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The Art Of The Tax Disclosure: How To Avoid Tax Penalties By Disclosing A Return Position

The Art Of The Tax Disclosure: How To Avoid Tax Penalties By Disclosing A Return Position

There are at least three questions when it comes to IRS tax disclosures: (1) Should a taxpayer disclose; (2) How should a taxpayer disclose; and (3) How much detail should be disclosed? Should a taxpayer simply append a statement or footnote to the return, or should the taxpayer utilize a Form 8275, Form 8275-R, or Form 8886?  This article addresses these questions, drawing on experience with hundreds of tax return disclosures.   We also explore outstanding questions in the context of IRS disclosures.

To Disclose or Not To Disclose, That is the Question

The Internal Revenue Code (IRC) imposes penalties for tax-reporting positions that result in an underpayment of tax or an understatement of liability and  (1) lack the appropriate level of authority and/or (2) are not adequately disclosed. The Accuracy-Related Penalty imposed by Section 6662 (taxpayer) and Section 6694 (preparer) are two examples.

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Radio Show Host Talks His Way To A Win In Tax Court On Employment Status: Employee V. Independent Contractor

Radio Show Host Talks His Way To A Win In Tax Court On Employment Status

A radio show host demonstrated that he could talk as well in tax court as he could in front of a microphone. At issue was the question of whether or not a person can be an employee as well as an independent contractor simultaneously with the same employer.

During 2007, Juan A. Ramirez was employed by Univision as an on-air talent and program director for radio station KXTN in San Antonio, Texas. In addition, to hosting a five-hour, six days a week radio program, his contract also called for him to perform various other duties.

These duties included working as an announcer at the radio station, attending staff meetings, and promoting the station in general by making off air appearances. For those services, Mr. Ramirez received a base salary, bonuses and stock options in Univision, the parent company of KXTN. Ramirez’s employment agreement stated that his work was subject to the control of Univision and that he was to live up to Univision’s professional standards in all aspects.

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U.K. Tax Management: What Is Due To Caesar Is Rendered Unto Caesar

U.K. Tax Management: What Is Due To Caesar Is Rendered Unto Caesar

Tax management benefits are peace of mind for the entrepreneurs,
knowing that their tax affairs are managed, filed timely and financial provisions are made to ensure that what is due to Caesar is rendered unto Caesar.

In short, every business, whether incorporated or not, must take appropriate steps to ensure that its affairs and accounting records are structured in a manner that will enable it to comply with its statutory tax reporting obligations. A company must file a tax return within 12 months after the end of its accounting period in the UK. However, if it has a liability to pay tax, that liability must be paid within 9 months and 1 day after the end of its accounting period. Thus, careful tax management is essential.

What is the objective of tax management?

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Tax Professionals: How To Help Your Clients Battle Identity Theft Risk Related To Unemployment

Tax Professionals: How To Help Your Clients Battle Identity Theft Risk Related To Unemployment

Internal Revenue Service Security Summit partners today outlined for tax professionals how they can assist clients who were victims of unemployment compensation fraud schemes that targeted state workforce agencies in 2020 and 2021.

The IRS, state tax agencies and the tax industry – working together as the Security Summit – reported that unemployment compensation fraud was one of the more common identity theft schemes that emerged in 2020 as criminals exploited the COVID-19 pandemic and the resulting economic impact.

Addressing unemployment compensation fraud is the third in a five-part series sponsored by the Summit partners to highlight critical steps tax professionals can take to protect client data. This year’s theme “Boost Security Immunity: Fight Against Identity Theft,” is an effort to urge tax professionals to try harder to secure their systems and protect client data during the pandemic and its aftermath.

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Post-Tax Cuts And Jobs Act (TCJA) Alimony

Post-Tax Cuts And Jobs Act (TCJA) Alimony

More than three years have passed since the Tax Cuts and Jobs Act (TCJA) fundamentally changed how alimony is treated for federal tax purposes, yet confusion still reigns among many family law and tax professionals.  One of the most common questions in this author’s experience is “Does modifying an alimony agreement that was in place prior to the TCJA cause alimony to become not taxable to the recipient spouse and not deductible for the payor spouse?”   This question is frequently followed up with “Did we have to have the final decree of divorce or separation in place on or before December 31, 2018, to achieve deductibility for the payor spouse and income inclusion for the recipient spouse?

Although to the best of this author’s knowledge there has been no tax litigation to date on either of the above questions, a close look at the law as written, and subsequent IRS unofficial guidance would seem to indicate that the answer to both questions is “no”.

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Back Off, IRS! – Accounts Holding Advance Child Tax Credit Payments Immune From Levy?

Back Off, IRS! - Accounts Holding Advance Child Tax Credit Payments Immune From Levy?

By now, many eligible taxpayers may have found a deposit appear in their bank account during July. This was likely in addition to one or more correspondence letters from the Internal Revenue Service and/or the White House (which may or may not have given some taxpayers a heart attack, thinking the IRS letter was a potential income tax audit). That initial deposit and related communications were the beginning of advance Child Tax Credit payments. Eligible taxpayers will receive periodic payments between July and December 2021 in advance of the 2021 Child Tax Credit claimed on their 2021 personal income tax returns. Some taxpayers are not thrilled about the advance deposits (to the extent they have received them); however, according to a recent memorandum issued by the Internal Revenue Service, such funds may be subject to levy protection.

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Recent Bankruptcy Court Ruling Addresses The Jurisdiction of Bankruptcy Courts To Hear Innocent Spouse Relief Cases

Recent Bankruptcy Court Ruling Addresses The Jurisdiction of Bankruptcy Courts To Hear Innocent Spouse Relief Cases

The recent case of In re Bowman, Case No. 20-11512, Section A (Bankr. E.D. La., July 12, 2021) addresses an interesting intersection of tax and bankruptcy law.  Specifically, it looks at the issue of whether bankruptcy courts have jurisdiction to grant a debtor relief as an “innocent spouse” under § 6015 of the Internal Revenue Code, and ultimately determines that it does.

Although it is true that Section 6015(f) does not allow a bankruptcy court to exercise initial subject matter jurisdiction over an innocent spouse defense because only the Secretary of the IRS receives the equitable power to grant innocent spouse relief under that Section, in this case, it was undisputed that the Debtor sought such relief from the Secretary in July 2019 and the Secretary denied the request.  The bankruptcy court determined that § 6015(e)(1)(A) confers subject-matter jurisdiction to determine whether innocent spouse relief should be granted when it is denied by the Secretary. Citing to Pendergraft v. I.R.S. (In re Pendergraft), Adv. No. 16-3246, 2017 WL 1091935, at *3-4 (Bankr. S.D. Tex. Mar. 22, 2017), the Court explained:

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TaxConnections: How To Check For Your U.S. State Tax Refund

TaxConnections: State Tax Refund Links

Are you looking for your U.S. State Tax Refund? Here is a great list of links to take you to the answers to your questions. We also list the states with no individual taxes that many people are now moving to in order to reduce taxes.

Alabama

Alaska (Does not have an individual state income tax.)

Arizona

Arkansas

California

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IRS Gets Green Light To Seek Information From Third Parties Regarding Panama Offshore Legal Services

IRS Gets Green Light To Seek Information From Third Parties Regarding Panama Offshore Legal Services

On July 29, 2021, the United States Attorney for the Southern District of New York, the Assistant Attorney General for the Department of Justice Tax Division, and the IRS Commissioner all announced that a federal court in New York had entered an order “authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (‘POLS’) and its associates (together, the ‘POLS Group’) to evade federal income taxes.”  A copy of the news release can be found here.  Although the government’s efforts to identify additional foreign assets and accounts is not surprising, the news release does provide another cautionary tale of the government’s power and reach to identify taxpayers who hold foreign accounts and assets overseas without proper reporting and payment of federal taxes.

Background 

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Motivational Quotes From Athletes To Inspire You

Motivational Quotes From Athletes

Make each day your masterpiece. ~ John Wooden, American Basketball Coach And Player

You dream. You plan. You reach. There will be obstacles. There will be doubters. There will be mistakes. But with hard work, with belief, with confidence and trust in yourself and those around you, there are no limits. ~ Michael Phelps, Competitive Swimmer, Most Decorated Olympian Of All Time

It is hard to beat a person who never gives up. ~ Babe Ruth, Former American Professional Baseball Player

The only person who can stop you from reaching your goals is you. ~ Jackie Joyner-Kersee, 6 Olympian Medals Winner, Heptathlon

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What Is A Kovel Accountant? A Deep Dive

Kovel Agreement

The Internal Revenue Service (IRS) has broad statutory authority to investigate and audit taxpayers.[i]  In many cases, the IRS attempts to fulfill this statutory authority through seeking communications made between taxpayers and third parties, such as tax return preparers and CPAs.  Oftentimes, the IRS is authorized to obtain these communications.

However, there are methods to protect communications made between taxpayers and accountants.  One such method is referred to as a Kovel agreement.  Under that agreement, the taxpayer engages a tax attorney who, in turn, engages the services of a tax accountant.  When done properly, federal courts have recognized that communications amongst these parties are not subject to disclosure under the theory that such communications are protected by the attorney-client privilege.

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IRS Get Tax Transcript And Federal Tax Refund Services

IRS Get Tax Transcript And Federal Tax Refund Services

The Get Transcript Service is for individual taxpayers to retrieve their own transcripts for their own purposes. Use by any other entities is prohibited.

You can get various Form 1040-series transcript types online or by mail. If you need your prior year Adjusted Gross Income (AGI) to e-file, choose the tax return transcript type when making your request. To find out how much you owe or to verify your payment history, you can view your tax account.

The method you used to file your tax return, e-file or paper, and whether you had a balance due, affects your current year transcript availabilityNote: If you need a photocopy of your return, you must use Form 4506

Get Your Tax Transcript From The IRS Online

Check Your Federal Tax Refund Status