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Yearly Archives: 2019

Minority Shareholder & President Libel For Trust Fund Recovery Penalty Minority Shareholder & President Liable for Trust Fund Recovery Penalty

July 3, 2019

A district court has found that the IRS properly determined that a corporation’s minority shareholder and president was liable for the trust fund recovery penalty under Code Sec. 6672. As president, the individual approved, signed, and submitted a variety of tax forms and documents to Federal and state authorities on behalf of the corporation. Therefore, he was a responsible person, and he failed to ensure the trust fund taxes were being paid.

Anthony Samango, Jr., was the sole shareholder and president of Carson Concrete, a concrete construction company. As president of Carson Concrete, he oversaw all aspects of the business, including reviewing and signing all federal and state tax returns for Carson Concrete. Samango was also a minority shareholder and president of SS Frames. As president of SS Frames, Samango approved, signed, and submitted a variety of tax forms and documents to Federal and state authorities on behalf of SS Frames.
 

SS Frames and Carson Concrete had the same business address and phone number. The two companies also shared top-level management and employees. In 2008, Carson Concrete subcontracted SS Frames to help it with a construction project.

While Samango was president of Carson Concrete and SS Frames, he signed checks from a Carson Concrete account to pay SS Frames' liability for state unemployment compensation insurance. Samango also approved, signed and submitted to the IRS Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, for SS Frames.

On September 12, 2014, the IRS assessed a trust fund recovery penalty under Code Sec. 6672 against Samango. The IRS determined that Samango was a responsible person who failed to collect, account for, and pay over trust fund taxes for four quarters during which SS Frames was working with Carson Concrete as a subcontractor.

Samango paid part of the assessed tax liability and filed a refund claim alleging that he was only a minority shareholder in SS Frames, he had no knowledge of SS Frames' finances, operations, or general decision making, and he had no power or authority to pay SS Frames' taxes.

Samango was a person responsible for paying trust fund taxes who willfully failed to pay such taxes to the government; therefore, he was liable for the trust fund penalty under Code Sec. 6672. The district court rejected Samango's claims that he was not a responsible person because he had no oversight or control of SS Frames' finances.

Samango signed and certified government forms for SS Frames as its "manager" or as its "president." In addition, Samango paid taxes owed by SS Frames using funds from a Carson Concrete account for which he had signatory authority. Thus, Samango clearly had enough authority to be a responsible person for SS Frames under Code Sec. 6672.

 The district court also rejected Samango's argument that, even if he was a responsible person, he did not willfully fail to pay over the trust fund taxes to the government. Samango testified that he did not take any steps to ensure that SS Frames' trust fund taxes were, in fact, being paid to the government. Samango's admission, coupled with the fact he was a responsible person, was sufficient to establish that he acted willfully.

Given his position as president of SS Frames, Samango should have known that there was a grave risk that the trust fund taxes were not being paid, he was in a position to very easily find out for certain whether they were being paid, but he did nothing to find out if the trust fund taxes were actually being paid.

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The House Sues Treasury For Trump’s Tax Returns

July 2, 2019

According to Law360, The House’s tax committee sued the U.S. Department of the Treasury in federal court for President Donald Trump’s tax return information on Tuesday, setting in motion a legal battle that will likely end at the U.S. Supreme Court.

Ways and Means Chairman Rep. Richard Neal, D-Mass., made the request for Trump's tax information under Section 6103 of the Internal Revenue Code, which states that the Treasury secretary “shall furnish” the tax records of any individual to the chairs of the Ways and Means Committee, Senate Finance Committee or the Joint Committee on Taxation upon their request.

 
"Defendants Have Now, For What The Committee Believes Is The First Time Ever, Denied A Section 6103(F) Request In Order To Shield President Trump’s Tax Return Information From Congressional Scrutiny,"

the complaint said. "In refusing to comply with the statute, defendants have mounted an extraordinary attack on the authority of Congress to obtain information needed to conduct oversight of Treasury, the IRS, and the tax laws on behalf of the American people who participate in the nation’s voluntary tax system."

Neal and Mnuchin had previously said that they expected the request for Trump’s tax returns to land in court. The dispute will likely be decided by the Supreme Court, given that either side would appeal an unfavorable ruling.

In his suit, Neal averred that Congress’ broad oversight authority easily surpasses the legal bar for obtaining the documents. In his original request, Neal said that the committee had an interest in reviewing the IRS’ auditing practices as they relate to the president’s tax return information.

Neal Wrote To Rettig And Mnuchin On June 28 That He Had "Serious Concerns" About The Briefing, According To The Complaint. That Episode Underscored The Committee's Need To Review The Actual Return Information As Part Of Its "Oversight Duties," He Said In The Letter.

 

Mnuchin had previously invited committee members to consult with officials at Treasury regarding their concerns about the presidential auditing program.

Mnuchin has previously said that he would not comply with Neal’s request because it lacked a “legitimate legislative purpose” and was politically motivated. In a legal memorandum released in June, the U.S. Department of Justice said Mnuchin should not comply with the request because House Democratic lawmakers intend to publicly disclose Trump's tax information.

Ways and Means Committee ranking member Rep. Kevin Brady, R-Texas, criticized the complaint on the grounds that neither the committee nor the full chamber voted to authorize it.  Brady pledged to introduce a resolution “to preserve the integrity of the people’s house from the attacks of the elite few and restore the voice of every American.”

Now That The Battle Over Trump’s Tax Returns Has Hit The Court System, The Process Could Drag Out Beyond The November 2020 Elections.
 The committee petitioned the court to move swiftly in addressing the committee’s complaint.
“If this court does not redress defendants’ noncompliance quickly, the committee will be unable to fulfill its essential role of overseeing the executive branch or to carry out its constitutional obligation to legislate on issues of paramount national importance before the current Congress ends,” the complaint said.
The current congressional session ends Jan. 3, 2021. After that date, the entire process for attempting to procure the tax returns would have to restart.
The case is Committee on Ways and Means v. U.S. Department of the Treasury et al., case number 1:19-cv-01974, in the U.S. District Court for the District of Columbia.
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IRS Revamp Legislation Signed Into Law by President Trump

July 2, 2019

According to Law360, President Donald Trump signed a bill on July 1, 2019 that in part will prevent private debt collectors from pursuing low-income individuals who owe money to the Internal Revenue Service.
 
Trump signed into law H.R. 3151, the Taxpayer First Act, which will also make a host of administrative changes to the IRS to improve customer service and technology and overhaul the agency's appeals process.

“New protections for low-income taxpayers, practical enforcement reforms, and upgraded assistance for taxpayers and small businesses will all now go into place,” House Ways and Means Committee Chairman Richard Neal, D-Mass., said in a statement after the signing.

The original version of the bill, H.R. 1957, sailed through the House by voice vote in April. But the legislation later hit a snag in the Senate when lawmakers and outside groups expressed concerns that codifying the Free File Alliance would prevent the Internal Revenue Service from developing its own cost-free filing portal.

Eventually, both the House and the Senate passed a version that excluded the free file provision. Both chambers approved the legislation by voice vote, which is a procedure reserved for noncontroversial items.
"I’m Proud That After Three Years Of Thoughtful Bipartisan Work, Our Bold Package Of Reforms To The Internal Revenue Service Are The Law Of The Land," He Said.

 According to updated estimates that the Joint Committee on Taxation released last month, the revised bill would raise $36 million over a decade.

 
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How to Report Foreign Income on Your US Tax Return?

June 26, 2019

You must express the amounts you report on your U.S. tax return in U.S. dollars. If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars.

How you do this depends on your functional currency. Your functional currency generally is the U.S. dollar unless you are required to use the currency of a foreign country.

Note: Payments of U.S. tax must be remitted to the U.S. Internal Revenue Service (IRS) in U.S. dollars.

You must make all federal income tax determinations in your functional currency. The U.S. dollar is the functional currency for all taxpayers except some qualified business units (QBUs). A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records.

Even if you have a QBU, your functional currency is the dollar if any of the following apply.

  • You conduct the business in dollars.
  • The principal place of business is located in the United States.
  • You choose to or are required to use the dollar as your functional currency.
  • The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted.

Make all income tax determinations in your functional currency. If your functional currency is the U.S. dollar, you must immediately translate into dollars all items of income, expense, etc. (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax.

Use the exchange rate prevailing when you receive, pay, or accrue the item. If there is more than one exchange rate, use the one that most properly reflects your income. You can generally get exchange rates from banks and U.S. Embassies.

If your functional currency is not the U.S. dollar, make all income tax determinations in your functional currency. At the end of the year, translate the results, such as income or loss, into U.S. dollars to report on your income tax return.

What Currency Exchange Rate Do I Use When Preparing my Tax Return?
Where you are a US expat, green card holder or a US resident who received income or paid any expenses in a foreign currency, you must translate the foreign currency into US dollars when preparing your tax return. The only exception relates to some qualified business units (QBUs) which are generally allowed to use the currency of a foreign country.

Allowable Currency Exchange Rates
What is important to remember is that the Internal Revenue Service has no official exchange rate. The IRS will normally accept any posted exchange rate that is used consistently. When preparing your Form 1040, Form 2555, Form 1116 or any other necessary tax form use the rate that applies to your specific facts and circumstances.

What exchange rate do I use if I received income such as interest or dividends in a single transaction in a foreign currency? If you have a single transaction such as interest income, dividend income or the sale of a business that occurred on a single day, use the exchange rate for that day.

What exchange rate do I use if I earned income or paid expenses in a foreign currency evenly throughout the year? You can translate the foreign currency to U.S. dollars using the yearly average currency exchange rate for the tax year.

Yearly average currency exchange rates
The table published on the IRS website at http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates includes yearly average exchange rates for prior years. For additional exchange rates, refer to Foreign Currency and Currency Exchange Rates.

How do I use the table? To convert from foreign currency to U.S. dollars, divide the foreign currency amount by the applicable yearly average exchange rate in the table. To convert from U.S. dollars to foreign currency, multiply the U.S. dollar amount by the applicable yearly average exchange rate in the table.

Have a Tax 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

 

Read more at: Tax Times blog

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