Monthly Archives: June 2022

On July 27, 2021 we posted U.S. Government Argued Repatriation Tax Is Constitutional! Where we discussed that the U.S. government urged the Ninth Circuit to not revive a couple's challenge against the 2017 federal tax overhaul's repatriation provision, arguing the pair has mischaracterized the levy on foreign income as an unconstitutional direct tax on property. (Charles G. Moore et al. v. U.S., case number 20-36122, in the U.S. Court of Appeals for the Ninth Circuit).

Now according to Law360, the Ninth Circuit tossed a constitutional challenge to the 2017 federal tax overhaul's corporate repatriation tax, affirming a lower court's decision that the one-time levy passes muster under a clause limiting the federal government's authority to tax.

The Tax Cuts and Jobs Act's repatriation tax is a permissible tax on income that does not exceed limits on the government's taxation power laid out in the U.S. Constitution, the appeals court said in a published opinion Tuesday. The provision under Internal Revenue Code Section 965 was passed as part of the TCJA's shift to a more territorial tax system, and it imposes a one-time mandatory transition tax on deferred earnings held abroad.

Congress authorized the tax with the legitimate intent to tax offshore, undistributed earnings held by U.S. people that could otherwise avoid taxation, according to the opinion. And courts have consistently affirmed the validity of other taxes similar to the transition tax, the Ninth Circuit said, rejecting a California couple's challenge to the tax under the apportionment clause as well as the Fifth Amendment's due process clause.

David A. Hubbert, deputy assistant attorney general of the U.S. Department of Justice, lauded the decision in a statement. "We are gratified that the court of appeals reaffirmed Congress' broad authority under the Constitution to solve unique tax problems, such as taxing more than $2 trillion in earnings being held offshore by U.S. taxpayers," Hubbert said.

But Sam Kazman of the Competitive Enterprise Institute, who is representing the couple, told Law360 that the Ninth Circuit advanced too expansive a view of income in finding it "does not need to be realized in order to be taxed." The holding risks opening the door to taxes such as a wealth tax, according to Kazman, who said his legal team will likely challenge the decision.

The couple in the dispute, Charles and Kathleen Moore, filed a complaint in 2019 in California federal court saying they paid about $15,000 in taxes under Section 965 based on their small stake in a controlled foreign corporation, KisanKraft Ltd., that provides affordable equipment to India's small-scale farmers. In seeking a refund, the Moores said the tax bill was based on earnings retained and invested by KisanKraft, earnings they never received, and that the levy is a direct tax that violates the Constitution's apportionment clause.

That clause requires that such taxes be apportioned among the states in proportion to their population. The 16th Amendment, though, carves out an exception for income taxes.

The California federal court tossed the suit, finding that the tax is a tax on income that consequently doesn't violate the apportionment clause. It also rejected the Moores' arguments that the tax is imposed retroactively in violation of the Fifth Amendment's due process clause, given that it "is a rational means of affecting a legitimate legislative purpose."

The Ninth Circuit agreed with those holdings, finding Tuesday that Congress authorized the tax to address the $2.6 trillion in offshore earnings that the U.S. previously couldn't tax until they were distributed. And it has reached this result by "rational means," by using a date following the passage of the TCJA as the effective date of distribution in order to tax the earnings, according to the opinion.

Kazman of the Competitive Enterprise Institute, a libertarian think tank, told Law360 that the opinion is a "relatively extreme ruling" that can allow the government to pursue different taxes, such as a wealth tax proposed by Sen. Elizabeth Warren, D-Mass., or federal property taxes.

Have IRS Tax Problems?

     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

According to Law360, U.S. Treasury Secretary Janet Yellen told the House Ways and Means Committee on Wednesday that the OECD's global tax deal would reduce some of the tax burden on the country's workers and place it on corporations.

The OECD's tax overhaul is in the country's best interest, Yellen told lawmakers during a committee hearing, adding that the share of the U.S. tax burden borne by corporations has diminished significantly over time considering the size of the economy.

"I'm very encouraged that most major economies are moving forward and adopting it," Yellen said, adding she thinks that Poland will soon decide that it's in its interest and that the European Union will adopt it soon. Poland is the lone holdout in the EU.

All but a handful of countries in the OECD's inclusive framework of 141 jurisdictions agreed to the global tax overhaul in October, which included the 15% minimum tax rules under Pillar Two for large multinational corporations and a reallocation of taxing rights on highly profitable companies under Pillar One.

"For the United States, this will level the playing field," Yellen said, noting that the U.S. is the only country in the world to currently impose a minimum tax on the foreign income of multinational corporations. 

Rep. Lloyd Doggett, D-Texas, said the global minimum tax would end some of the distortion in the current tax system that favors those who dodge their taxes versus domestic businesses that are paying their fair share, and would remove the incentive to export American jobs. A global minimum tax would additionally help multinational companies because of the way their international competitors would be taxed, Doggett said.

Under Pillar One, taxing rights would be reallocated to jurisdictions where highly profitable multinationals have customers but lack the physical presence required to be taxed under current nexus rules.

Rep. Kevin Brady of Texas, the Ways and Means Committee's top Republican, said that under the agreement, companies such as Boeing and Caterpillar would bear the brunt of the revenue redistribution because 60% of the revenues for redistribution would come from U.S-based companies. Meanwhile, foreign competitors such as Europe-based Airbus and Volvo would bear less of the deal's financial burden, Brady said.  

Yellen Also Defended President Joe Biden's Internal Revenue Service Funding Request During The Hearing,
Telling Lawmakers The IRS Needs The $80 Billion
To Expand Its Enforcement Activities. 

(Lots of Luck with that, as there does not appear to be
any realistic possibility of that happening with this Senate)

"Tax compliance, in effect, is voluntary and this proposal will address that," Yellen said. The proposal would improve the experience of all taxpayers by ensuring customer service representatives are available to answer calls and taxpayers have access to tax credits, refunds and other benefits they're entitled to, she said.

The proposal would additionally provide resources to hire more employees, Yellen said.

"That's critical to addressing this issue,'' she said, "ensuring that the IRS has the workforce and the technologies it needs to best serve taxpayers." 

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

There are few things that can send a chill down your spine more than mail from the IRS. Just seeing the agency’s name on an envelope’s return address creates anxiety. If you find yourself in that position and open the mail to find a CP2000 notice inside, you don’t need to panic, but you do need to know what to do.

What Is a CP2000 Notice?

The Internal Revenue Service sends out CP2000 notices to taxpayers whose submitted tax returns do not reflect what’s been submitted by employers and others that provide the agency with information on the income you’ve received over the course of the tax year. Though these forms are not notifications that you’re subject to an audit, they do carry the full weight of an IRS inquiry, and as such you are required to respond fully and promptly by the indicated deadline.

The CP2000 is not just a notice that something doesn’t look right. Also known as an underreporter inquiry, it is notification that the income information the agency has received about you via forms like your W-2 and any 1099s does not match the information you’ve provided on your tax return. It can also point to issues the agency has regarding credits or deductions that you’ve taken. In addition to detailing those discrepancies, it will also suggest the amount of tax that you owe based on the new information and the amount of penalty that the agency has calculated would be appropriate based on the information they have.

A CP2000 notification is not the final word on monies owed or penalties. These notifications are computer-generated, and the system is not considered infallible. Taxpayers can file appeals arguing against both the determination and the penalties, and these appeals frequently address the situation completely or significantly reduce the amount owed. But they do need to be answered.

What should you do if you receive a CP2000 Notice?

Take a deep breath, a CP2000 notice is no reason for panic, but it is definitely a reason to reach out to our tax office. That’s because there is a specific process that needs to be followed, and it must be completed within the time frame that the IRS dictates. At its core the process involves investigation and response, but the steps are more complicated than that. If you’re a current client, contact our office so we can help you with these steps. If you aren’t a client yet, it’s highly recommended that you contact us and don’t try to undergo this complex process alone:

• 

  Determine whether you do, in fact, owe the taxes that the IRS has indicated that you owe. To do that you’ll need to retrieve all of the documents and statements that you’ve received under your Social Security Number for the year to make sure that you included everything on your tax return. 

• If you find that you failed to include all income, you’ll need to recalculate your taxes, determining whether the missed information impacts deductions or credits that you’re owed or that you took. This calculation can then be compared to the number that the IRS provided for both the taxes you owe and the penalty that has been suggested.
   
• If you believe that the IRS calculation is correct, respond using the form provided, including any monies owed. If the amount exceeds your ability to pay at the moment, the IRS provides the ability to ask for an installment agreement. 

• If you believe that the IRS calculation is wrong or only partially correct, you will need to provide documentation of why and submit that information to the agency. If some of their information is correct and your tax return needs to be modified, include the corrected return. Note that there is a difference between a corrected return – which is what you should use – and an amended return. Once the IRS reviews your corrections, they will either accept them and make the correction on your behalf or reject your response. 

• If you agree that errors existed and want to discuss the penalties proposed by the IRS, the underreporter notice response can be used for these purposes. 

• Await a response from the IRS. If you have not heard back in eight weeks, you can either call to determine the outcome of your case or check online to see whether a resolution has been noted. If the agency denies your response you are able to file an appeal. 

If you need professional help

Receiving a CP2000 notice is intimidating, and seeking professional assistance with the process is a smart move. If you’d like our help with responding, start by gathering the following: a copy of the notice and the associated tax return; tax returns from the year before and after the return the notice was sent about; copies of any responses that you’ve submitted and any other CP2000 notices you’ve received in the past; and any documents associated with deductions or expenses related to the subject of the CP2000. With those things in hand, contact us and set up a time to discuss your situation.

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

According to Law360, A Florida woman is eligible for relief from joint tax liability with her former husband for tax years 2006 through 2008, the U.S. Tax Court held on June 6, 2022 in Jan E. Pocock v. Comm', docket numbers 2558-17 and 23569-17L, U.S. Tax Court.

Jan Pocock qualified for innocent spouse relief from joint liability for those years under Internal Revenue Code Section 6015(f), the Tax Court said. The Tax Court concluded that the liabilities at issue were attributable to her ex-husband, and Jan Pocock hadn't engaged in asset transfers with him as part of a fraudulent scheme and she hadn't been a knowing participant in the filing of fraudulent joint returns.

The court said that not granting her relief would cause Jan Pocock economic hardship and under the circumstances, trying to investigate the accuracy of the returns would've risked her safety because she suffered spousal abuse.

 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