Tax Notes logo

Tax Procedure Roundup for 10/04/13

Posted on Oct. 5, 2013

Busy week of great content and still trying to come up with a name for this post.  I read a lot of our blog.  Keith and Les really were on their game this week.  Beyond that, I was overwhelmed with the amount of information TIGTA provided; really interesting stuff.  Here is what else I was reading this week:

  • Starting with TIGTA, a report was issued stating the Service needs to use its current penalties and sanctions available for tax return preparers more frequently.  Report can be found here, and a write up here.  This really impacts a lot of our prior discussions  (for example, see Les’ post on Loving, tax preparer regulations, and the BASR case) and probably will be tied in to future content.
  • Sticking with TIGTA, a report found here indicates Appeals is failing to properly handle CDP cases.  Although Keith Fogg may not like CDP, it would be nice if the Service implemented it properly, particularly given what can be at stake.  I found the suggested solution (fix the found errors) to be lacking.  Presumably, TIGTA has previously offered more institutional guidance on fixing these issues; otherwise, seems like a lot of effort for not much benefit.
  • TIGTA again, although I cite here to Tax Prof Blog where I found this report.  Report indicates IRS violates taxpayer rights in a lot of FOIA requests.  The failures were both in denying valid requests and also incorrectly disclosing sensitive taxpayer information.  Appearances may be as important as reality.  I suspect the reality is that more training is needed, and perhaps more devoted funds.  The appearance is that the Service is secretive about its own workings, but fairly loose with taxpayer information.
  • The federal income tax turned 100 this week.  NYT has coverage here and the Cato Institute has it here.  Two different takes, and you can find another million or so by Googling this.  Instead of weighing into a policy debate, I will highlight that I sought out to buy an original income tax return from 1913 once on the internet.  Some scammer separated me from thirteen hard earned dollars, and sent me a photo copy (or I didn’t read the E-bay listing closely).  ***At the request of  Anthony Parent, I’ve attached what I received for my $13.00 here: 2013 Income tax return.***
  • As you may have heard, the Service is on forced vacation right now. Here is an article about the IRS contingency plan.   Here is an interesting post about issues finding the skeleton staff of the Service that is supposed to still be working, which also touches on one of many real life stories of people being directly and negatively impacted.  So much of this is very sad.  I am sure you have seen other people say the same thing, but how do 10% of Americans approve of Congress right now.  Service deadlines remain unchanged.  Tax Court deadlines can be found here.  Also, no refunds.  I was supposed to get a $2MM refund check for a client within the next week or two.  Uncool.
  • This is a Tax Notes link, sorry if you don’t have a subscription.  The article highlights that the Service is not tracking the effectiveness or usefulness of the Compliance Assurance Program.  Everyone seems to think CAP is a good idea, and beneficial, but there is apparently no quantitative analysis of the streamlined audit process.
  • A link to Professor Steve Johnson’s article applying administrative law to the IRS’s efforts to regulate unlicensed tax return preparers can be found here.  Timely with his participation on the Loving panel at the Villanova Symposium, and the article will appear in an upcoming issue of the Villanova Law Review.
  • Here is an article on privilege under Section 7525 for federally authorized tax practitioners, including accountants.  As a tax attorney, I worry about this, because, as the article identifies, the privilege under 7525 has many exceptions and does not create the same privileges afforded to the attorney/client relationship.
  • Rev. Proc. 2013-32 stating the Service will no longer issue PLRs regarding some corporate reorganizations in order to conserve resources.  I have not read this entire Rev. Proc. yet, but my understanding is the situations explained therein will simply no longer be reviewed.  It seems like there has to be a price point where this makes financial sense to the Service, and for those willing to pay, it would still be very beneficial.
  • SCOTUS blog argument preview for Woods. Will Red McCombs be liable for the additional penalty?  Oral argument will be this week on Wednesday, October 9th.
  • Reither v. United States (Checkpoint link, sorry), where the District Court for New Mexico held that the taxpayer did not carry its burden to show preparer reliance for the reasonable cause exception to penalties.  Court found taxpayers failed two of the three prongs.  The accountant was qualified, but in his deposition, he indicated that he couldn’t remember if he checked the basis of donated equipment against prior depreciation schedules.  The Court held he did not have all relevant information.  If the accountant or his firm had handled the prior returns, this seems like a stretch to me.  The Court also stated that the taxpayers had not relied on the accountant’s advice on the matters alleged in having him prepare the return.  That did not amount to “communication” from the professional containing “analysis or conclusions”.  Given the complexity of the return, it seems like the taxpayer should have been able to show this.  Tax attorneys have to hammer all the prongs or else risk adverse decisions.
  • Another Hom decision, here with the District Court holding the Service is authorized to use tax return information from an examination to conduct a separate FBAR investigation of the same taxpayer.  Taxpayer, an avid online gambler, argued that investigation of his tax return, which resulted in information regarding foreign accounts, was confidential return information and not disclosable for FBAR investigation purposes.  The Court royally flushed the taxpayer’s argument, and held that Section 6103(b)(4) allowed for disclosure for administration purposes, which included execution of the revenue laws and related statutes, which included 31 USC 5314, the applicable FBAR statute.  Jack Townsend hit this on his criminal tax blog.
  • Jack Townsend’s post on the response in the Zwerner case can be found here.  Mr. Zwerner is the first known person who has had the 50% FBAR penalty applied to him in multiple years.  DOJ sued to collect that penalty, and Mr. Zwerner has argued his side.  Mr. Townsend provides an eloquent and concise summary, which saved me from reading the actual answer.
  • Professor James Maule, and his Mauled Again blog covers the recent Haskett case, and highlights the need to keep your tax records.
  • And, finally, a lot of Mo Willems’ books, mostly the Elephant and Piggie ones lately, as my four year old is somewhat obsessed with “reading” like her older sisters, and is trying to memorize those.  If you have young ones at home, and aren’t familiar with Mo, you should check him out.
  • Also not related to tax procedure, but of great importance, today is my little sister’s birthday.  Happy Birthday Katie, hope your week off from the Forest Service was nice.  
Copy RID