Monthly Archives: September 2020

A U.S. Government Accountability Office (GAO) team is telling Congress that taxpayers can abuse private placement variable life insurance.

The GAO team looked at the product for Sen. Charles Grassley, R-Iowa, the chairman of the Senate Finance Committee. The team focused on two types of offshore insurance: 

• Micro-Captive Insurers controlled by U.S. businesses, and 
• Private Placement Variable Life Insurance.

Jessica Lucas-Judy, a GAO director, wrote in a report on the GAO team’s findings that there are many legitimate uses for offshore life insurance products. Lucas-Judy wrote in the report: 

“Offshore Variable Life Insurance Products Have Been Used To Conceal Assets From The U.S. Government, Including Undeclared Assets At Risk Of Being Discovered During Investigations Of Foreign Banks.” 

“Further, some taxpayers closely control how their premiums are invested and may direct premium funds toward illiquid assets they currently own in an attempt to convert taxable income to tax-exempt income that is eventually passed on to their beneficiaries tax-free.”

The IRS has been clashing with taxpayers and their tax advisors over offshore insurance arrangements for years. The GAO prepared the report partly to  summarize the history of IRS efforts to police offshore insurance arrangements.

The U.S. Supreme Court agreed in May to take up an offshore captive insurance case, CIC Services v. IRS. The case hinges on a question about rules governing legal challenges to regulatory mandates that are not taxes, rather than on insurance tax rules. 

In 2019, Lucas-Judy wrote, prosecutors won a criminal case involving a taxpayer who failed to file reports on a foreign financial account associated with a Swiss private placement variable life insurance policy.

In another case, a Tax Court judge determined “that the taxpayer had significant control over the assets held in the foreign financial account associated with his offshore private placement variable life insurance policies,” according to Lucas-Judy. “As a result, the court held that the taxpayer was the owner of that account for federal income tax purposes, and any income from the assets was includable in the taxpayer’s gross income.”

That taxpayer, an investment manager and the offshore insurer exchanged more than 70,000 emails about the variable life policies’ investment accounts, and the taxpayer directed the assets toward startups and other companies in which he had a financial interest, according to Lucas-Judy.

Have IRS Tax Problem?

 Contact the Tax Lawyers at
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Read more at: Tax Times blog

In a SB/SE memo to its employees, has said that, except in limited cases, new Notice of Federal Tax Lien (NFTL) requests should be deferred until after September 30, 2020. memo 

As discussed in previous Collection memorandums, the Service’s operations will not immediately return to the “pre-pandemic normal.” While the backlog of mail is being addressed, there are still situations in which delays are occurring which are impacting closing actions on offer cases.

Although most mail has been processed at the Offer Specialist (OS) Posts of Duty (POD) and the Centralized Offer in Compromise sites in Brookhaven and Memphis, it is important that offer employees make extra efforts to verify any taxpayer correspondence and/or payments have been addressed prior to making a case decision.

Prior to closing any offer under return procedures, the offer examiner/offer specialist (OE/OS) must verify all mail has been processed at their specific post of duty. Also, payments must be processed at both Brookhaven and Memphis Centralized Offer in Compromise (COIC) locations before closure under mandatory withdrawal procedures.

Accepted OICs– Taxpayers with accepted OICs should make up all missed payments and should have resumed making required payments on July 16, 2020. If payments were not received and all mail/payments have been processed, the potential default provisions in IRM 5.19.7.14.4, Failure to Adhere to Compliance Terms, should be followed. Taxpayers who have questions about their payments or are unable to make up their missed payment(s) should be advised to contact the MOIC unit to discuss their options.

Notice of Federal Tax Lien-Requesting new Notices of Federal Tax Lien (NFTL) should be deferred until after September 30, 2020 unless:

1. Exigent circumstances exist, such as the taxpayer is liquidating assets and there is no NFTL filed. 
2. Recommending offer acceptance and the terms provide for payment in more than five months and the liability is over $50,000.

Employees should not request a NFTL against any taxpayer due to exigent circumstances, without senior managerial (Territory Manager/Operations Manager) approval. A NFTL being filed based on an offer acceptance with terms more than five months should include a copy of the Form 7249 with the NFTL request as approval authority. Ensure CAP rights have been discussed with the taxpayer before requesting a NFTL.

Refer to Attachment 1 of this document regarding completing the request for filing of the Notice of Federal Tax Lien.

Filing Other Lien Documents

Employees may request NFTL Refiles following standard IRM procedures (e.g., secure email Form 12636 or a manually-prepared Form 668-F to *SBSE CLO Liens Team 301 or, for authorized employees, input the refile directly). Request the refile with enough time for the Centralized Lien Operation (CLO) to process the document and for it to be delivered to the recording office before the refile deadline. If there is insufficient time (generally less than 30 days), consider filing the document in another manner.

Employees may request Revocations of erroneous lien releases by manuallypreparing Form 12474, Revocation of Release of Federal Tax Lien, and submitting it to the FORT for filing. However, the NFTL that follows the revocation is subject to the restrictions on new NFTL filings as described in this memorandum.

Employees may request other lien documents, as needed, through CLO following standard IRM procedures. CLO will print and file all lien documents on a regular basis.

FIELD CALLS -the requirement for a field call prior to acceptance of an offer in accordance with IRM 5.8.4.8(10) continues to be waived until further notice.

We need to continue to apply good judgment in recognition that some taxpayers have been significantly impacted by economic factors caused by the COVID-19 pandemic. The Internal Revenue Manual provides employees with the necessary authorities, flexibility, and discretion to appropriately handle unusual situations and situations where taxpayers are experiencing an economic hardship.rvice (CPS).

Have IRS Tax Problem?

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

Read more at: Tax Times blog

In Notice 2020-69 the IRS announced that the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue regulations addressing the application of §§ 951 and 951A of the Internal Revenue Code (Code) to certain S corporations with accumulated earnings and profits.  

For those S corporations electing this treatment, global intangible low-taxed income (GILTI) inclusions would create AAA. 

This notice also announces that the Treasury Department and the IRS intend to issue regulations addressing the treatment of qualified improvement property (QIP) under the alternative depreciation system (ADS) of § 168(g) for purposes of calculating qualified business asset investment (QBAI) for purposes of the foreign-derived intangible income (FDII) and GILTI provisions. 

These rules when issued would implement recent clarifications enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  All of these provisions were originally part of the 2017 Tax Cuts and Jobs Act (TCJA). Notice 2020-69 will be published in Internal Revenue Bulletin 2020-39 on Sept. 21, 2020.

Have IRS Tax Problem?

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

Read more at: Tax Times blog

The IRS announces the launch of the Bi-Partisan Budget Act (BBA) Centralized Partnership Audit Regime website.

The Centralized Partnership Audit Regime replaces the Tax Equity and Fiscal Responsibility Act (TEFRA) and the electing large partnership rules. The centralized partnership audit regime, or BBA, is generally effective for tax years beginning January 2018. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level. 

A partnership is subject to BBA unless it is an eligible partnership and makes an annual election out of BBA on a timely filed Form 1065.  An eligible partnership is one with 100 or fewer partners, all of whom are either individuals, C corporations, foreign entities that would be treated as a C corporation if it were domestic, S corporations or estates of deceased partners.

The new webpage is intended to be a one-stop location for anything BBA-related, including regulations and other guidance and instructions related to the Partnership Representative (PR), electing out of the centralized audit regime, Administrative Adjustment Requests (AARs) and what to expect during a BBA administrative proceeding.

Taxpayers are encouraged to visit the website often for information, including electronic submission instructions of forms related to a BBA examination when those instructions are available.   

Have IRS Tax Problem?

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

Read more at: Tax Times blog