Tax Blog/Blawg

During a course that I taught about tax treaties at last week’s TEI Houston Tax School, one audience member asked whether the exchange-of-information provisions of U.S. tax treaties apply not only to the federal government but also to state and local governments.   I had to confess that I did not know the answer of the top of my head.  However, I took a quick look at the question later in the week.

By way of background, in each income tax treaty with foreign jurisdictions, the United States negotiates an “exchange of information and administrative assistance” provision.  This ...

It is not uncommon for sought-after job seekers to receive what appears to be an offer that is too good to be true:  in addition to a good compensation and benefits package, the employer proposes to make a loan to the applicant, and to forgive the entire amount if the person stays employed for a particular term—such as five years.  Sometimes the game plan is not in writing, and is left to “wink wink, nudge nudge” in terms of the likelihood that the loan will be forgiven if the person stays employed that length of time.

These arrangements are not in any way “illegal,” but as Robert and ...

The difference between what taxpayers should pay and what they actually pay the IRS is called the “tax gap.”  A significant portion of the tax gap is attributable to non-compliance with employment tax laws, including worker misclassification.  The IRS is currently conducting a three-year research project, which entails an additional 6,000 random employment tax audits.  This research will inevitably lead to the conclusion that worker misclassification is rampant and depriving the federal government of billions of dollars in tax revenues each year.  Therefore, the IRS likely ...

Nearly all taxpayers will face penalties by the IRS at some point, regardless of their sophistication level and size.  Accordingly, tax practitioners, even those who claim not to get involved in traditional "collection" activities, must understand key aspects of abatement and collection procedures in order to effectively advise their clients.  This is particularly true given that the IRS persists in taking extreme positions in the Tax Court, such as the always-say-never approach, that are contrary to the majority of existing legal authorities.  A recent example is Custom Stairs & ...

Fox Business invited me to appear yesterday on “After The Bell” with Liz Claman and David Asman to discuss (i) the IRS reopening the disclosure initiative for offshore bank accounts and (ii) the ongoing debate about whether Congress should implement a corporate repatriation holiday.  A link to the video is below the fold.

See the video at Fox Business.

The reopening of the 2011 OVDI is good news for taxpayers.  While the initiative presently has no deadline by which taxpayers must come forward, the IRS can change the terms of the initiative at any time.  If the government experiences ...

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

As reported earlier this week in the tax press, the recently completed initial filing season for Schedule UTP produced at least one major surprise in the eyes of IRS officials, who had anticipated a much greater number of items listed on the average Schedule UTP than actually materialized.  In fact, the IRS’s predictions were off by a wide margin, with the number of disclosed positions of the 1,500 or so Schedule UTPs filed averaging only slightly more than three items per schedule for CIC taxpayers, and less than two items for non-CIC taxpayers.  Pre-filing expectations of item ...

Peter Pappas at the Tax Lawyer's Blog takes note of a recent report from TIGTA regarding audits of small corporations (those with less than $10 million in assets, according to the IRS).  As Mr. Pappas says, language from the report suggests that Treasury may consider the closely held nature of many small businesses to be an indicator of a propensity to structure transactions to avoid taxes.

Many corporations in the United States are considered closely held because they are owned by one shareholder or a closely knit group of shareholders. As such, these shareholders typically have a ...

Over the weekend, a variety of Canadian news sources (see, e.g., the Financial Post and the Edmonton Journal) reported on anticipated guidance from the IRS, which would result in the waiver of penalties on certain U.S. citizens living in Canada for past failures to file Form TD F 90-22.1, commonly known as the "FBAR."  According to the news reports, the IRS will waive failure-to-file penalties for such individuals who file delinquent tax returns and FBARS so long as the individual owes no taxes.  In addition, taxpayers who were unaware of the FBAR filing requirement will be able to file ...

As discussed in a story in this morning's Tax Notes, the IRS intends to begin requesting electronic files as part of  taxpayer examinations so that it can analyze the "metadata" contained in those files.  Metadata, sometimes referred to as "data about data," generally shows information about a computer file, such as its editing history.  The IRS claims that such information "may be relevant" to taxpayer examinations because the information "may support or undermine the credibility of the records offered to substantiate the accuracy of the [taxpayer's] return."  See Chief Counsel ...