Category Archives: criminal tax law

The IRS Independent Office of Appeals (“Appeals”) has issued a procedural memo,  AP-08-0321-0009: Memorandum for Required Use of Virtual Conferences, that requires Appeals employees to offer a virtual conference to taxpayers who request an in-person conference that can't be accommodated. Offering a virtual Appeals conference previously wasn't required in this situation. 

Most taxpayers with an active tax controversy can request a conference with Appeals to try to settle their tax controversy. (Code Sec. 7803(e)(4))

This new procedural memo requires Appeals employees to offer taxpayers a “virtual conference” in certain circumstances. 

For example, an Appeals employee is required to offer and conduct a virtual conference if the taxpayer (or their representative) has requested one. In addition, the Appeals employee should offer a virtual conference if the taxpayer (or their representative) has requested an in-person conference, but that request can’t be accommodated by Appeals.

Prior to COVID, Appeals would generally hold an in-person conference if a taxpayer requests one. However, Appeals stopped conducting in-person conferences at the beginning of the COVID-19 pandemic and has not yet resumed holding them. 

Appeals employees are not required to offer a virtual conference when a taxpayer (or their representative) has requested a phone or correspondence conference. In this case, the Appeals employee should use their judgment and experience to determine whether to voluntarily offer a virtual conference to that taxpayer. 

If the taxpayer declines the offer of a virtual conference, then the Appeals employee should continue with normal case processing procedures.

The Memo notes that this procedural deviation doesn't replace in-person conferences when Appeals begins holding them again. Appeals will still hold in-person conferences when Appeals can accommodate them and such conferences are appropriate. 

This guidance is effective as of March 22, 2021and will be incorporated into IRM 8.6.1 within two years of this date.

                                                                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

Internal Revenue Service officials on April 9, 2021 urged participants in abusive micro-captive insurance arrangements to exit these transactions as soon as possible (IR-2021-82). 

On March 10, 2021, the U.S. Tax Court held in Caylor Land & Dev. v. Commissioner, T.C. Memo. 2021-30 (2021), that yet another micro-captive arrangement failed to qualify as insurance for federal tax purposes. This decision follows several earlier Tax Court decisions that also confirmed the IRS’s determinations that certain micro-captive arrangements were not eligible for the claimed federal tax benefits. In Caylor, the Tax Court also sustained the IRS’s determination of accuracy-related penalties and rejected the taxpayer’s claim of reliance on tax advice.

Taxpayers who engaged in abusive micro-captive transactions are once again encouraged to consult an independent tax advisor prior to filing their 2020 tax returns. Taxpayers should consider exiting the transaction and not reporting deductions associated with abusive micro-captive insurance transactions.

“In multiple cases before the courts, judges have held that these ‘fanciful’ and ‘unreasonable’ arrangements don’t add up to insurance in the commonly accepted sense,” said IRS Commissioner Chuck Rettig. “I strongly urge participants in these arrangements to get independent legal advice separate from those who helped steer them into these abusive arrangements.”. 

In Notice 2016-66, the IRS advised that micro-captive insurance transactions have the potential for tax avoidance or evasion. The notice designated transactions that are the same as or substantially similar to transactions that are described in the notice as “Transactions of Interest.” The notice established reporting requirements for those entering into such transactions on or after Nov. 2, 2006 and created disclosure and list maintenance obligations for material advisors.

In March and July 2020, IRS issued letters to taxpayers who participated in a Notice 2016-66 transaction alerting them that IRS enforcement activity in this area will be expanding significantly and providing them with the opportunity to tell the IRS if they've discontinued their participation in this transaction before the IRS initiates examinations. Early responses indicate that a significant number of taxpayers who participated in these transactions have exited the transaction.

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

In the latest issue of A Closer Look, Andrew Keyso, Chief of the Independent Office of Appeals, discusses what taxpayers can do if they disagree with an IRS audit or collection decision. 

“I’d Like To Remind Taxpayers That They Can Have Their Case Reviewed By An Appeals Officer Who Is Independent Of The IRS Compliance Function That Made The Initial Determination In Their Case. I’m A Big Believer In A Strong Appeals Function Within The IRS,” Said Keyso.

Appeals is an independent function within the IRS, completely separate from the compliance functions responsible for collecting and assessing taxes. Appeals provides an informal forum for taxpayers who disagree with an IRS determination. Our job is to resolve tax disputes without litigation, where possible, consider each case fairly and impartially and improve public confidence in the integrity and efficiency of the IRS.

We do this by listening to taxpayers, understanding both sides (taxpayers and IRS compliance), independently evaluating all arguments and available information and identifying appropriate settlement options. 

We Have An Overall Staff Of Approximately
1,240 Employees, Mostly Appeals Officers
And Settlement Officers.

An Appeals Officer typically handles matters involving audit-related issues like penalties or additions to tax. For some complex matters, Appeals Officers may work as a team with other Appeals Officers. A Settlement Officer typically handles matters involving collection matters like whether the IRS followed proper procedures when imposing a lien or proposing a levy for unpaid taxes.

In Appeals, we work with taxpayers informally to settle tax disputes without a formal court hearing and, in most cases, without the need to hire someone to represent them. We provide taxpayers a meaningful opportunity to be heard, regardless of their educational or economic status, background or English language proficiency. In fact, the Taxpayer First Act of 2019 gives taxpayers the right to come to Appeals to dispute most IRS Compliance determinations.

Appeals is unique within tax administration, because we have the authority to compromise the amount of tax owed to resolve a dispute. 

How to Request an Appeal

Typically, appeal rights become available following a compliance action by IRS that could include an audit, penalty assessment or notice of a collection action. If you receive an IRS notice and your case is eligible for an appeal, the notice will explain your appeal rights. At that point, if you disagree with the IRS determination, you can request an appeal. The next step is to write down, either in a formal protest or simple statement, the issues with which you disagree and why. 

It’s important to remember that you should make your appeal request with the IRS compliance person who worked your case. That employee then will be able to send your appeal request, along with your case file, to Appeals. Taxpayers can also come to appeals after filing a petition in the United States Tax Court to dispute the IRS compliance action.

The Appeals Process

Once your case arrives in Appeals, we will assign it to an Appeals Officer or Settlement Officer depending on the type of case. Our goal is to have the assigned Appeals employee contact you by mail or telephone within approximately 30 days of receiving your case; however, it is taking longer these days due to pandemic-related delays and other resource constraints. 

To evaluate your case, the Appeals Officer will fully consider your position and arguments along with the administrative case file from the IRS compliance person who worked your case. You may request to view the non-privileged part of the Compliance file prior to meeting with Appeals. One of the most helpful things you can do is provide all relevant facts, documents and other information supporting your position to the IRS compliance person working your case before it comes to Appeals. 

Appeals Officers and Settlement Officers try to resolve cases after holding a taxpayer conference or by correspondence. But, some complex cases may take more than one conference to resolve. As mentioned earlier, Appeals may also consider the "hazards of litigation" or the probable outcome if your case were to go to court.

The scope and nature of our review depends on the type of case. But in all cases, the Appeals Officer or Settlement Officer will listen to your concerns and review any information or comments you present before making a final decision. 

If your case results in a decision you feel is unfavorable, we will explain the reasons for our decision and any additional options you may have. If you agree to settle your case in Appeals, we may provide you with an agreement form to sign. If you are unable to settle your case in Appeals, you may be entitled to dispute the IRS determination in the Tax Court or another Federal court. 

Recently, for non-docketed examination or collection appeals, the entire process, from the time your case is received in Appeals to the time it is resolved or closed in Appeals, takes on average 7 or 8 months.

                                                                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 Michigan federal court correctly dismissed a suit by cannabis business owners seeking to quash a third-party summons issued by the IRS requesting their companies' records because the summons aided a criminal investigation, the Sixth Circuit said Friday.

A three-judge panel determined that the summons issued to a data software company by the Internal Revenue Service seeking financial records of the various cannabis businesses that Kimberly and Richard Gaetano owned were valid to determine whether they underreported their federal taxes, according to its opinion.

The summons was essential to the agency's criminal investigation into whether the couple owed federal taxes, and the IRS proved that the summons met exceptions to the notice requirement under Internal Revenue Code Section 7609, U.S. Circuit Judge Ralph B. Guy Jr. said in the opinion.

"In sum, because the exception in Section 7609(c)(2)(E) applies, the bar of sovereign immunity remains, and subject-matter jurisdiction does not exist," Judge Guy said.

During the criminal investigation of the couple, the IRS issued a summons to the owners of Portal 42 LLC, a data software company that provides point-of-sale systems for cannabis businesses, of which the Gaetanos were clients. The summons sought the Gaetanos' records held by Portal 42 from the beginning of 2015 to Sept. 1, 2019, according to the opinion, and the couple wasn't notified of the summons by the IRS.

The Gaetanos filed suit against the IRS in 2019, requesting that the summons be quashed because they should have been notified under Section 7609, and argued that the summons was issued in bad faith.

During the lower court proceedings, the couple conceded that Portal 42 wasn't a third-party recordkeeper that required the IRS to notify the Gaetanos under an exception to Section 7609, and the IRS testified that it was investigating whether the Gaetanos underreported their federal taxes for their cannabis businesses.

The Michigan federal court determined that the IRS met the exceptions under Section 7609 that allowed the summons to be issued without notice to the Gaetanos and dismissed the couple's suit. The Gaetanos appealed that ruling, arguing that the criminal investigation conducted by the IRS was invalid because no quarterly tax period ends on Sept. 1, according to court documents.

In Its Opinion, The Sixth Circuit Affirmed That The Lower Court Correctly Determined The Summons Was Connected To The IRS’ Investigation Into Whether The Gaetanos Underreported Their Federal Tax Liability,
Per An IRS Agent’s Affidavit.

The couple also failed to prove how the summons was required to meet a four-factor test established by the U.S. Supreme Court in its 1964 decision in U.S. v. Powell stipulating when a summons is valid.

In its Powell ruling, the Supreme Court stipulated that an agency must state a legitimate purpose for seeking information outside its possession that is relevant to an investigation and proper administrative procedures must be followed.

In the Gaetanos' case, the IRS agent's testimony alone most likely would have satisfied the Powell standard, but the lower court didn't have to address the issue because it correctly dismissed the suit for a lack of jurisdiction under Section 7609, the appeals court said.

"We cannot proceed to the Powell test when Section 7609 does not confer jurisdiction over this action," Judge Guy said. "As such, the Gaetanos have placed the cart before the horse."

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