There are at least three questions when it comes to IRS tax disclosures: (1) Should a taxpayer disclose; (2) How should a taxpayer disclose; and (3) How much detail should be disclosed?  Should a taxpayer simply append a statement or footnote to the return, or should the taxpayer utilize a Form 8275, Form 8275-R, or Form 8886?  This article addresses these questions, drawing on experience with hundreds of tax return disclosures.   We also explore outstanding questions in the context of IRS disclosures. To Disclose or Not To Disclose, That is the Question The Internal Revenue Code (IRC) imposes penalties…
By now, many eligible taxpayers may have found a deposit appear in their bank account during July. This was likely in addition to one or more correspondence letters from the Internal Revenue Service and/or the White House (which may or may not have given some taxpayers a heart attack, thinking the IRS letter was a potential income tax audit). That initial deposit and related communications were the beginning of advance Child Tax Credit payments. Eligible taxpayers will receive periodic payments between July and December 2021 in advance of the 2021 Child Tax Credit claimed on their 2021 personal income tax…
The recent case of In re Bowman, Case No. 20-11512, Section A (Bankr. E.D. La., July 12, 2021) addresses an interesting intersection of tax and bankruptcy law.  Specifically, it looks at the issue of whether bankruptcy courts have jurisdiction to grant a debtor relief as an “innocent spouse” under § 6015 of the Internal Revenue Code, and ultimately determines that it does. Although it is true that Section 6015(f) does not allow a bankruptcy court to exercise initial subject matter jurisdiction over an innocent spouse defense because only the Secretary of the IRS receives the equitable power…
A federal district court in Texas recently took up an interesting FBAR issue: whether civil FBAR penalties survive death?  That is, if a taxpayer/account holder dies after the IRS assesses an FBAR penalty against them, do the FBAR penalties remain against the decedent’s estate?  Or do the penalties die, so to speak, along with them? The analysis typically turns on a subsidiary question: Are the penalties, for these purposes at least, penal or remedial?  If penal, the FBAR penalties would potentially dissolve at death.  If, on the other hand, they are remedial, maybe not. FBAR penalties can be notoriously draconian. …
On July 29, 2021, the United States Attorney for the Southern District of New York, the Assistant Attorney General for the Department of Justice Tax Division, and the IRS Commissioner all announced that a federal court in New York had entered an order “authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (‘POLS’) and its associates (together, the ‘POLS Group’) to evade federal income taxes.”  A copy of the news release can be found here.  Although the government’s efforts…
The Report of Foreign Bank and Financial Accounts (i.e., the “FBAR”) was for many years confined to the lonely backwaters of Title 31 of the United States Code—the intriguingly-named Bank Secrecy Act.  For years, compliance levels were abysmal.  But penalties were generally not enforced.  To put the situation in perspective, in the course of more than a decade, you could probably have counted the number of penalties assessed against non-compliant account holders on one hand—maybe, just maybe, two hands—at least according to contemporary reports from the Treasury Department to Congress. But my how the times have changed.  FBAR penalties
The IRS’ streamlined filing procedures were first offered by the IRS on September 1, 2012.  Since that time, the IRS has made several revisions.  A current summary of the IRS’ Streamlined Filing Compliance Procedures is discussed below. Do I Qualify for the IRS’ Streamlined Filing Compliance Procedures? To qualify for the IRS’ Streamlined Filing Compliance Procedures (either Domestic or Foreign), taxpayers must meet the following initial requirements: The taxpayer must be an individual taxpayer or an estate of an individual taxpayer. The taxpayer must certify in a narrative under penalties of perjury that the conduct was not willful. The relevant…
Many taxpayers (if not all) would agree with the sentiment expressed on a wall plaque that recently caught my eye: “Dear IRS: I would like to cancel my subscription. Please remove my name from your mailing list.” That feeling is intensified for those taxpayers who owe the Internal Revenue Service money for back taxes. The IRS has various tools at its disposal to collect outstanding tax liabilities: notices, liens, personal visits, etc. However, levies are perhaps one of the most powerful tools (weapons?) the IRS wields against taxpayers. In a recent decision by the Eleventh Circuit Court of Appeals,…
The Internal Revenue Service (IRS) has broad statutory authority to investigate and audit taxpayers.[i]  In many cases, the IRS attempts to fulfill this statutory authority through seeking communications made between taxpayers and third parties, such as tax return preparers and CPAs.  Oftentimes, the IRS is authorized to obtain these communications. However, there are methods to protect communications made between taxpayers and accountants.  One such method is referred to as a Kovel agreement.  Under that agreement, the taxpayer engages a tax attorney who, in turn, engages the services of a tax accountant.  When done properly, federal courts have recognized…
Federal tax law permits taxpayers to deduct so-called “theft losses,” provided certain requirements are met.  Initially, a taxpayer must show that he or she will not receive compensation through insurance or another third party for the loss.  If this threshold is met, the taxpayer must overcome additional hurdles, including showing:  (1) the occurrence of a theft; (2) the amount of the theft; and (3) the date the taxpayer discovered the theft.  As discussed more fully below, these requirements are not always so easy to meet. The Occurrence of a Theft. Commonsensically, a taxpayer must first show the existence or occurrence…