Monthly Archives: April 2022

The U.S. Tax Court concluded in Treece Financial Svcs. Group, 158 TC No 6 (4/19/2022) that it has jurisdiction to review an IRS determination that a taxpayer wasn't eligible to participate in the Voluntary Classification Settlement Program (VCSP).

Treece Financial Services Group, a corporation, petitioned for review of a notice of employment tax determination under Code Sec. 7436. Both Treece and the IRS agreed that the agency had properly determined that someone working for Treece was an employee but disputed the proper amount of employment tax under that determination.

Treece asserted that the amount should be computed using Ann 2012-45, 2012-51 IRB 724, i.e., the VCSP.

The IRS Said Treece Couldn't Use The VCSP And
 Argued That The Tax Court Lacked Jurisdiction
To Review That Determination.

The court noted that the VCSP provides partial relief from federal employment taxes for eligible taxpayers that agree to treat workers prospectively as employees for future tax periods. To be eligible for the VCSP, a taxpayer must: 

1. Have consistently treated the workers as nonemployees; 
2. Have filed all required Forms 1099, consistent with the nonemployee treatment, for the previous three years; and 
3. Not currently be under employment tax audit by the IRS.

Generally, the Tax Court said, it has jurisdiction under Code Sec. 7436(a) to determine: 

1. Whether an individual providing services to a person is that person's employee for purposes of subtitle C; 
2.  Whether the person, if an employer, is entitled to relief under section 530 of the Revenue Act of 1978; and 
3. The proper amounts of employment taxes which relate to the IRS's determination concerning worker classification.

The Court's Deficiency Jurisdiction Includes Reviewing Administrative Determinations That Are Necessary To Determine The Merits Of The Deficiency Determinations. (Trimmer, 148 TC 334 (2017))

In addition, Trimmer held that there is a strong presumption that an act of administrative discretion is subject to judicial review. Further, in 2000, Code Sec. 7436(a) was amended to provide the Tax Court jurisdiction to "determine whether such a determination by the [Treasury secretary] is correct and the proper amount of employment tax under such determination."

The court concluded that, pursuant to statute and case law, the Tax Court has jurisdiction to determine whether the liability is correct in proceedings for determination of employment status. Because the denial of a taxpayer's eligibility for VCSP directly affects the amounts of tax, the procedures that Congress has established for judicial review of the IRS's determinations logically contemplate review of such a denial as one element of the determination.

Have an IRS Tax Problem?

 

Read more at: Tax Times blog

We previously posted on July 3, 2020, The Common Law Mailbox Rule Now Superseded By Regulations where we discussed that after Sec. 7502's enactment, the courts generally took two positions regarding its effect on the common law mailbox rule. 

Some courts held that it superseded the common law mailbox rule and provided the exclusive exceptions to the common law physical-delivery rule. Other courts held that Sec. 7502 only provided a safe harbor to the physical-delivery rule and that under the common law mailbox rule, testimonial and circumstantial evidence could still be used to prove timely mailing.

The court said on April 13, 2022 that it dismissed Stephen Pond's case because he hadn't proved his return was physically delivered on time, and under a Treasury regulation, the only exceptions to a requirement to show physical delivery were those for certified or registered mail explicitly included in Internal Revenue Code Section 7502 . 

Read more at: Tax Times blog

On April 30, 2021 we posted Draft Schedules K-2 And K-3 Released To Enhance Reporting Of International Tax Matters By Pass-Through Entities where we discussed that the Treasury and the IRS released on April 30, 2021 updated early drafts of new Schedules K-2 and K-3 for Forms 1065, 1120-S, and 8865 for tax year 2021 (filing season 2022). The schedules are designed to provide greater clarity for partners and shareholders on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits.

Read more at: Tax Times blog

With the April 18 tax-filing deadline closing in for most taxpayers, the Internal Revenue Service wants to dispel some new and common myths about getting refund details or speeding up tax refunds in IR-2022-80. A number of these myths circulate on social media every tax season.

Seven Common Myths About Tax Refunds:

Myth 1: Calling the IRS or visiting an IRS office speeds up a refund
Many taxpayers mistakenly believe the commonly held myth that speaking with the IRS by phone or visiting in-person at an IRS Taxpayer Assistance Center will expedite their tax refund. The best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app. Alternatively, those without internet access can reach “Where’s My Refund?” by calling the automated refund hotline at 800-829-1954. IRS Taxpayer Assistance Centers operate by appointment and inquiring about a tax refund’s status does not expedite the process.

Myth 2: Taxpayers need to wait for their 2020 return to be processed before filing their 2021 return, or that all refunds are delayed due to the number of 2020 returns the IRS still needs to process.
The reality is that taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns. They should file when they’re ready. People with unprocessed 2020 tax returns, should enter $0 (zero dollars) for last year's AGI on their 2021 tax return when electronically filing.

Myth 3: Taxpayers can get a refund date by ordering a tax transcript
Ordering a tax transcript will not inform taxpayers of the timing of their tax refund, nor will it speed up a refund being processed. Taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation. But the “Where’s My Refund?” tool is the fastest and most accurate way to check the status of a refund.

Myth 4: “Where’s My Refund?” must be wrong because there’s no deposit date yet
While the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer for a variety of reasons, including when a return is incomplete or needs further review. Delays can be caused by simple errors like an incomplete return, transposed numbers or when a tax return is affected by identity theft or fraud. The “https://www.irs.gov/refunds” tool only updates data once a day – usually overnight.

Myth 5: “Where’s My Refund?” must be wrong because a refund amount is less than expected
Different factors can cause a tax refund to be larger or smaller than expected. Situations that may decreasea refund can include corrections to any Recovery Rebate Credit or Child Tax Credit amounts, delinquent federal taxes or state taxes and past due child support. The IRS will mail the taxpayer a letter of explanation if these adjustments are made. The Department of Treasury's Bureau of the Fiscal Service may also send a letter if all or part of a taxpayer’s refund was used to pay certain financial obligations.

Myth 6: Calling a tax professional will provide a better refund date
Contacting a tax professional will not speed up a refund. Tax professionals cannot move up a refund date nor do they have access to any "special" information that will provide a more accurate refund date. The “Where’s My Refund?” tool provides taxpayers with the same accurate and timely information that a tax professional, or even an IRS telephone assistor can access.

Myth 7: Getting a refund this year means there's no need to adjust tax withholding for 2022
Taxpayers should continually check their withholding and adjust accordingly. Adjusting tax withholding with an employer is easy, and using the Tax Withholding Estimator tool can help taxpayers determine if they are withholding the right amount from their paycheck. Taxpayers who experience a life event like marriage or divorce, childbirth, an adoption, home purchase or major income change are encouraged to check their withholding. Withholding takes place throughout the year, so it's better to take this step as soon as possible.

Have an IRS Tax Problem?

 

Read more at: Tax Times blog