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Tag Archive for John Dundon

IRS Penalty: What Is Reasonable Cause?

IRS penalty relief brings big business opportunities for astute tax practitioners as the IRS does indeed have the authority to provide relief from various penalties if you know how to do the dance.

In 2014 the IRS abated either in part or in full approximately 12.3% of the 40.3 million penalties issued reducing penalty assessments paid by US Taxpayers up to $9.8 billion.

According to the IRM, relief from penalties can fall into one of four separate categories.

  • Reasonable cause.
  • Statutory exceptions.
  • Administrative waivers.
  • Correction of IRS error.

This post drills down into Reasonable Cause. The IRS bases reasonable cause on all the facts and circumstances of each individual case file and it allows for relief of penalties as per IRM 20.1.1.3.2.

The IRS grants reasonable cause relief when you exercised ordinary business care and prudence in determining your tax obligations but nevertheless were unable to to timely comply with those obligations.

IRS Policy Statement 3-2 provides a very limited list of ’causes’ which can be ‘reasonable’ for late filing of a return or failure to deposit or pay tax when due (IRM 1.2.12.1.2).

Examples of sound causes for delay which can be accepted as reasonable cause include:

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How To Formulate An IRS Penalty Abatement Request

Greetings fellow tax nerds! Perhaps life might suck for me at present but lately, there seems to be nothing more satisfying than making tax penalties go away. Think about it. You’re a good person. You work hard. You struggle every day to do right. Then all of a sudden something changes. It appears innocuous.

Your busy and it gets blown off. Happens all the time. Three years later the IRS sends you a letter asserting that you are guilty and you are indeed guilty as charged. I’ve grown exhausted by toothless IRS letters and more so the reprobate tax collection practice of preying on taxpayer fears of the IRS…for profit.

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How To Submit A Reasonable Cause Claim To The IRS For Penalty Abatement

John Dundon, Tax Advisor, Tax Blog, Denver, Colorado, USA, TaxConnections

If you have not filed your personal income tax form (1040), generally, you should get the tax form filed ASAP without consideration for the yet to be assessed penalties.

Then exercise patience.

Wait for the IRS to assess the penalty and then send a reasonable cause explanation to the address indicated on the notice from the IRS. This way you mitigate all sorts of procedural kerfuffles. Read more

Navigating The Shoals Of IRS Penalties

John Dundon, Tax Advisor, Tax Blog, Denver, Colorado, USA, TaxConnections

For those of us inclined to the proverbial ‘head-bury’ strategy with Big Brother, it is best to understand the civil penalties assessed when IRS systems catch up – as measured in tangible $$ out the pocket. For the brave of heart, navigating the shoals of IRS Penalties can be intimidating to comprehend but it is far from rocket science.

Understanding IRS civil penalties starts with picking up Part 20.1 of the Internal Revenue Manual (IRM).  Here you will find guidance on all areas of civil penalties imposed by the Internal Revenue Code (IRC).

Criminal penalty provisions are contained in IRM 9.1.3 and beyond the scope of this post. Read more

5 IRS Penalties Changed Under The Tax Cuts And Jobs Act Of 2018

John Dundon, Tax Advisor, Denver, Colorado, USA, Tax Blog, TaxConnections

This post contains cocktail party killer one liners about how 5 IRS Penalties Changed Under the Tax Cut and Jobs Act of 2018.

My editor also quipped that reading this post helps with insomnia as well. So if you are looking to either kill a party and/or fall asleep faster please continue reading.

If you are a tax practitioner however, you better know this stuff and with all due respect – most do NOT.

The 5 big changes are summarized as follows: Read more

What You Should Know About Your Form W-2

John Dundon, Tax Advisor, Tax Blog, Denver, Colorado, TaxConnections

It’s tax time, and you need your Form W-2, Wage and Tax Statement from your employer(s) to file an accurate federal tax return. You should have received this form by January 31.

If you did not get it by now check with your employer to make sure they have your correct address.

If the employer(s) in question have your correct address and the W-2’s have not arrived by the end of February you must still file your income tax forms and pay any income taxes due on time. Not to worry. Read more

Reporting Casualties Under The New US Personal Income Tax Regimen- Thefts Not So Much

John Dundon, Tax Advisor, Denver, CO, TaxConnections

The new Tax Cuts and Jobs Act (TCJA) amends Internal Revenue Code Section 165further restricting our ability as individual taxpayers to write off CASUALTY LOSSES going forward solely to ‘disaster areas’ as declared by the POTUS.

Say whaaaat ?!?!?!?!?!?!?!?

Effective immediately this new restriction detailed in the US Tax Code WILL HARM ANYONE who falls victim to any tragedy that does not rise to a less than fully clear standard set by our beloved Twitter-In-Chief, aka #StableGenius (presently ‘trending’). Read more

20 Sound Bites On Tax Reform

John Dundon, Tax Advisor

Like a good tax nerd I spent a beautiful Saturday reviewing the US House Tax Cuts and Jobs Act H.R. 1 Section-by-Section Summary. For your impending confrontation with Drunk Uncle (or Aunt) over the holiday season, the following is what I’ve been able to distill down to sound bites.

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“Corporations Are People Too ….. My Friend.” – Tax Law

Giving a speech on tax reform whilst stumping for president in what is now seemingly a woebegone era of politics, Mitt Romney quipped this now seemingly famous sound bite personifying the greed of purported capitalism. According to US tax law, unfortunately he is right. Corporations are ‘treated’ like people.

Since this is how we live, when it comes to writing tax laws it seems a reasonable expectation that corporations behave as moral agents of society just like the rest of us. After all, they have their own decision structures and choices to make between rightness and wrongness, goodness and badness that are justified with reasons just like us. Read more

Rollover Of Retirement Plans Self Certification For More Time

John Dundon

Normally you have 60 days to rollover retirement plan distributions in order to avoid current taxation and possible penalty. If you have special circumstances challenging your ability to complete the rollover within this 60-day time frame, please be advised that there are several circumstances in which the IRS has repeatedly given taxpayers additional time to complete the rollovers.

In an attempt to help taxpayers avoid costs and time, the IRS released Revenue Procedure 2016-47. This ‘Rev Proc’ in tax geek speak has a self-certification statement which should be completed and given to the financial institution receiving the rollover. Be sure to keep a copy of the statement in question along with the Rev Proc in case audited. Read more

Foreign Bank Account Reporting (FBAR)—FinCEN Form 114

John Dundon

Financial Crimes Enforcement Network (FinCEN) is a bureau of the Treasury Department. Authorized under the Bank Secrecy Act, foreign bank account reporting, commonly referred to as “FBAR”, is electronically reported to the IRS via FinCen Form 114, separate and distinct from filing a U.S. income tax return.

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Lessons Learned Preparing & Defending IRS Form 8938

John Dundon

The Foreign Account Tax Compliance Act, better known as FATCA, was enacted March 18, 2010 and requires filing IRS Form 8938. It is important to note that this foreign financial asset reporting requirement does not replace or otherwise affect a taxpayer’s obligation to file a FinCEN Form 114. Basically, if you are a US taxpayer holding foreign financial assets you must file IRS Form 8938 if you have an obligation to file IRS Form 1040 reporting income.

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