful and comparable consumer information to employees on the cost of their health care coverage. This reporting to employees is for their information only, to inform them of the cost of their health care coverage, and does not ...

The Government has been aggressively seeking injunctive relief against employers ordering them to timely file the corporation's tax returns and to withhold and pay over federal income taxes and employment taxes.  Most recently, the Government has increased its enforcement efforts in the temporary staffing arena.  On March 17, 2001 in US v. LCL Administration, Inc. the U.S. District Court for the Eastern District of California granted  the Government's request for a preliminary injunction against LCL, a temporary staffing company, and its officers, ordering them to timely ...

For better or worse, many a tax dispute has been won or lost on procedure, often on the question of whether a document - be it a tax return, refund claim, or petition - was timely filed.  The centrality of this issue helps explain the renown of the otherwise unremarkable "mailbox rule" (a.k.a. the "timely-mailing-is-timely-filing rule").

The attached article, published in the International Tax Review, examines a recent case, Dietsche v. Commissioner, in which the Tax Court ruled that a petition mailed from New Zealand and postmarked the day after its due date was not timely filed ...

For interested readers, we have a number of speaking engagements approaching in the next couple of months.

• Tomorrow (March 23), I will be speaking with Ed Froelich (Morrison & Foerster) and Kristin Hickman (University of Minnesota) on a Strafford webinar about the impact of the Supreme Court's decision in Mayo Foundation.  We will be discussing not only the reasoning behind the decision and its implications for non-regulatory guidance but also specific considerations for taxpayers to deal with heightened deference to Treasury's interpretations of the Internal Revenue Code.

• On ...

Nowadays, newspapers and tax journals often contain articles about international tax issues, particularly the duty of U.S. persons to file an annual Form TD F 90-22.1 ("FBAR") to report their interests in foreign financial accounts.  As general knowledge of the FBAR increases, the chances of taxpayers avoiding penalties on grounds that they did not act "willfully" decrease. Nevertheless, one recent case fought before both the Tax Court and a federal district court, in United States v. Williams, 09-cv-437 (E.D. Va. 2010), offers support for the notion that where there's no will ...

Following on the heels of the IRS announcement that a problem was identified in the way the first quarter HIRE credit (line 12e) was applied when computing the Failure to Deposit (FTD) penalty on second quarter Forms 941, IRS announced the audit criteria for HIRE Act examinations. John Tuzynski, Chief of Employment Tax Operations, IRS Small Business/Self Employed Division, said an IRS enforcement initiative is under way for employers that claimed tax credits under the HIRE Act.    He indicated that the exams focus on verifying Forms W-11, payroll amounts claimed by employers and ...