Monthly Archives: June 2022

National Taxpayer Advocate Erin M. Collins today released her statutorily mandated mid-year report to Congress. The report expresses concern about continuing delays in the processing of paper-filed tax returns and the consequent impact on taxpayer refunds. At the end of May, the agency had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million over the same time last year.

“The IRS has said it is aiming to crush the backlogged inventory this year, and I hope it succeeds,” Collins wrote. 

“Unfortunately, At This Point The Backlog Is Still Crushing
The IRS, Its Employees, And Most Importantly, Taxpayers.
As Such, The Agency Is Continuing To Explore
Additional Processing Strategies.” 

More than 90% of individual income taxpayers e-file their returns, yet last year, about 17 million taxpayers filed their returns on paper. Some choose to file on paper. Some have no choice because they encounter e-filing barriers, such as when they are required to file a tax form or schedule the IRS cannot accept electronically. Before the pandemic, the IRS typically delivered refunds to paper-filers within four to six weeks. Over the past year, refund delays on paper-filed returns have generally exceeded six months, with delays of 10 months or more common for many taxpayers.

Forms 1040 are just one component of the paper tax returns processing backlog. Millions of business tax returns and amended tax returns (both individual and business) are also filed on paper. The overall backlog has increased by 7% over the past year as shown in the Figure 1.

Figure 1: Status of Unprocessed Paper Tax Returns Comparing Weeks Ending May 22, 2021, and May 27, 2022

The IRS Has Publicly Committed To Reducing Its
Paper Tax Return Backlog To A “Healthy” Level
By The End Of The Year, But It Has Not Provided
A Definition Of “Healthy.”

“Historically, the IRS has paid refunds resulting from paper-filed returns within four to six weeks,” Collins wrote. “From a taxpayer perspective, returning to a four-to-six-week refund delivery period is a reasonable definition of ‘healthy.’”

Have an IRS 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

On April 5, 2022 we posted 3 Groups Urge Supreme Court To Review Non-Willful FBAR Penalty, where we discussed that whether a foreign bank account reporting penalty is assessed Per Unreported Account or Per Unfiled Form should be determined by the U.S. Supreme Court, tax and business groups said, arguing a circuit split on the issue warrants high court intervention.

In amicus briefs filed on April 1, 2022, the U.S. Chamber of Commerce, Center for Taxpayer Rights and American College of Tax Counsel told the Supreme Court it should resolve the divergent findings by two appeals courts on the proper application of the penalty for a person or business' nonwillful failure to disclose foreign accounts.

The U.S. Supreme Court decided on June 21, 2022 to hear a dispute over the maximum penalty for failing to disclose foreign bank accounts to the IRS in a case that could resolve the limits of a $10,000 penalty for undeclared accounts. The case is Alexandru Bittner v. U.S., case number 21-1195, in the U.S. Supreme Court.

The justices will weigh in on the dispute between Alexandru Bittner and the federal government, who disagree over the proper application of the $10,000 penalty for a nonwillful failure to disclose foreign bank accounts, according to an order list. 

While the Ninth Circuit has decided that the penalty for a nonwillful failure to disclose foreign accounts is assessed on a per-form basis, the Fifth Circuit found in Bittner's case that the penalty is imposed for each unreported account.

 Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation at: 

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

The IRS collected more than $245 million as a result of whistleblowers' tips, for which it made 179 awards totaling over $36 million in 2021, the agency's Whistleblower Office said in its annual report to Congress.

According to the report, which was released June 13, 2022 the revenue was split between almost $130 million collected under Code Sec. 7623(a) and more than $115 million under Code Sec. 7623(b). Covering the period October 2020 through September 2021, the report found that the work of Whistleblower Office decreased as a result of the COVID-19 pandemic, though most operations have resumed in full.

Since the whistleblower program began in 2007, the number and amounts of awards paid annually can vary significantly, "especially when a small number of high-dollar claims are resolved in a single year," according to the report. 

The year in which an award is paid is generally not the year in which collections occurred because the IRS must wait to make a final determination of proceeds. That determination can occur only after a taxpayer has exhausted all appeals and can no longer file a claim for refund or otherwise seek to recover the proceeds from the government.

Read more at: Tax Times blog

In IR-2022-125 the Internal Revenue Service added to its annual "Dirty Dozen" scams list for the 2022 filing season, with a warning to taxpayers to avoid being misled into using bogus tax avoidance strategies. 

The IRS warned taxpayers to watch out for promoters peddling these schemes. As part of its mission, the IRS is focused on high-income taxpayers who engage in various types of tax violations.

“These tax avoidance strategies are promoted to unsuspecting folks with too-good-to-be-true promises of reducing taxes or avoiding taxes altogether,” said IRS Commissioner Chuck Rettig. 

"Taxpayers Should Not Kid Themselves Into Believing They
Can Hide Income From The IRS. The Agency Continues To Focus On These Deals, And People Who Engage In Them
Face Steep Civil Penalties Or Criminal Charges.”

The IRS has stepped up efforts on abusive schemes in recent years. As part of this wider effort, the IRS Office of Chief Counsel announced earlier this year it would hire up to 200 additional attorneys to help the agency combat abusive syndicated conservation easements and micro-captive transactions as well as other abusive schemes. (IR-2022-17).

For the conclusion of the Dirty Dozen, the IRS highlights other schemes that typically target high-net-worth individuals who are looking for ways to avoid paying taxes. Solicitations for investment in these schemes are generally more targeted than solicitations for widespread scams, such as email scams, that can hit anyone.

Hiding assets in what the taxpayer hopes is an anonymous account or simply not filing a return in the hopes of staying off the grid are tax avoidance scams that have been around for decades. The IRS warns anyone thinking about using one of these schemes – or similar ones – that the agency continues to improve work in these areas thanks to new and evolving data analytic tools and enhanced document matching. 

Concealing Assets in Offshore Accounts 

The IRS remains focused on stopping tax avoidance by those who hide assets in offshore accounts and in accounts holding cryptocurrency or other digital assets.

International tax compliance is a top priority of the IRS. New patterns and trends emerging in complex international tax avoidance schemes and cross-border transactions have heightened concerns regarding the lack of tax compliance by individuals and entities with an international footprint. As international tax and money laundering crimes have increased, the IRS continues to protect the integrity of the U.S. tax system by helping American taxpayers to understand and meet their tax responsibilities and by enforcing the law with integrity and fairness, worldwide.

Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. They then access the funds using debit cards, credit cards, wire transfers or other arrangements. Some individuals have used foreign trusts, employee-leasing schemes, private annuities and structured transactions attempting to conceal the true owner of accounts or insurance plans.

Improper Reporting of Digital Assets

Digital assets are being adopted by mainstream financial organizations along with many other parts of the economy. The proliferation of digital assets across the world in the last decade or so has created tax administration challenges regarding digital assets, in part because there is an incorrect perception that digital asset accounts are undetectable by tax authorities. Unscrupulous promoters continue to perpetuate this myth and make assertions that taxpayers can easily conceal their digital asset holdings.

The IRS urges taxpayers to not be misled into believing this storyline about digital assets and possibly exposing themselves to civil fraud penalties and criminal charges that could result from failure to report transactions involving digital assets.

"The IRS is able to identify and track otherwise anonymous transactions of international accounts as well as digital assets during the enforcement of our nation's tax laws," Rettig said. "We urge everyone to come into compliance with their filing and reporting responsibilities and avoid compromising themselves in schemes that will ultimately go badly for them."

Have IRS Tax Problems?

     Contact the Tax Lawyers at

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