Tag Archive for Collection Due Process

Collection Due Process And A Lawyer’s Race Car Business Expense Deductions

Collection Due Process And A Lawyer’s Race Car Business Expense Deductions

Avery v. Comm’r, T.C. Memo. 2023–18| February 21, 2023 | Lauber, J. | Dkt. No. 23237–18L (Collection Due Process and a Lawyer’s Race Car Business Expense Deductions)

Summary: Since 1982, James William Avery (Avery) was a practicing lawyer, specializing in personal injury law as a solo practitioner primarily in Denver, Colorado for the period 2008–2013 but also some in Indiana during 2008–2010. Avery became involved in car–racing activities in 2005 after he moved to Indiana. He began attending car shows, thinking this might be a way to meet potential clients. He purchased a race car and placed a decal for the Avery Law Firm, his “sponsor,” on the car. His website dedicated to racing activities linked to the Facebook page for his law firm, hoping to attract potential clients or referrals. But, after his marriage dissolved during the period 2011–2013, he all but quit racing, and the race car sat idle in a garage.

Avery failed to file returns for 2008 and 2009, and the IRS accordingly prepared substitutes for returns (SFRs). In 2011, Avery hired a new CPA. Some of Avery’s financial records remained in the possession of his wife, her father (Avery’s former CPA), or her divorce lawyer. On April 29, 2013, his new CPA filed delinquent returns for 2010 and 2011. Avery timely filed his return for tax year 2012, reporting zero tax due. Avery did not file a return for 2013, and the IRS prepared an SFR on the basis of third– party reports. On January 14, 2016, the IRS sent Avery a notice of deficiency for 2008, 2009, and 2013. The notice was based on the SFRs and determined deficiencies of $3,752, $242,788, and $141,754, respectively, plus additions to tax for failure to timely file, failure to timely pay, and (for 2009 and 2013) failure to pay estimated tax. The IRS examined Avery’s 2010–2012 returns. It disallowed for lack of substantiation all deductions claimed on his Schedules C, Profit or Loss From Business, and determined unreported gross receipts for 2011 and 2012. The IRS issued Avery a notice of deficiency for 2010–2012 that determined deficiencies for each year. The notice determined late–filing additions to tax for 2010 and 2011. Later in 2016, Avery prepared and submitted to the IRS delinquent returns for 2008, 2009, and 2013, and amended returns for 2010–2012. On his delinquent and amended returns Avery claimed in connection with his Schedule C business $355,000 of deductions for racing– related advertising expenses (contending the expenses promoted his litigation practice), all reported in round–dollar amounts of $50,000, $60,000, $65,000, or $70,000.
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CDP Proceedings – Is the Time Limit in Section 6330(d)(1) a Jurisdictional Requirement for Tax Court Petitions?

CDP Proceedings - Is the Time Limit in Section 6330(d)(1) a Jurisdictional Requirement for Tax Court Petitions?

In the tax universe, deadlines are normal and expected. Most Americans are familiar with income tax filing deadlines (e.g., April 15th), and businesses are familiar with employment tax deadlines (e.g., January 15th). Statutory deadlines also apply to taxpayers involved in collections. When a taxpayer receives a notice of determination from IRS Appeals, the taxpayer has 30 days to petition the U.S. Tax Court. However, if the taxpayer files its petition late—even one day late—is the taxpayer completely barred from having the petition considered by the Tax Court? That issue is currently being considered by the U.S. Supreme Court in Boechler, P.C. v. Commissioner of the Internal Revenue Service.

Boechler, P.C. v. Comm’r,[1] Background

On June 5, 2015, the Internal Revenue Service (“IRS”) issued a letter to Boechler, P.C. (“Boechler”), noting a “discrepancy” between prior tax submissions. Not receiving a response, the IRS imposed a 10% intentional disregard penalty. Boechler, in turn, did not pay the penalty, and the IRS issued a notice of intent to levy. In response, Boechler timely filed a request for Collection Due Process (“CDP”) hearing but did not “establish grounds for relief” from IRS Appeals. Accordingly, on July 28, 2017, IRS Appeals mailed a notice of determination to Boechler, sustaining the levy—although the notice was not delivered until July 31, 2017. Per the notice (and per statute), Boechler had 30 days from the date of the notice to petition the U.S. Tax Court—i.e., until August 28, 2017.[2][3]

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When To Request A Collection Due Process Hearing

What is A Collection Due Process Hearing?

A collection due process (CDP) hearing gives you one last chance to avoid a federal tax lien or tax levy. You will know you have a right to request a CDP hearing because you will receive a CDP notice. This notice is sent when any of the following IRS collection actions are being taken:

  • Filing of a Federal tax lien
  • Bank account levy
  • Jeopardy Levy
  • Levy on Your State Tax Refund

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New Passport Program: Why Notice to Taxpayers Matters

Previously, I analyzed the IRS collection performance, looking at the effects of different drivers of collection such as notices, installment agreements, liens, levies, and refund offsets. Today, I’d like to pick this topic back up, but focus on a collection issue associated with new legislation. In late 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act), which aimed to boost tax collection through two avenues: Read More

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The IRS’s New Passport Program (Part 1 of 2)

Nina Olson

In 2015, I wrote a blog post analyzing IRS collection performance, looking at the effects of different drivers of collection such as notices, installment agreements, liens, levies, and refund offsets. Today, I’d like to pick this topic back up, but focus on a collection issue associated with new legislation. In late 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act), which aimed to boost tax collection through two avenues: Read More

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Liens and Levies: Keeping Your Clients Options Open – Part 7

Taxpayer’s Other Payment Options

We have mentioned other payment options throughout this post. We are going to put them together here.

Determining other payment options for your client takes serious research, compilation of records and information, and then sitting the client down and having a coming to reality meeting with them. This is where we help them decide on some of those option I mentioned earlier:

1. The Fresh Start Initiative – Full Pay Installment Agreement or Partial Pay Installment Agreement Read More

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Liens and Levies: Keeping Your Clients Options Open – Part 6

Getting a Lien/Levy Released

Once a taxpayer has a lien or levy in place (isn’t this where we usually come in?), the representatives primary job is to try and get the lien/levy released. There are many ways to do this. First and foremost is to get the taxpayer to pay the balance due, assuming we have determined he actually owes it.

Liens are usually “self-releasing” after the CSED date has passed. When the IRS files a lien the Form 668Y, Notice of Federal Tax Lien, has a section to let the party the lien is filed with the release date. If the CSED is extended for some reason after the filing of the Form 668Y the IRS will re-file the Lien with a new release date. Read More

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Liens and Levies: Keeping Your Clients Options Open – Part 5

Collection Due Process (CDP)

Another option in the representatives toolbox is the CDP Hearing request. Unlike the CAP, the reasons for requesting a CDP Hearing are more limited. They have strictly to do with Liens and Levies.

Timing is a critical factor in this process. Timely filing of the request preserves the taxpayers rights to Judicial Review of the decision made by the Appeals Division. If you, as a representative, are not brought in until after the time lines are blown, you may still file a request for a hearing but it will be an Equivalent Hearing (EH) and the right of Judicial Review is not available. Read More

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Alphabet Soup For Installment Agreements

I. What is an installment agreement? An installment agreement is an option for those who cannot pay their entire tax bills by the due date. It allows taxpayers to pay the amount due over a period of time

II. Introduction

a. Although revenue officers are instructed to request immediate payment of an outstanding liability, it will be obvious to the IRS when a taxpayer is unable to comply with such a request.

b. Deferred payments: As an alternative to enforced collection action, the IRS may be willing to defer payment. The revenue officer can grant an extension of time to pay for up to Read More

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