Monthly Archives: June 2019

On June 7, 2019 the IRS released IR-2019-106 where The Service urges  taxpayers who owe tax and have not filed their 2018 return to act before Friday, June 14, before a larger penalty kicks in.

The failure-to-file penalty is assessed if there is unpaid tax and the taxpayer fails to file a tax return or request an extension by the April due date. This penalty is usually 5 percent of tax for the year that’s not paid by the original return due date. The penalty is charged for each month or part of a month that a tax return is late. But, if the return is more than 60 days late, there is a minimum penalty, either $210 or 100 percent of the unpaid tax, whichever is less.

Taxpayers who have filed and paid on time and have not been assessed any penalties for the past three years often qualify to have the penalty abated pursuant to First-Time Penalty Abatement
provisions.

A taxpayer who does not qualify for the first-time penalty relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not due to willful neglect.

The IRS also expanded the penalty waiver for those whose 2018 tax withholding and estimated tax payments fell short of their total tax liability for the year. The penalty will generally be waived for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty.

In addition to penalties, interest will be charged on any tax not paid by the regular April due date. For individual taxpayers it is the federal short-term interest rate plus 3 percentage points, currently 6 percent per year, compounded daily. Interest stops accruing as soon as the tax is paid in full. Interest cannot be abated.

For available IRS payment plans see our post Available IRS Payment Plans - Part I and Available IRS Payment Plans - Part II

Need Time To Pay Your IRS Taxes?  

   Contact the Tax Lawyers at 
Marini & Associates, P.A. 

 

 

for a FREE Tax HELP Contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

On August 7, 2018 we posted IRS Win In Altera Cost-Sharing Row Withdrawn? where we discussed that the Tax Court had sided with Altera Corp., an Intel subsidiary, in the case in July 2015 after finding that the IRS had ignored significant evidence and public comments while issuing its rule requiring cost-sharing agreements between related parties to include the costs of stock-based compensation and that now on August 7, 2018 the Ninth Circuit withdrew its July 24 decision against Intel Corp. subsidiary Altera, letting stand a U.S. Tax Court decision invalidating IRS regulations that require employee stock option expenses to be shared with foreign subsidiaries in cost-sharing arrangements.

The Court of Appeals for the Ninth Circuit, reversing a Tax Court decision, has upheld the validity of a reg under Code Sec. 482 that requires controlled entities entering into qualified cost-sharing agreements (QCSAs) to share stock-based compensation (SBC) costs. A dissenting opinion rejected the reg, for similar reasons as those in the Tax Court decision.

• 2015 Tax Court decision. The Tax Court held that Reg. § 1.482-7A(d)(2) was invalid because it failed to satisfy State Farm 's reasoned decision-making standard. (Altera Corporation and Subsidiaries, (2015) 145 TC 91)
• CA 9 reversed, upholds reg. The Court of Appeals for the Ninth Circuit, on July 24, 2018, reversed the Tax Court and upheld the reg. It said that IRS's rule-making complied with the APA, and its reg is entitled to Chevron deference. A dissenting opinion would have rejected the reg, for reasons similar to those of the Tax Court. (Altera Corporation and Subsidiaries v. Comm., (CA 9 7/24/2018) 122 AFTR 2d ¶2018-5068)
• One of the judges that was part of the majority in the case died after oral arguments in October 2017 but before the decisions were released in July 2018.
• CA 9 withdrew its opinion. The Ninth Circuit withdrew both the majority and dissenting opinions filed on July 24th, allowing time for a "reconstituted panel" of judges to confer (i.e., with a new judge taking the place of the deceased judge).
• CA 9 upholds the regs again – The court first held that the reg did not exceed the authority delegated to IRS under Code Sec. 482. The court also explained that Code Sec. 482 does not speak directly to whether the IRS may require parties to a QCSA to share employee stock compensation costs in order to receive the tax benefits associated with entering into a QCSA. 

The statute underlying the IRS’ regulatory requirement does not explicitly say that related parties must share these costs to receive the tax benefits associated with entering into a qualified cost-sharing agreement.

Altera, now an Intel Corp. subsidiary, had agreed to share research and development costs with a Cayman Islands affiliate. The chipmaker had argued that the statute, by its plain terms, cannot apply to stock-based compensation. Payments that the Cayman Islands subsidiary made to Altera did not include the costs of stock-based compensation, and the IRS issued a deficiency notice saying that Altera’s cost-sharing payments were short by more than $80 million from 2004 to 2007.

The majority interpreted Altera’s argument as saying that only preexisting intangibles, unlike stock-based compensation, can be transferred between parties. However, businesses that enter into cost-sharing agreements are “transferring future distribution rights to intangibles … that have yet to be developed,” Judge Thomas said.

In addition to noting that Congress had sanctioned a flexible methodology to achieve an arm’s-length result, Judge Thomas rejected Altera’s contention that the IRS and the U.S. Department of the Treasury had improperly rejected comments from the public when they had first proposed the rule.
Similar to his last opinion in the case, he said that Treasury had given sufficient notice for its rule and articulated why treating stock-based compensation as a cost led to arm’s-length results.

“Indeed, Treasury made clear that a comparability analysis is the cornerstone of the arm’s-length standard,” Judge O’Malley said.

 

 

“The majority accepts the latest of the [IRS’] ever-evolving post-hoc rationalizations and then, amazingly, goes even further to justify what Treasury did here.”

The lawsuit, which started in 2012, attracted the attention of law professors, business groups and other technology companies, which advised the court to rule one way or another.

Other major multinational companies including Microsoft disclosed that they were either closely watching the lawsuit or banking on significant tax refunds if Altera prevailed.

Have an Inter-Company Pricing Problem? 

 

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243 

he Whistleblower Office has been making efforts in recent years to improve its interactions with tipsters after coming under criticism for not being responsive to them and dragging out cases. Both the IRS and the Securities and Exchange Commission have been making potentially larger whistleblower awards available. The Bipartisan Budget Act of 2018 also included two amendments closing some loopholes that could have double-taxed some whistleblower awards under the Dodd-Frank Act of 2010.
 
The changes to the program date back even earlier. The Tax Relief and Health Care Act of 2006 added section 7623(b) to the Tax Code, providing a new framework for the consideration of whistleblower submissions and establishing the Whistleblower Office within the IRS to administer that framework.
 
The total number of awards has been declining, going from 418 in fiscal year 2016 to 242 in fiscal 2017 and 217 in fiscal 2018. But the total amounts spiked last year, going from $61.3 million in fiscal 2016 and $33.9 million in fiscal 2017 to $312.2 million in fiscal 2018.

_____________________________

 

Want a Reward of Between 15- 30% of

Underpaid IRS Tax Liabilities for

Blowing the Whistle on a Tax Cheat? 
________________________________________

 

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Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation at:

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

Source

accountingTODAY