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Taxpayers who file false tax returns with the IRS can find themselves in hot water.  Indeed, section 7206(1) of the Internal Revenue Code (“Title 26”) makes it a felony to file a false return when the taxpayer knows that the information in the return is incorrect. But, there are other potential federal crimes that could potentially apply when a taxpayer files a false return.  For example, 28 U.S.C. § 1343, or the federal wire fraud statute, makes it a felony to defraud another party using an interstate wire communication to facilitate the scheme.  Because many tax returns are now filed…
Section 965 audits are on the rise.  Taxpayers under section 965 transition tax audits often face significant potential liability exposure.  The IRS previously announced an active “campaign” specifically targeting unpaid section 965 transition tax liability resulting from amendments to section 965 under the Tax Cuts & Jobs Act.  For taxpayers with ownership in foreign corporations, that could mean increased exposure to an IRS audit. On December 22, 2017, Congress amended the Internal Revenue Code (“IRC”) Section 965 through the Tax Cuts & Jobs Act (“TCJA”).  As amended, Section 965 required that certain taxpayers include a “Section 965 inclusion” in…
In re Kent Culp, Case No. 20-52558 (Bankr. E.D. Mich., July 29, 2021) This recently issued case from the Bankruptcy Court for the Eastern District of Michigan addresses an interesting intersection of bankruptcy and tax law involving a Debtor’s tax refund.  The Debtor filed his bankruptcy case on December 23, 2020 (“Petition Date”).  Before the Debtor and his non-filing spouse, Conni Culp, filed a joint federal income tax return for 2018. In that tax return, the Culps claimed and requested a tax refund of $13,825.00. After the Petition Date, the IRS sent a check to the Chapter 7 Trustee, dated…
A topic that doesn’t get a whole lot of attention from tax professionals is “Currently Not Collectible” (“CNC”) status, which is a status that your account with the IRS may obtain when you cannot currently afford to pay the debt.  It makes sense that tax professionals wouldn’t pay a lot of attention to this issue because inability to pay a tax debt probably equates to an inability to pay a tax professional for assistance.  But obtaining this status can be of great benefit to taxpayers who are in that situation.  It’s something that we frequently attempt to take advantage of…
A topic that we frequently see in the Tax Clinic that I run, one that is often misunderstood, is that of innocent spouse relief. Generally, the purpose of providing innocent spouse relief is to, as one court put it:  “protect one spouse from the overreaching or dishonesty of the other.”  Purcell v. Commissioner, 826 F.2d 470 (6th Cir. 1987).  But many people that come into the clinic think that it means that, if the other spouse earned the income, then they are automatically entitled to innocent spouse relief when the appropriate amount of tax does not get paid.  And…
It’s a common scenario: A taxpayer misses the deadline to file an election with the IRS. What options does the taxpayer have now?  I have helped many clients out of this jam, and it is a situation that often presents several options for a tax professional who knows how to navigate the tax administration system—though sometimes it requires quick, diligent action. We will focus on one particular route today: So-called “Section 9100” relief.  Section 9100 provides an opportunity to make a missed regulatory election.[1] Section 9100 grants the IRS Commissioner authority to allow a reasonable extension of time for…
Introduction.  The Internal Revenue Code (the “Code”) contains over 150 civil tax penalties for various conduct and non-conduct.  One common group of penalties, associated with the late filing of a tax return and the late payment of tax, are housed in section 6651 of the Code.  To avoid these penalties, taxpayers must generally show “reasonable cause,” i.e. that the taxpayer acted reasonably under the particular set of circumstances. The late-filing and late-payment penalties apply to a variety of tax returns and tax obligations.  For example, the late-filing penalty applies when an executor fails to timely file an estate…
The Freeman Law International Tax Symposium Join leading tax experts from across the globe, as we discuss tax trends that are reshaping international taxation. We have assembled leading experts from across the world, along with key government officials and other industry leaders, setting the stage for unparalleled thought leadership—all delivered in a format made for 2021 and beyond. Learn from recognized leaders, as we discuss: Global Tax Reform International Civil Penalty Enforcement International Criminal Tax Enforcement The Untold Story of Swiss Bank Secrecy and a revolutionary Era of International Tax Enforcement Transfer Pricing Developments A Closer Look at GILTI and FDII Cryptocurrency – Global Enforcement Trends…
The executor of the Estate of Tamir Sapir is seeking a refund of more than $25 million of fiduciary income tax alleged to have been overpaid to the Internal Revenue Service (“IRS”).  While the refund suit is currently teed up before a federal district court, the estate sought judgment on the pleadings, attempting to seize on the government’s sparse affirmative-defense pleading.  The case addresses a question on which federal courts have split: Whether a heightened-pleading standard—a la the Supreme Court’s Iqbal/Twombly line of cases—applies to pleadings raising a defense in a tax refund suit. Background.  The estate had previously filed…
Coinbase, Mt. Gox, and Gemini are well-known virtual currency exchanges. It is through these exchanges that cryptocurrency users may execute transactions (e.g., a Bitcoin transfer—whereby a transaction announcement occurs on the blockchain). As noted in a previous blog post, cryptocurrency transactions are pseudonymous, not anonymous. Further, cryptocurrency users do not have Fourth Amendment privacy interests in their virtual currency transaction records. See Bare Bitcoins – No Fourth Amendment Privacy in Virtual Currency Records. However, in the civil context, are litigants privy to blockchain information to identify users? Last Friday, a federal district court dealt with whether a civil litigant…