Yearly Archives: 2025

Beginning with 2025 tax returns filed during the upcoming season, the IRS will automatically grant first-time penalty abatement (FTA) relief to taxpayers who meet existing eligibility requirements—meaning taxpayers no longer have to submit a formal request or call to ask for relief if they qualify.

What Automatic FTA Means

·         Qualified taxpayers (those who haven’t had similar penalties in the last three years and are otherwise tax-compliant) will have failure-to-file, failure-to-pay, and failure-to-deposit penalties automatically removed if they’re assessed on tax year 2025 or later returns.

·         Previously, practitioners or taxpayers needed to actively request this relief by contacting the IRS or filing Form 843, which will now be unnecessary for eligible cases.

Eligibility Highlights

·         Taxpayer must have filed required returns and paid or arranged to pay taxes for the year in question.

·         No similar penalties must have been assessed during the prior three years (except those abated for non-FTA reasons).

·         Applies only for certain penalty types: failure-to-file, failure-to-pay, and failure-to-deposit—not for accuracy-related or fraud penalties.

Practitioner and Compliance Impact

·         The new system will reduce administrative workload for tax professionals and speed up relief for affected taxpayers.

·         However, practitioners must ensure clients do not have prior ineligible penalties, since the IRS will use an automated evaluation—any prior penalty for the same tax type may automatically disqualify the taxpayer from abatement for the new year.

 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)

Sources

1.       https://www.reddit.com/r/taxpros/comments/1p18mjl/irs_to_automatically_apply_first_time_abatement/     

2.      https://news.bloombergtax.com/daily-tax-report/irs-to-provide-automatic-penalty-relief-next-filing-season 

3.      https://turbotax.intuit.com/tax-tips/tax-relief/irs-tax-penalty-abatement-and-relief/c0xDLC8Qm   

4.      https://longislandtaxresolution.com/irs-first-time-penalty-abatement/   

5.       https://www.taxhardshipcenter.com/blog/first-time-forgiveness-irs-qualify-apply/

6.      https://www.irs.gov/forms-pubs/about-form-843

7.       https://www.nerdwallet.com/taxes/learn/irs-penalty-first-time-abatement  

8.      https://scltaxlaw.com/irs-penalty-abatement-complete-guide/

9.      https://www.irs.gov/payments/administrative-penalty-relief

10.   https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill

11.    https://www.jdsupra.com/legalnews/a-big-beautiful-break-irs-gives-8447857/

12.   https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-milton-various-deadlines-postponed-to-may-1-2025-in-all-of-florida

13.   https://www.irs.gov/payments/penalty-relief-for-reasonable-cause

14.   https://www.thetaxadviser.com/issues/2024/jul/irs-penalties-abatements-and-other-relief/

15.    https://www.irs.gov/payments/penalty-relief

16.   https://www.reddit.com/r/taxpros/comments/1p18mjl/irs_to_automatically_apply_first_time_abatement/   

17.    https://news.bloombergtax.com/daily-tax-report/irs-to-provide-automatic-penalty-relief-next-filing-season 

18.   https://turbotax.intuit.com/tax-tips/tax-relief/irs-tax-penalty-abatement-and-relief/c0xDLC8Qm   

19.   https://longislandtaxresolution.com/irs-first-time-penalty-abatement/  

20.  https://www.nerdwallet.com/taxes/learn/irs-penalty-first-time-abatement 

21.   https://scltaxlaw.com/irs-penalty-abatement-complete-guide/

22.   https://www.reddit.com/r/taxpros/comments/1p18mjl/irs_to_automatically_apply_first_time_abatement/

23.   https://turbotax.intuit.com/tax-tips/tax-relief/irs-tax-penalty-abatement-and-relief/c0xDLC8Qm

24.  https://news.bloombergtax.com/daily-tax-report/irs-to-provide-automatic-penalty-relief-next-filing-season

25.   https://www.irs.gov/payments/administrative-penalty-relief

26.  https://www.blueandco.com/covid-irs-penalty-relief/

27.   https://www.irs.gov/payments/penalty-relief

28.  https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill

29.  https://gordonlaw.com/learn/irs-announces-automatic-penalty-relief/

30.  https://www.jacksonhewitt.com/tax-help/tax-tips-topics/penalties/five-reasons-irs-penalty-relief/

31.   https://www.nerdwallet.com/taxes/learn/irs-penalty-first-time-abatement

32.  https://www.jdsupra.com/legalnews/a-big-beautiful-break-irs-gives-8447857/

Read more at: Tax Times blog

On November 17 we posted Shall I Stay or Shall I Go? - IRS Reports That US Expatriations Rose By 50% To 1,600 In 3rd Quarter of 2025! where we discussed that The Internal Revenue Service said in its notice that the number of people who lost or renounced their U.S. citizenship totaled 1,600 in the third quarter as logged by the U.S. Treasury Department, a 50% increase from the previous quarter.

According to InterNations The Best & Worst Countries for Expats in 2025 are as follows:

• 1st for the Second Year in a Row: Panama

• Your Money Takes You Far in Colombia (2nd)

• A Welcoming Local Culture in Mexico (3rd)

Need Advise on Expatriation?

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation 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

• Are You Tired of Trump 2.0.
• That The Republicans Now Control the House & the Senate.
• Are You Sick of Liberal Democrats Trying to Revise Society.
• Are You Tired of Government Shout Downs or
• Maybe You're A Naturalized U.S. Citizen Or Permanent Resident Who Has Prospered Here, But Would Now Like To Move Back The Old Country For Retirement?

You Might Want to Consider Expatriation?

The Internal Revenue Service said in its notice that the number of people who lost or renounced their U.S. citizenship totaled 1,600 in the third quarter as logged by the U.S. Treasury Department, a 50% increase from the previous quarter.

Included on the list are those who lost U.S. citizenship under Internal Revenue Code Section 877(a) and Section 877A, according to the notice, as well as long-term residents who are treated as losing citizenship under Section 877(e)(2). 

According to CNBC the top reason why Americans abroad want to dump their U.S. citizenship include:

• Nearly 1 in 4 American expatriates say they are “seriously considering” or “planning” to ditch their U.S. citizenship, a survey from Greenback Expat Tax Services finds.  
• About 9 million U.S. citizens are living abroad, the U.S. Department of State estimates.
• More than 4 in 10 who would renounce citizenship say it’s due to the burden of filing U.S. taxes, the Greenback poll shows.

Should I Stay or Should I Go?

Need Advise on Expatriation?

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation 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

The recent Tax Court decision in Patel and McAnally Patel v. Commissioner (TCM 2024-34) delivers a decisive blow to aggressive microcaptive insurance tax planning. In this case, Dr. Sunil Patel and Laurie McAnally-Patel created two microcaptives and paid millions in premiums, claiming large deductions under IRC § 831(b).

What Went Wrong?

·         Premiums Set for Tax Advantage: The premiums paid to the captives far exceeded those for comparable commercial insurance and were calculated specifically to maximize deductions allowed under § 831(b)—not based on actuarial science or true risk.

·         Duplicative Insurance and Circular Flow: Despite setting up captives, Dr. Patel maintained ordinary commercial insurance and paid both sets of premiums, leading the court to find the captive arrangement had no meaningful economic effect aside from tax reduction.

·         Failed Economic Substance Tests: The arrangement failed both the objective and subjective prongs of the economic substance test. Objectively, there was no substantial change in the taxpayers’ economic position. Subjectively, emails and documents revealed a primary motive to reduce taxes rather than manage risk.

IRS Penalties Upheld

The IRS disallowed all deductions and imposed accuracy-related penalties. The court highlighted that the Patels did not have substantial authority for their treatment and could not defend their position by relying on promoters and advisors with a financial stake in the transactions.

Practice Takeaways

·         Tax-Favored Doesn’t Mean Safe: Even transactions explicitly incentivized by Congress (like microcaptives under § 831(b)) can be struck down if they lack economic substance.

·         Substance Over Form Prevails: Deductions for insurance premiums must reflect legitimate risk management, not simply an effort to lower income taxes.

·         Penalties Are Real: The IRS and courts will impose harsh penalties for arrangements they consider “too good to be true” and improperly disclosed on returns.

This decision should serve as a cautionary tale for taxpayers and advisors considering microcaptive insurance structures. Rigorous compliance with both tax law and the economic substance doctrine is the only way to ensure legitimate tax benefits.

 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)

Sources:

1.       https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner        

2.      https://www.lw.com/admin/upload/SiteAttachments/Tax-Court-to-Consider-Relevancy-Threshold-for-Economic-Substance-Doctrine-Under-Section-7701o.pdf   

3.      https://www.westerncpe.com/tax-cases-you-should-know/sunil-s-patel-and-laurie-mcanally-patel-v-comm-tcm-2024-34/  

4.      https://www.carltonfields.com/api/pdf?url=https%3A%2F%2Fwww.carltonfields.com%2Finsights%2Fblogs%2Freinsurance-focus%2Fmigrated%2Ftax-court-upholds-irs-decision-that-premiums-paid-to-microcaptive-insurance-companies-did-not-qualif&fileName=Tax_Court_Upholds_IRS_Decision_That_Premiums_Paid_to_Microcaptive_Insurance_Companies_Did_Not_Qualify_for_Tax_Deductions.pdf 

5.       https://www.jdsupra.com/legalnews/tax-court-upholds-irs-decision-that-4663424/

6.      https://case-law.vlex.com/vid/patel-v-comm-r-1028486785  

7.       https://www.velaw.com/insights/planning-for-irs-audits-in-an-era-of-uncertainty/

8.      https://www.irs.gov/pub/irs-aod/AOD-2012-05.pdf 

9.      https://www.actconline.org/wp-content/uploads/2024/09/20240906_Amicus_Brief_Patel_v_Commissioner.pdf 

10.   https://www.ntu.org/foundation/detail/ntuf-urges-tax-court-to-limit-economic-substance-doctrine-on-captive-insurance-companies 

11.    https://documents.nam.org/law/amicusbriefs/2024/Patel_v_Commissioner_TaxCourt_082324.pdf

12.   https://taxlawcenter.org/files/FINAL-Amicus-Brief-of-The-Tax-Law-Center.pdf

13.   https://www.law360.com/tax-authority/articles/1873218/chamber-backs-doctor-in-tax-court-economic-substance-suit

14.   https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner     

15.    https://www.forbes.com/sites/jayadkisson/2024/04/06/another-taxpayer-microcaptive-blowout-loss-in-patel/    

16.   https://www.ntu.org/foundation/detail/ntuf-urges-tax-court-to-limit-economic-substance-doctrine-on-captive-insurance-companies 

17.    https://ams.law/micro-captive-insurance/

18.   https://www.velaw.com/insights/planning-for-irs-audits-in-an-era-of-uncertainty/

19.   https://taxlawcenter.org/blog/an-important-tool-to-fight-aggressive-tax-planning-is-under-review-at-the-tax-court-7fca500b4186

20.  https://www.millerchevalier.com/publication/tax-court-requests-amicus-briefs-esd-patel

21.   https://documents.nam.org/law/amicusbriefs/2024/Patel_v_Commissioner_TaxCourt_082324.pdf

22.   https://lawquill.com/how-to-write-the-best-blog-titles-for-seo/

23.   https://www.forbes.com/sites/jayadkisson/2024/04/06/another-taxpayer-microcaptive-blowout-loss-in-patel/

24.  https://www.currentfederaltaxdevelopments.com/blog/2025/11/12/examining-penalties-in-microcaptive-transactions-patel-v-commissioner

25.   https://www.taxcontroversy360.com/2021/12/types-of-tax-court-opinions-and-their-precedential-effect-updated/

26.  https://forwardpush.com/blog/25-content-ideas-for-tax-attorneys/

27.   https://www.matheranderson.com/blog/btl

28.  https://www.twrblog.com/category/court-cases/

29.  https://wagnertaxlaw.com/blog

30.  https://www.chamberlainlaw.com/tax-blawg/tag/tax-court

31.   https://taxschool.illinois.edu/style-guide/

Read more at: Tax Times blog