In McNeill v. Commissioner, 148 T.C. No. 23 (June 19, 2017), the Tax Court held that taxpayer challenges to penalties imposed in the wake of a TEFRA partnership audit or litigation can be challenged in collection due process (CDP) proceedings. It was always clear that if a taxpayer had personal defenses to a penalty asserted at the partnership level, the taxpayer could pay the penalty (and any associated interest), file a claim for refund, and have his personal defenses considered by the IRS and the courts.
What You Need to Know About the IRS’s Campaign to Identify Foreign Non-Filers Through a W-8ECI Matching Program
On May 23, 2017, IRS Officials announced in an industry webcast that the IRS began a campaign to identify foreign companies that should be filing Form 1120-F, but have not. The officials also warned that the IRS intends to follow up on every potential non-compliant company it identifies and refer some for further audit. Apparently initial letters have just been sent to companies or will be coming “very, very soon.”
In January, the IRS announced a rollout of its compliance campaigns targeting certain issues on which the IRS Large Business & International (LB&I) will focus its examinations. It is part of LB&I’s shift to issue-focused examinations in light of a diminished IRS budget. Since the announcement, LB&I has been conducting a series of webinars on its 13 new campaigns. On June 6, LB&I executives provided information on its Related-Party Transactions (RPT) campaign, which is one of the 13 campaigns.
The IRS proposed estate tax deficiencies of hundreds of millions of dollars against the Estate of Michael Jackson, accusing the Estate of undervaluing the assets held by the King of Pop at his death. Much of the case has been settled, but the parties still dispute the value of the Gloved One’s image and likeness, with the IRS contending it was worth $161 million and the estate contending the value was far less. A trial on this issue (along with the value of certain music catalogues) was held in February of 2017.
Taxpayers Beware: IRS Announces You Can’t Rely On What IRS Says In Its Website FAQs Because They Are Not “Legal Authority.”
The IRS is distancing itself from the advice it offers to taxpayers on its OWN website. The IRS announced on May 18th in Memorandum SBSE-04-0517-0030, that “FAQs that appear on IRS.gov but that have not been published in the Internal Revenue Bulletin (IRB) are not legal authority and should not be used to sustain a position.” Essentially the IRS has told its examiners that if a taxpayer relies on an FAQ on the IRS’s website, the examiner need not follow that authority and can find against the taxpayer unless the advice in the FAQ have been published in something that is “legal authority.” Many taxpayers might find it surprising that they can’t rely on what the IRS posts on its own website. We certainly did. Accordingly, before any taxpayer relies on the IRS website, the taxpayer should be sure there is other “legal authority.”
Recent TIGTA Report on Criminal Enforcement Against Employment Tax Noncompliance Criticizes IRS for Ineffectively Addressing Employment Tax Crimes, Offers Lessons to Employers/Responsible Parties Under Audit or In IRS Collections
On March 21, 2017, the Treasury Inspector General for Tax Administration (TIGTA) issued a report titled, “A More Focused Strategy Is Needed to Effectively Address Egregious Employment Tax Crimes.” The Report noted that, as of December, 2015, 1.4 million employers owed approximately $45.6 billion in unpaid employment taxes, interest, and penalties. The report indicated that in 2015, the IRS assessed the TFRP against 38% fewer responsible persons than just five years before (asserting the TFRP against just 11% of responsible individuals), and that simultaneously the number of employers with egregious employment tax noncompliance (20 or more quarters of delinquent employment taxes) has tripled in a 17-year period. TIGTA was concerned that, despite this noncompliance, there are fewer than 100 criminal convictions for employment tax violations per year.