IRS Appeals Conference

IRS Appeals Conference

Tax Alliance Conference Wednesday, November 3, 2010
Only $40 Through 11/1/2010

ADDISON CONFERENCE CENTRE
15650 Addison Rd. Addison, TX 75001

Meet & Greet the decision makers! Hear both sides of the issues! Topics Include: Overview of Appeals; Preparing Effective Protests; Innocent Spouse Update; Offers In Compromise; Collection Due Process Workshop; Overview of Fast Track Settlement; Panel Discussion; Q&A

Register Now! Tax Alliance Conference

Price includes 6 hours of CPE, (MCLE pending) continental breakfast, and lunch!

Seating is limited, so be sure to register early!

For more details click here! Tax Alliance Conference

Lantz Issue on Appeal in Other Circuits

The Lantz issue is on appeal in the 3rd and 2nd Circuits with a number of cases pending in the Tax Court.

Lantz Decision Reversed by the 7th Circuit

The 7th Circuit today reversed the Tax Court decision in Lantz.  Lantz held that there was not a two year rule for filing an innocent spouse claim under Section 6015(f) of the Code.  The 7th Circuit opinion can be found here.

2009 Whistleblower Report Released

The 2009 Whistleblower Report to Congress has been released and be found here.

IRS Publishes Cash Audit Techniques Guide

The IRS has published its Cash Audit Techniques Guide to provide guidance for the examination of income in a cash intensive business. This guide will:

Provide background about Cash Intensive Businesses
Identify frequent and/or unique issues
Provide examination techniques
Supply applicable laws and court cases
 
The complete guide can be found here.

Things to Know If You Receive an IRS Notice

IRS advises of tips on notices it sends to taxpayers.  See the IRS Tax Tip 2010-73 here.

IRS Announces Change of Taxpayer Address Procedures

The IRS has issue a new revenue procedure that explains how the Internal Revenue Service is informed of a change of address. When so informed, the IRS will update the taxpayer's address of record to the new address. The IRS uses the taxpayer's address of record for the various documents that are required to be sent to a taxpayer's "last known address" under the Internal Revenue Code and for refunds of overpayments of tax. Rev. Proc. 2001-18, 2001-1 C.B. 708, is superseded by this Revenue Procedure.  Se the Rev. Proc. here.

Tax-exempt Organizations' Reporting Requirements

The IRS posted a list of FAQs (updated 4/5/10) annual reporting requirements for exempt organizations. See the list here.

IRS Continues to Increase Oversight of Tax Return Preparers to Improve Compliance

IRS Continues to Increase Oversight of Tax Return Preparers to Improve Compliance.  See here for more.

Justice Department Highlights Tax Enforcement Results

Department of Justice highlights it success.  See the press release here.

Proposed Reg Issued Regarding Return Preparer PTINs

The IRS has issued the first proposed regulations related to Return Preparer Review Implementation. REG-134235-08 outlines a mandatory requirement for return preparers to use Preparer Tax Identification Numbers (PTINs) and provides examples of the meaning of the term tax return preparer for the purposes of the IRC section 6109.  See the proposed Regulation here.

Summary of Health Care

House Speaker Pelosi has issued a summary of the health care reform act.  The summary can be found here.

New IRS Program - Rapid Response Appeals Process

The IRS is implementing a pilot program that provides new priority procedures for pyramiding in-business trust fund (IBTF) Collection Due Process (CDP) cases in Appeals. This program is referred to as the Rapid Response Appeals Process (RRAP).  A description of the program can be found here.

Tax Court Denies Charitable Deduction

In Friedman v. Commissioner, TC Memo 2010-45, the Tax Court denied the taxpayers claimed charitable contribution deductions for the donation of equipment.  The Tax Court found that the taxpayers did not strictly comply with the substantiation requirements of Section 1.170A-13, Income Tax Regs.  On the otherhand the taxpayers contend their documentation satisfied the substantial compliance doctrine according to Bond v. Commissioner, 100 T.C. 32, 40-41 (1993).  The Tax Court found that the taxpayers did not establish substantial compliance because they did not provide adequate descriptions of the equipment and did not identify the valuation methods used, the manner of acquisition, and the cost bases of the equipment.

The Tax Court further held that the taxpayers' documentation did not satisfy the requirement of Section 170 of the Internal Revenue Code in that the taxpayers did not obtain contemporaneous written acknowledgments of the donations.

Penalties under Section 6662(a) of the Code were also imposed.

IRS Releases 2009 Data Book

The Internal Revenue Service has announced the release of the 2009 IRS Data Book, an annual snapshot of agency activities for the fiscal year.  You can view the Data Book here.

IRS Updates List of Dirty Dozen Tax Scams

The Internal Revenue Service issued its 2010 "dirty dozen" list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.  The list can be found here.

IRS Outlines Additional Steps to Assist Unemployed

The Internal Revenue Service has announced several additional steps it is taking this tax season to help people having difficulties meeting their tax obligations because of unemployment or other financial problems. See the announcement here.

The steps include additional flexibility on offers in compromise for struggling taxpayers, a series of Saturday "open houses" offering taxpayers extra opportunities to work out tax problems face to face with the IRS, special outreach with partner groups to unemployed taxpayers and the availability of more information on a special section of the IRS Web site.

Taxpayers Cannot Rely On Preparer to Avoid Penalty

Taxpayers met with their preparer with respect to their 2005 federal income tax return and gave the preparer financial documents, including a 2005 Form SSA-1099, Social Security Benefit Statement, indicating that they had received $21,445 of Social Security benefits in 2005. Petitioners did not give the preparer a 2005 Form 1099-DIV, Dividends and Distributions, indicating that they had received $216 of dividend income, or a 2005 Form 1099-INT, Interest Income,indicating that they had received $24 of interest income.

Subsection (a) of Section 6662 imposes an accuracy-related penalty of 20 percent of any underpayment that is attributable to causes specified in subsection (b). Among the causes justifying the imposition of the penalty is any substantial understatement of income tax as defined in Section 6662(d). The Section 6662(a) penalty is not imposed if a taxpayer can demonstrate (1) reasonable cause for the underpayment and (2) that the taxpayer acted in good faith with respect to the underpayment.

Reliance on the advice of a professional can give the taxpayer a defense of reasonable cause.

The Tax Court found that Taxpayers did not rely in good faith on their preparer’s advice because they did not examine their return before it was submitted to the IRS. See Estate of Edsel Stiel v. Commissioner, TC Memo 2009-278.

Most Litigated Tax Issues

The National Taxpayer Advocate 2009 Annual Report to Congress list the following as the most litigated tax issues.  You can find the report here.

1.  Appeals from Collection Due Process (CDP) Hearings Under Internal Revenue Code Sections 6320 and 6330

2.  Summons Enforcement Under Internal Revenue Code Sections 7602, 7604, and 7609

3. Trade or Business Expenses Under Internal Revenue Code Section 162 and Related Section

4.  Gross Income Under Internal Revenue Code Section 61 and Related Sections

5.  Accuracy-Related Penalty Under Internal Revenue Code Section 6662

6.  Frivolous Issues Penalty Under Internal Revenue Code Section 6673 and Related Appellate-Level Sanctions

7.  Civil Actions to Enforce Federal Tax Liens or to Subject Property to Payment of Tax Under Internal Revenue Code Section 7403

8.  Failure to File Penalty Under Internal Revenue Code Section 6651(a)(1) and Estimated Tax Penalty Under Internal Revenue Code Section 6654

9.  Family Status Issues Under Internal Revenue Code Sections 2, 24, 32, and 151

10.  Relief from Joint and Several Liability Under Internal Revenue Code Section 6015

IRS Sends Letter To Preparers

The Internal Revenue Service is taking a number of steps to contact paid tax return preparers to improve the accuracy and quality of filed tax returns and heighten awareness of preparer responsibilities. They  are sending letters to and visiting a segment of the return preparer community to provide information on the kinds of errors they are seeing. This letter can be found here describes common errors made by taxpayers and return preparers and their general responsibilities as a return preparer. It is reported that preparers are being visited by Special Agents and Revenue Agents.

The Truth About Frivolous Tax Arguments

The IRS has published an article titled The Truth About Frivolous Tax Arguments.  The 83 page article can be found here and discusses various issues the IRS considers frivolous.

Remarks by the Commissioner of Internal Revenue

The IRS has announcement a new schedule to be attached to a corporate tax return listing uncertain tax positions.  See the remarks of the Commissioner here.

Pro Se Nurse Wins Against the IRS

A nurse represented herself and won her case against the IRS.  The Tax Court in Singleton-Clarke v. Commissioner, T.C. Summary Opinion 2009-182 found that the nurse's advanced degree did not qualify her for a new trade or business, and held that she could deduct her education expenses for 2005.

Top Ten Common mistakes for 1040X

• Schedule A missing when change to itemized deductions. Correspondence is then necessary.

• No original signature (copy). Correspondence is then necessary.

• Schedule C not included when amending schedule C or it does not indicate which Taxpayer it is for when the return is Married Filing Jointly (MFJ). Correspondence is then necessary.

• Schedule EIC is not attached when EIC is amended. Correspondence is then necessary.

• TP does not indicate exemptions name and SSN/ITIN number in exemption section when adding or removing and exemption. Correspondence is then necessary.

• Taxpayer requests direct deposit of their amended refund or adds direct deposit information for their original refund, since direct deposit information cannot be added on an amended return, we must correspond.

• Form 5405 not attached when claiming the First-Time Homebuyer Credit.

• Signature is other then the taxpayer and no supporting documentation is attached or indicated. (i.e. Form 2848, Durable POA, parent for minor, etc)

• Missing schedules and/or forms for Line 7 credits. Correspondence is then necessary.

Other common mistakes:

• Taxpayer files Head of Household (HOH) with no exemptions and does not indicate Qualifying dependents (QND) name and/or SSN.

• Taxpayer removes an exemption but not Recovery Rebate Credit (RRC). This requires additional correspondence.

• TP does not indicate if a child is eligible for Child Tax Credit (CTC) but takes the credit or the reverse.

IRS Telephone Directory for Practitioners

See this link for an IRS telephone directory for practitioners that list numbers for all states.

First Wednesday Tax Forum

The next First Wednesday Tax Forum will actually be held on the second Wednesday, January 13, 2010. Special Agents Todd Norwood and Elisa Rodriguez of IRS Criminal Investigation will be speaking on Refund Fraud and Fraud Detection. This will be an interesting and informative presentation. As tax season arrives, learn what you need to know to protect yourself and your clients.

Requisite Knowledge and Experience: None is needed

Advance Preparation: None is needed.

This is an update presentation.

The presentation is lecture style.

The First Wednesday Tax Forum will meet from 7:30-9:10 AM at the University of Phoenix, Dallas/Ft. Worth Campus. The University of Phoenix Campus is located in Churchill Tower, 12400 Coit Road, Dallas, Texas. Park in the parking garage behind the building. Come to the front of the building on the first floor. Registration is $15 per course. CPAs and enrolled agents receive 2 hours of CPE credit. If you plan to attend, please send an e-mail to dawn@tjtaxlaw.com. Make checks payable to Townsend & Jones, L.L.P., and mail to 8100 Lomo Alto, Suite 238, Dallas, Texas 75225. Phone 214-696-2661.

National Taxpayer Advocate's 2009 Annual Report to Congress

Nina Olson, the National Taxpayer Advocate, has released her Annual Report. The report can be found here.

*New* The return preparer review final report is now available.

The IRS has released it final report on return preparers and the report can be found here.  The report contains recommendations for oversight of return preparers.