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Monthly Archives: April 2020

LB&I Not Opening New Exams, But Still Working on Voluntary Disclosures During COVID-19

In a memo entitled LB&I-04-0420-0009: LB&I Compliance Priorities During the COVID-19 Pandemic the IRS Large Business & International (LB&I) Division has clarified its compliance priorities for the period beginning April 14, 2020 and ending July 15, 2020.

This memorandum provides additional guidance regarding LB&I compliance activities which are postponed or allowed through July 15, 2020.

I. Activity Postponed through July 15, 2020

  • LB&I will not start an examination of any new return unless it falls within Category II below.
  • No time should be charged to new Discriminate Analysis Score (DAS) cases without Senior Director approval.
  • Managers have discretion on prior, subsequent, and related returns associated with an existing examination.

II. Activity Continuing

  •  Compliance Assurance Process, Large Corporate Compliance, FATCA, Qualified Intermediary programs and current open examinations: proceed as usual, but without in-person contact.
  • New examinations arising from Voluntary Disclosure Practice cases, claims, and other pre-refund verification programs: proceed as usual, but without in-person contact.
  • Work should continue on Syndicated Conservation Easements campaign, Micro Captive Insurance campaign, IRC 965 campaign and any future campaign related to the Tax Cuts and Jobs Act; but without in person contact. Existing and any new campaigns will be assessed for purposes of categorizing as postponed or allowed with clear communications to follow on which are allowed.
  • Workload reviews of existing inventory will continue.
  • Examiners can charge time to new cases (e.g., audit planning) where taxpayer contact will not be made until after the emergency declaration is lifted.
  • Prior time limits on classification activities are suspended.
  • Other consensual work initiated by taxpayers: proceed as usual, but without inperson contact, for example, Pre-Filing Agreements, Refund Claims.

While the IRS cannot anticipate and provide guidelines for every possible situation, it remains vitally important for all LB&I employees to be sensitive to the individual circumstances of taxpayers and provide them with the appropriate tax administrative actions commensurate with the taxpayer’s situation.

Do You Have Undeclared  Offshore Income?
 
Want to Know Which Voluntary Disclosure Program is Right for You? 
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Read more at: Tax Times blog

Physical Presence Tests for 2019 Waived for Several Countries

In a Rev Proc 2020-14, 2020-16 IRB 661, the IRS has waived the residency and presence tests that apply for purposes of the 2019 Code Sec. 911 foreign earned income and foreign housing cost exclusions with respect to certain U.S. individuals in the Democratic Republic of the Congo, Haiti, Iraq, Sudan and Venezuela, due to adverse conditions in those countries.
For 2019, the Treasury Secretary, in consultation with the Secretary of State, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in the following countries beginning on the specified date:
  • Congo, Democratic Republic of the – January 13, 2019;
  • Haiti – February 14, 2019; 
  • Iraq – May 14, 2019; 
  • Sudan – April 11, 2019; and
  • Venezuela – January 24, 2019. 
For purposes of Code Sec. 911, an individual who left the Democratic Republic of Congo on or after January 13, 2019, will be treated as a qualified individual for the period during which that individual was present in, or was a bona fide resident of, the Democratic Republic of Congo if the individual establishes a reasonable expectation that he or she would have met the requirements of Code Sec. 911(d) but for those conditions.
To qualify for relief under section Code Sec. 911(d)(4), an individual must have established residency, or have been physically present, in the foreign country on or before the date that the Treasury Secretary determines that individuals were required to leave the foreign country. Thus, for example, individuals who were first physically present or established residency in the Democratic Republic of Congo after January 13, 2019, are not eligible to qualify for the exception provided in Code Sec. 911(d)(4) for tax year 2019.
 
Have an International Tax Problem?
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Marini & Associates, P.A.
 
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Read more at: Tax Times blog

Did You Receive a Semi-Automated Penalty Assessments For Late Filed Form 3520's & 3520-A's – We Can Help!

On April 10, 2019, we posted US Taxpayers Are Receiving Automated Penalty Assessments For Late Filed Form 5471's & 5472's - We Can Help!  where we discussed that we have been receiving a many calls from businesses who have received penalty notices regarding late filed or non-filed Form 5471 & 5472's and that we discussed ways to defend against these automatic assessments and request penalty abatement including the Reasonable Cause Defense and First-Time Offender Abatement (FTA) Defense.

The same arguments are equally as effective when defending the even more egregious late filing penalties, associated with Form 3520 & Form 3520-A. 

We Recently Successfully Represented A Taxpayer
In Having Abated $325,178.70 in Late Filed
Form 3520–A Penalty, On March 30, 2020.

 

The key to successfully having these penalties abated, more so today than ever before, is to hire an Experienced Tax Attorney, to develop the facts and distinguish adverse case law, especially when requesting penalty abatement based upon "Reasonable Cause".

Penalties for Late Filing or Failure to File Form 3520

IRC section 6677 provides for stiff penalties if Form 3520 is not timely filed or is incomplete or incorrect. The initial penalty is the greater of $10,000 or—

  • 35% of the gross value of any property transferred to a foreign trust if a U.S. person fails to report the creation of or transfer to a foreign trust;
  • 35% of the gross value of the distributions received from a foreign trust by a U.S. person who fails to report receipt of the distribution; and
  • 5% of the gross value of all of a foreign trust’s assets treated as owned by a U.S. person under the grantor trust rules (IRC sections 671–679) if the U.S. owner fails to report required information. The owner is also subject to an additional 5% penalty if the foreign trust itself fails to file a timely Form 3520-A [“Annual Information Return of Foreign Trust With a U.S. Owner”; see IRC section 6048(b)], does not provide all required information, or provides incorrect information. 

Penalties for Late Filing or Failure to File Form 3520-A

The U.S. owner is subject to an initial penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the trust's assets treated as owned by the U.S. person at the close of that tax year if the foreign trust (a) fails to file a timely Form 3520-A, or (b) does not furnish all of the information required by section 6048(b) or includes incorrect information. Criminal penalties may be imposed under sections 7203, 7206, and 7207 for failure to file on time and for filing a false or fraudulent return.

 

Have You Been Assessed a Semi-Automatic Penalty
for a Late Form 
3520 or 3520-A?

Contact the Tax Lawyers at 
Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243)
 

 





Read more at: Tax Times blog

Private Collectors Still Collecting Tax Debts

On March 25, 2020 we postedIRS Unveils New COVID-19 Temporarily Suspension of Key Compliance Efforts in People First Initiative where we discussed that in order to help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced in IR-2020-59 on March 25, 2020 a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.
 
Now according to Law360,although the IRS suspended collection activities on new cases of hard-to-settle unpaid tax liabilities during the novel coronavirus pandemic, taxpayers already targeted by the agency’s private debt collection agencies may not get a break, a taxpayer rights advocate said Friday.

The Internal Revenue Service pledged not to transfer any new cases to its network of private debt collectors until July 15 as part of its People First Initiative announced in March. However, the agency’s failure to clearly address the status of existing cases in the pipeline has drawn attention from tax lawyers and taxpayer advocates. 

Nina Olson, executive director of the Center for Taxpayer Rights, said the IRS should make it clear that low-income, elderly and disabled taxpayers will not face collection activities by IRS debt collectors.

“That There Is Even The Remotest Possibility In The Course of This Economic and Health Crisis A Private Collection Agency Employee Would Contact A Taxpayer Who Is Low Income, or Receiving Social Security Disability Income (SSDI) or Supplemental Security Income (SSI), Is Unconscionable,”

Said Olson, The Former National Taxpayer Advocate
Who Retired In 2019. 

Olson said the IRS' lack of clarity about how it’s treating existing cases held by private debt collection agencies is particularly troubling because it hasn’t implemented the Taxpayer First Act requirement to exclude from referrals people who receive SSDI or SSI.

 

The ABA Section of Taxation recommended in a Monday comment letter that the IRS should instruct private collection agencies to suspend all private debt collection, not merely “new” delinquent accounts. Alternatively, the IRS could transfer from the private collection agency to the agency, pursuant to the Fair Debt Collection Practices Act, any account where the taxpayer has been affected by COVID-19, the respiratory illness caused by the coronavirus, the ABA tax section letter said.

The transfer should take place “if the service determines that private collection agencies are not prepared to respond adequately to the medical and financial issues affecting taxpayers impacted by the COVID-19 emergency,” the letter said.

Olson said low-income taxpayers could see their $1,200 economic recovery payments threatened by private collection agencies.

“What is to stop a PCA employee from saying to the taxpayer, ‘Well, now you can make a one-time payment toward the debt,’” Olson said. “Folks are afraid and will agree to pay.”

She added, “Since the IRS hasn’t implemented the low income/SSDI/SSI filters, the right thing to do is tell the PCAs to stand down until July 15 at the earliest.”

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www.TaxAid.com or www.OVDPLaw.com
or
Toll Free at 888-8TaxAid
 
 
 

 

 

 

 

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