Yearly Archives: 2020

The Internal Revenue Service Advisory Council (IRSAC) conveys the public's perception of IRS's activities and plays a significant role as external evaluator regarding the reorganization and its implementation. The Council advises the IRS regarding tax administration policy, programs, and initiatives, and they sees a danger in chronic underfunding of the agency.

IRSAC made the point in its annual report, which also highlighted the importance of the Taxpayer First Act and opportunities to expand the e-filing and online application process.

The 2020 Public Report includes recommendations on 26 issues, which cover a broad range of topics, including:

• Funding of the IRS
• The Taxpayer First Act
• Expansion of e-File
• Proposal for an early exam program for Large Business
• Telephone response times for the Practitioner Priority Service
• Resources for Native American taxpayers and federally recognized tribes
• Taxpayer Digital Communications

Inadequate IRS funding is a fundamental risk to tax administration. “A tax system rooted in voluntary compliance requires appropriate levels of customer service and enforcement, both of which depend upon adequate and consistent funding,” the report said. “Congressional appropriations provide the vast share of operating funds for the IRS to administer the nation’s tax system, and collect over $3.1 trillion in net revenue.”

In Fiscal Year 2019, More Than 80 Percent of Federal Government Spending Was Funded By
Federal Taxes Collected By The IRS.

Yet “Overall Funding For The IRS Has Decreased Roughly 20 % On An Inflation-Adjusted Basis Since FY2010,”
Added Charles Read, CEO Of GetPayroll In Lewisville, Texas.

“The result of these budget reductions since FY 2010 is a 22 percent decline in the number of employees at the agency and a 30 percent decline in the number of employees working in enforcement roles.”

Among IRSAC’s recommendations are advocacy for funding at a level no lower than the FY2010 benchmark adjusted for inflation, or $14.3 billion, or at minimum a level that will provide for a net increase in staffing on a sustained yearly basis; and advocating for consistent or multi-year funding for long-term initiatives, including the customer service strategy, training strategy and business modernization plan.

Have IRS Tax Problems?

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

Read more at: Tax Times blog

According to AccountingTODAY, during a House Ways and Means Oversight Subcommittee hearing, Rep. Judy Chu, D-California, submitted the AICPA letter for the congressional record and asked Rettig to respond to how its backlog of millions of pieces of mail from the pandemic is still affecting taxpayers who are being sent penalty notices and the tax professionals who are trying to help them without an easy way to get through to the IRS.

“The IRS closed its facilities to protect its workforce for several weeks this spring and I recognize that it created a huge backlog of mail that the IRS is still working through,” she said. “But I’m disturbed that the IRS is continuing levy and lien notices while processing that backlog of mail. Taxpayers and businesses who have in fact filed on time are being penalized because the IRS still has not processed their filings.”

She noted that the AICPA letter from Nov. 5 included some “commonsense options that the IRS can implement to alleviate the financial difficulties for these tens of thousands of taxpayers.”

She asked him why the IRS wasn’t setting up a dedicated way to address these concerns. “Commissioner Rettig, my understanding is that the IRS has not established an expedited phone service for tax professionals to dispute the lien and levy notices that are being sent to taxpayers despite the backlog,” she said. “Do you have a current estimate of how large the mail backlog is could you also provide a rationale for not setting up such a process to date and whether we can have such a process?”

Rettig Responded That The IRS Has “An Aggregate Of About 3 Million Pieces Backlogged, Of Which About A Million Are Tax Returns, Which Is Not Unusual For Us.”

As for the AICPA letter, he pointed out that he worked for 36 years on the outside as a tax attorney before joining the IRS. “I’m in touch with thousands of practitioners on the outside, AICPA as well as others, and what they were asking for was for us to go beyond the first-time abate and beyond reasonable cause for individuals with a comment saying first-time abate for a failure to file, failure to pay, failure to estimate penalty, you get an automatic abatement and one of their comments was, well if somebody already has one of those they don’t get a second one but then they default to reasonable cause,” he said. 

“We have procedures in place. The individuals in the Internal Revenue Service were not merely career employees who looked at this, but more than 10 people who came onboard from private practice with similar experience to mine looked at this as well and were not willing to provide an open forum for people, professionals particularly, who might not be addressing their responsibilities during this. So we took a hard look at that and AICPA is aware, as are other practitioners.”

Have IRS Tax Problems?

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

Read more at: Tax Times blog

On September 11, 2019, we posted IRS Not Agree with Chiropractic Adjustments  - Chiropractor Sentenced to Prison for Tax Evasion, where we discussed that the owner of a chiropractic business was sentenced to Six (6) months in prison for tax evasion after pleading guilty to the charge in June 2019. 

Previous to that we posted on September 26, 2017, Utah Chiropractor Sentenced to Prison for Tax Evasion and Obstructing the IRS, where we discussed that yet another chiropractor, who also owned a health care products business, was sentenced to 33 months in prison for tax evasion and corruptly endeavoring to obstruct the internal revenue laws

And now according to DoJ, a Montana chiropractor and his wife pleaded guilty on November 20, 2020 to tax evasion.

According to court documents and statements made in court, Jonathan Wilhelm, owned and operated Pro Chiropractic PC (Pro Chiro) and Big Sky Spinal Care Center Inc. (Big Sky). From 2013 through 2018, the Wilhelms directed payments to cash and then did not report the cash transactions on Pro Chiro’s and Big Sky’s books and records, which they provided to a return preparer to prepare the businesses’ tax returns. 

The Wilhelms knew that omitting the cashed checks and cash payments resulted in an understatement of taxable income totaling $284,691 for tax years 2013, 2014, 2015, 2017, and 2018. In total, the defendants caused a tax loss to the IRS of $74,486.

U.S. Magistrate Judge Kathleen L. DeSoto (Same Judge as 2019 chiropractor tax evasion case) has scheduled a sentencing for March 12, 2021. 

At sentencing the defendants each face a maximum sentence of five (5) years. The defendants also each face a period of supervised release, restitution, and monetary penalties.

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

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

Read more at: Tax Times blog

On July 20, 2020, the U.S. Department of Treasury (Treasury) and the Internal Revenue Service (IRS) issued final regulations on the high-tax exclusion to the global intangible low-taxed income (GILTI) regime (the Final Regulations). The final high-tax exclusion rules allow taxpayers to opt out of the GILTI regime if certain foreign affiliates are already paying at least 18.9% in offshore taxes and allows retroactive relief for all applicable tax years.

GILTI High-Tax Exclusion

The Final Regulations give U.S. persons who own at least 10%, directly or indirectly, of the vote or value of a controlled foreign corporation (CFC) (U.S. Shareholders) the option to opt out of the GILTI regime if such CFC is subject to tax in a foreign country at an effective rate greater than 90% of the maximum U.S. corporate rate (i.e., currently a foreign effective tax rate of 18.9%, based on a U.S. corporate tax rate of 21%). 

The election is effective for the year in which it is made and all subsequent tax years, unless the election is revoked, and can be retroactively applied for tax years beginning after December 31, 2017 and before July 23, 2020. 

The Final Regulations Also Allow For Elections To Be Made On Amended Returns, Though U.S. Shareholders Must Then Also File Amended Tax Returns Within Specific Time Frames.

U.S. Shareholders must apply the GILTI high-tax exclusion consistently, such that an election made by a U.S. Shareholder will generally apply to all 10%-owned CFCs.

A U.S. Shareholder must determine a CFC's effective foreign tax rate for purposes of the exclusion at the CFC level. The effective foreign tax rate is calculated based on the effective foreign tax rate imposed on the aggregate of all items of net tested income of a CFC attributable to a single "tested unit." 

For purposes of the high-tax exclusion, a tested unit includes (i) a CFC; (ii) an interest in certain pass-through entity held, directly or indirectly, by a CFC; or (iii) certain branches whose activities are carried on directly or indirectly by a CFC. Additionally, if a tested unit makes a disregarded payment to another tested unit, the Final Regulations require gross income to be reallocated among the tested units to appropriately associate the income with the tested unit in which it is subject to tax.

Coordination with the Subpart F High-Tax Exception

Under the complementary Subpart F high-tax exception, a controlling U.S. Shareholder of a CFC may elect to exclude an item of the CFC's foreign base company income or insurance income from Subpart F income when the relevant income item is subject to tax in a foreign country at an effective rate of more than 90% of the maximum U.S. corporate rate (i.e., currently a foreign effective tax rate of 18.9%, based on a U.S. corporate tax rate of 21%).

In a separate set of proposed regulations also issued on July 20, 2020 (the Proposed Regulations), the Treasury and the IRS announced their intent to conform the rules implementing the Subpart F high-tax exception to the GILTI high-tax exclusion, and to provide for a single election under Code Section 954(b)(4) for purposes of both regimes. If the Proposed Regulations are finalized, the conformed Subpart F high-tax exclusion rules will be more restrictive than those that currently govern the election.

 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

Read more at: Tax Times blog