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Summary Opinions for 6/7/14

Posted on June 10, 2014

Interesting posts on PT last week. We had two posts each by Keith and Les; in a two-part series Keith wrote about the consequences of IRS failing to issue a notice and demand, and Les wrote about penalties and reasonable cause and whether the IRS can collect penalties after a taxpayer dies. On to other procedure items that caught our attention:

  • Most folks don’t like paying much in taxes and often complain, but I think Louis Balestra has a substantially stronger case for b!*#ing than most. The first paragraph of the Court of Federal Claims opinion summarizes the issue well, “[t]his is a suit for a refund of…FICA taxes…At bottom, this case concerns a simple issue: whether the Balestras should have to pay FICA taxes on deferred compensation to which Mr. Balestra had a vested right but, due to the bankruptcy of his employer, he will never receive. So, does Mr. Balestra owe tax on the compensation he did not and will not receive? Yep. Under the Code, nonqualified deferred comp plans must be taken into account as wages for FICA the later of when the services are performed or when there is no substantial risk of forfeiture. See Section 3121(v)(2). “Substantial risk of forfeiture” is based on the taxpayer’s requirements, not the potential for his company to go belly up. I have not researched this issue, but the result does not surprise me based on what I know of this area.
  • Whistleblower 11332-13W is on a roll, which I guess is cool considering the death threats he/she received. The Tax Court has held it has jurisdiction to review the award determination the Whistleblower received, which the Government had contested arguing that the information provided by the Whistleblower was provided prior to the enactment of Section 7623(b). Section 7623(b)(4) states the Tax Court has jurisdiction to review determinations. The Court’s official holding was that it had jurisdiction to review the award determination where whistleblower alleged that he/she provided information to the Government before and after the effective date of the statute.
  • From Jack Townsend’s Federal Tax Procedure Blog, Jack discusses the 2013 Lockheed case and the government’s “second defense” arguing for a theoretical setoff. The lack of actual items for the setoff is troublesome, as Jack highlights, because it could result in a fishing expedition to find setoffs. The post goes on to discuss the needs for factual assertions in this type of matter and the split in circuits, and provides the revised version of Jack’s text on this matter.
  • On May 23, 2014, TIGTA issued a report that should be of great concern to corporate officers or employees responsible for paying over withheld employment taxes, especially if those companies are behind. TIGTA reported that it found trust fund recovery penalties were not always timely or adequate, and the investigations were incomplete. In well more than a third of cases, the actions were untimely or inadequate, and most took over 500 days to review and process. TIGTA and the Service have agreed that this needs to be rectified, TFRP cases need to be processed better and more efficiently. The Service plans to make additional changes to the program shortly.
  • CPA Amit Chandel posted a link to, which discussed the case Bruce v. Comm’r. In Bruce, married taxpayers were in the process of getting divorced. H filed a tax return as married filing jointly for 2010 in January of 2011, and informed his ex-to-be that they were getting a refund. She provided bank information for her share of the refund. Unbeknownst to H, W filed a 2010 tax return in March of 2011 filing as head of household, and taking the children as dependents. The Service then modified H’s return to married filing separately, and assessed additional tax. The Tax Court upheld the adjustment because W filed her return prior to April 15th, which she was allowed to do under Section 6702(a) and Treas. Reg. 1.6013-1(a)(1). I’ll be discussing this with our family law folks later today – what a great way to piss off your ex.
  • Jack Townsend has a post on his Federal Tax Crimes Blog on the potential changes to OVDP for non-willful violators, including substantial quotes from Comm’r Koskinen’s speech about the topic.
  • From Bloomberg BNA, for this filing season, virtual currencies do not have to be reported on FBARs, but that could change in the future.
  • Mary McNulty and Emily Parker of Thompson & Knight recently presented for the Tax Executives Institute on preparing clients for the new IDR process. The slides from the presentation are available here.
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