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New Amendments to Swiss-US Tax Treaty Enter Into Force on Sept. 20

September 23, 2019

On July 31, 2019 we posted Senate OKs Tax Treaties With Spain, Japan, Switzerland & Luxembourg, where we discussed that the U.S. Senate on July 17, 2019 approved three bilateral tax treaties with Switzerland, Luxembourg and Japan, one day after approving a treaty with Spain.
Now according to Law360, amendments to the U.S.-Switzerland tax treaty providing for mandatory arbitration of double-tax cases and exchanges of information, and eliminating the distinction between tax evasion and tax fraud, entered into force on September 20, 2019, the Swiss government said in a press release.
The exchange of documents between the two countries marked the end of a decade-long wait for final ratification, according to statements from Switzerland and the U.S. The press release from the U.S. also noted that a treaty with Luxembourg had entered into force.

The instruments of ratification of the protocol of amendment on taxation of income were exchanged by Daniela Stoffel, Swiss state secretary for international finance, and by the U.S. ambassador to Switzerland, Edward McMullen.

 
"The Protocol, Which Entered Into Force On The Same Day, Represents A Milestone In Tax Relations Between Switzerland And The USA," Said The Statement Issued By The Swiss International Finance Secretariat. 

It said that the two countries had in fact signed the protocol of amendment on Sept. 23, 2009, with the aim of revising the 1996 double tax agreement. The Swiss approved the protocol on June 18, 2010, but the U.S. Senate, which is responsible for ratification in the U.S., didn't approve the measure until July 17 of this year. The Swiss treaty passed by a 95-2 vote in the U.S. Senate, ending years of blockage led by Sen. Rand Paul, R-Ky.

“The core element of this revision is the exchange of information. There is no longer any distinction between tax evasion and tax fraud, neither for individual nor for group requests,” the Swiss press release said. “This is in line with the international standard on the exchange of information upon request, which Switzerland applies to more than 100 states and territories, but not to date to the USA.”
 
 
The Release Said That Requests For Information Could Be

Made As Of Friday, and That Requests For Financial

Accounts Must Involve Cases That Have Occurred Since

The Signing Of The Protocol Of Amendment,

Meaning Sept. 23, 2009.

 
The release added that with respect to the Foreign Account Tax Compliance Act, group requests are admissible for cases from Jun. 30, 2014. Dividends to individual pension institutions are exempt from withholding tax from Jan. 1, 2020.

The mandatory arbitration clause will ensure that “double taxation is avoided even in cases where the competent authorities cannot reach agreement in the mutual agreement procedure,” the statement said. The Swiss release said that the entry into force of the protocol paves the way for additional revision of the double-taxation agreement.

“The aim of such a revision is to make further improvements, which take account of developments since the DTA was signed in 1996,” it said.

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Read more at: Tax Times blog

Senate Committee Approves Budget Calls For $11.5B In IRS Funding Up $200 Million From 2019 Budget!

September 20, 2019

On March 20, 2019, we posted 2020 Budget Calls For $11.5B In IRS Funding Up $200 Million From 2019 Budget!, where we discussed that President Donald Trump’s budget for fiscal year 2020 calls for $11.5 billion in funding for the Internal Revenue Service, up from $11.3 billion in the current fiscal year and that a slight $200 million increase in the Internal Revenue Service budget does little to make up for $845 million in lost funding over the last 10 years,” the union said in a statement.
 

 

Now the Senate Appropriations Committee on September 19, 2019 voted to advance the FY2020 Financial Services and General Government Appropriations Act, which funds the U.S. Treasury Department and the IRS. The measure provides $11.414 billion for the IRS, including $200 million more than the FY2019 enacted level for enforcement activities to address the tax gap.

The Senate funding for IRS, however, falls short of the House-passed Financial Services and General Government Appropriations Act, 2020 (H.R. 3351) which would provide $12 billion for the IRS, nearly a $700 million increase from the FY2019 enacted level. 

In addition, the Senate bill includes:
  • A prohibition on IRS funds for bonuses or to rehire former employees unless employee conduct and tax compliance is given consideration;
  • A prohibition on funds for the IRS to target groups for regulatory scrutiny based on their ideological beliefs;
  • A prohibition on funds for the IRS to target individuals for exercising their First Amendment rights. 
 
Have an IRS Tax Problem? 
 
   
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Read more at: Tax Times blog

TIGTA Reports That Billions of Dollars in Non-Filer Employment Taxes Went Unassessed

September 19, 2019

Final Report issued on September 16, 2019, Highlights of Reference Number:  2019-30-069 to the Commissioner of Internal Revenue. 
When a taxpayer that has a filing requirement fails to file a tax return, the IRS is authorized under Internal Revenue Code Section 6020(b) to determine and assess a tax liability.  For certain business nonfilers with unfiled employment tax returns, the IRS can systemically prepare a substitute return using the Automated 6020(b) [A6020(b)] program. 
The Nonfiler Case Creation Process For Business Returns Has Been Declining Since FY 2011 And Virtually Stopped In October 2016 Due To Significant Reductions In Staffing.

The creation of fewer nonfiler cases resulted in a reduction of potential inventory to select work from for the A6020(b) program.  Because of resource limitations, A6020(b) program new case starts have been declining since FY 2014 and were halted November 7, 2016.  As a result, the A6020(b) program secured fewer returns and collected less revenue on a portion of employment tax nonfiler cases during the time period that new cases were not started.
High-dollar nonfiler employment tax cases currently have to be manually assigned to the A6020(b) program to be worked, due to a low dollar threshold used for systemic assignment.  If the IRS removed the dollar threshold associated with systemic and manual case selection, hundreds of thousands of high-dollar cases could be worked by the A6020(b) program.
TIGTA identified 243,210 standalone nonfiler employment tax modules (taxpayers with unfiled tax returns but no balances due) that were assigned to other Collection functions as of January 2019. 

If The IRS Assigned The Top 86,554 Modules To The Program, Based On The Highest Dollar Proposed Assessments, The IRS Could Potentially Assess More Than $10.2 Billion and Potentially Collect More Than $3.3 Billion.

From A6020(b) cases closed between FYs 2011 and 2017, TIGTA also identified 6,784 cases for which the A6020(b) program did not post a tax assessment when it should have, resulting in a loss of proposed assessments of $19.7 million and potentially $6.4 million of revenue collected.

TIGTA made six recommendations, including that the IRS consider: 
  1. allocating additional resources to the A6020(b) program for FY 2020;
  2. updating the systemic and manual case selection criteria to work high-dollar cases;
  3. transferring the highest dollar standalone nonfiler inventory from other Collection functions to be worked by the A6020(b) program; and
  4. implementing system fixes to ensure that A6020(b) default assessments post as they should.
In response to the report, IRS management agreed with three of six recommendations and plans to take corrective action.  Click her to view the report, including the scope, methodology, and full IRS response.
 
Have Payroll Tax Problems?
 
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Marini & Associates, P.A. 
 
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or Toll Free at 888-8TaxAid (888 882-9243). 
 
 
 
 
 
 

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TIGTA Identified Some Improvements Necessary in CDP Appeals.

September 11, 2019

 

REVIEW OF THE OFFICE OF APPEALS COLLECTION DUE PROCESS PROGRAM

Final Report issued on September 6, 2019. Highlights of Reference Number:  2019-10-058 to the Commissioner of Internal Revenue.
IMPACT ON TAXPAYERS
The Collection Due Process hearing provisions are designed to give taxpayers an opportunity for an independent review to ensure that the levy action that has been proposed or the Notice of Federal Tax Lien that has been filed is warranted and appropriate.  An effective process is necessary to ensure that statutory requirements are met and taxpayers’ rights are protected.
WHY TIGTA DID THE AUDIT
This audit was initiated because TIGTA is statutorily required to determine whether the IRS complied with the required procedures under 26 United States Code Sections 6320 and 6330 when taxpayers exercised their rights to appeal the filing of a Notice of Federal Tax Lien or the issuance of a Notice of Intent to Levy.
WHAT TIGTA FOUND
Appeals properly informed taxpayers that Collection Due Process and Equivalent Hearings were conducted by an impartial hearing officer with no prior involvement with the tax or tax periods covered by the hearing.  However, TIGTA identified some errors that were similar to errors identified in prior reports.  Specifically, the Office of Appeals did not always classify taxpayer requests properly, and as a result, some taxpayers received the wrong type of hearing.  TIGTA reviewed a statistically valid stratified sample of 140 cases and identified nine taxpayer cases that were misclassified.  This is approximately the same number of misclassified cases that were identified in the prior year’s review.
Based on the same stratified sample, TIGTA determined that the Collection function did not timely process the hearing requests for an additional five taxpayers.  When taxpayers mail or fax their hearing request to the wrong Collection function location, Collection function procedures require employees to fax the taxpayer’s request to the appropriate Collection Due Process Coordinator at the correct location on the same day.  While the Office of Appeals provided taxpayers with the correct hearing type in these cases, the Collection function did not follow procedures.  As a result, the IRS may not have adequately protected the taxpayers’ rights due to the untimely processing of the misdirected hearing requests.
In addition, TIGTA continued to identify errors related to the determination of the Collection Statute Expiration Date (CSED) on taxpayer accounts.  TIGTA identified eight taxpayer cases that had an incorrect CSED.  For five taxpayer cases, the IRS incorrectly extended the time period, allowing the IRS additional time to collect delinquent taxes.  In the remaining three taxpayer cases, the IRS incorrectly decreased the time to collect the delinquent taxes.  Overall, this is approximately the same number of CSED errors that were identified in the prior year’s review.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the Director, Collection, take action to provide reasonable assurance that Collection function personnel forward misdirected Collection Due Process and Equivalent Hearing requests to the correct location on the same day the requests are received.  TIGTA also recommended that the Chief, Appeals, update the inaccurate CSEDs for the eight taxpayer accounts that TIGTA identified with CSED errors.  IRS management agreed with both recommendations and plans to take appropriate corrective actions.
 
READ THE FULL REPORT
To view the report, including the scope, methodology, and full IRS response, go to: https://www.treasury.gov/tigta/auditreports/2019reports/201910058fr.pdf.
 
Need to Appeal and IRS Tax Levy?
 
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

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