Monday, May 11, 2009

IRS Position on Burden of Proving Penalty on Failure to Pay Estimated Tax

The IRS has issued a notice that describes procedures that should be followed in Tax Court cases in which the addition to the tax for failure to pay estimated tax under Section 6654 has been determined and the IRS has the burden of production under Section 7491(c). See IRS notice at this link.

IRS Frequently Asked Questions on Offshore Accounts

The IRS has published a list of frequently asked questions on voluntary disclosure concerning offshore accounts. See the questions at this link.

Beware of Form 4180

When companies get in a financial bind, the last debt they pay in some cases is employment taxes to the IRS. Many owners and officers of these companies do not know they can be personally liable for the trust fund portion of these taxes that are not paid to the IRS. Under Section 6672 a person can be personally liable for trust fund taxes if they can sign checks and pay other creditors while knowing the taxes are not being paid.

When the IRS does their investigation they require those they interview to complete Form 4180. This form is used to gather information from potentially responsible persons. In most cases a revenue officer will interview the potentially responsible person and complete the form and then ask that it be signed without allowing it to be read by the potentially responsible person.

We are seeing more and more cases where the potentially responsible person is afraid or not allowed to read the form. This form is basically a confession and a taxpayer should never, never sign one without reading it carefully and making any changes that are necessary.

The best way to handle this form is for the taxpayer's representative to help the taxpayer complete the form and give it to the IRS.