It has almost been twenty years since Congress enacted the Revenue Restructuring Act of 1998 (“RRA98”). RRA98 prohibits the IRS from designating taxpayers as “tax protesters.” What is a Tax Protester? A tax protester is someone who uses illegal methods to protest the tax laws. This often includes Constitutional and other arguments about the taxpayer… Continue reading Where Did the Tax Protesters Go?
Tax Articles
Research Was Not Routine, But Compensation Was Excessive
For the research tax credit, when is research so routine that it does not qualify for the tax credit? And what if the founder of the company is paid an unreasonably high wage–can the high wage be considered as an expense for computing the credit? The court addressed these issues in Suder v. Commissioner, T.C. Memo.… Continue reading Research Was Not Routine, But Compensation Was Excessive
Bad Debt Deduction Not Allowed Until Business Fails
If you lend money to a failing business and the business eventually fails, can you take a bad debt deduction? And if so, when? The U.S. Tax Court addressed this in Cooper v. Commissioner, 143 T.C. 10, which provides an opportunity to consider the question. Facts & Procedural History The Coopers started Pixel in 1983. Pixel… Continue reading Bad Debt Deduction Not Allowed Until Business Fails
Designating Voluntary Tax Payments for Business Owners
If you owe a third party for several different items and you voluntarily pay a debt, you should get to designate which item the payment is to be applied to. This is the general rule for voluntary payments made to the IRS. But according to IRS Action on Decision 2014-01, the IRS will not follow… Continue reading Designating Voluntary Tax Payments for Business Owners
Informal Offer in Compromise? Is There Such a Thing?
What if you reach an oral agreement with the IRS to settle the tax debt, but then the IRS back tracks on the agreement? If you didn’t submit the offer on a Form 656, do you have any rights? The court addresses this in Bergdale v. Commissioner, T.C. Memo. 2014-152. Facts & Procedural History Mr.… Continue reading Informal Offer in Compromise? Is There Such a Thing?
Wife Can Rely on Husband (to Avoid a Tax Penalty)
Marriage can be challenging. This is particularly true when it comes to finances. And it is even more so when it comes to taxes. But what if a spouse reports something wrong? Can the other spouse get out of penalties for the wrong doing? The court answers this in Miller v. Commissioner, T.C. Summary Opinion 2014-74,… Continue reading Wife Can Rely on Husband (to Avoid a Tax Penalty)
IRS Notice of Intent to Levy Sustained Despite IRS Not Following Its Procedures
In Eichler v. Commissioner, 143 T.C. 2, the U.S. Tax Court said that the IRS Notice of Intent to Levy was proper even though the IRS failed to follow its policy to check an installment request into its system which would have stopped IRS collection actions. Facts & Procedural History The IRS assessed Section 6672… Continue reading IRS Notice of Intent to Levy Sustained Despite IRS Not Following Its Procedures
IRS Appeals: New Evidence & Theories
The IRS released a memo describing Phase II of the Appeals Judicial Approach and Culture (AJAC) program. This program is intended to formalize many of the best practices of the IRS Office of Appeals (Appeals). Tax disputes often end up in Appeals. Appeals is able to successfully resolve or settle most cases. The Appeals process… Continue reading IRS Appeals: New Evidence & Theories
Truck Driver Expenses Not Subject to Higher Substantiation
The absence of records results in the disallowance of tax deductions and credits on audit. This is particularly true for expenses that are subject to the higher substantiation requirement in Section 280F, such as travel expenses. In Baker v. Commissioner, T.C. Memo. 2014-122, the court considered whether a truck driver’s transportation expenses are subject to the… Continue reading Truck Driver Expenses Not Subject to Higher Substantiation
Self-Directed IRA Purchase of Real Estate is Taxable
Self-directed IRAs present a number of opportunities. But what if the self-directed IRA custodian chooses to limit the account holder’s options? Can the IRA account holder go around the custodian’s wishes? The recent Dabney v. Commissioner, Docket No. 14566-12, provides an example where the purchase real estate by a self-directed IRA was a taxable distribution from… Continue reading Self-Directed IRA Purchase of Real Estate is Taxable