Category Archives: criminal tax law

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

As an IRS practitioner you may have seen Issue Number IR-2021-83 Stating that the IRS reminds holders of foreign Bank accounts that the FBAR deadline remains April 15:

The FBAR is an annual report, due April 15 following the calendar year reported and the extension of the federal income tax filing due date and other tax deadlines for individuals to May 17, 2021, does not affect the FBAR requirement. 

However, you’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.

                                                                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

The Tax Court has determined in Rowan, (2021) 156 TC No. 8, that the IRS properly certified to the Treasury Secretary that a taxpayer’s tax debt was “seriously delinquent.” The Tax Court found that Code Sec. 7345 does not run afoul of the Fifth Amendment Due Process Clause or the Universal Declaration of Human Rights because it merely provides for the certification of certain tax-related facts; it does not restrict in any manner the right to international travel.

IRC Sec. 7345 authorizes the IRS to send to the Treasury Secretary a certification that an individual has a “seriously delinquent tax debt.” With certain exceptions, a “seriously delinquent tax debt” is an individual’s unpaid, legally enforceable federal tax liability, which has been assessed and which is greater than $50,000 (adjusted for inflation) and with respect to which the IRS has filed a Notice of Lien (for which the collection appeals rights have been exhausted or lapsed) or issued a Levy. (IRC Sec. 7345(b)). 

IRC Sec. 7345(d) requires the IRS to contemporaneously notify a taxpayer of any certification. Once IRS notifies a taxpayer that a Code Sec. 7345(a) certification has been made, the taxpayer may challenge that certification in a civil action filed either in the Tax Court or in a federal district court. The court first acquiring jurisdiction over a certification challenge has sole jurisdiction over that action. (Code Sec. 7345(e)(1))

For more than two decades, Dr. Robert Rowan (“Rowan”) failed to pay his federal taxes. Rowan, a U.S. citizen, is a medical doctor licensed to practice in California. He frequently travels to developing countries to offer medical services free of charge to populations that would not otherwise have access to adequate medical care. He also has family members in Singapore and mainland China, where he travels for personal reasons.

After Rowan ran up a $474,846 unpaid tax bill, which the IRS tried to collect without success, the IRS certified to the Treasury Secretary that he had a seriously delinquent tax debt (“certification”). In turn, the Treasury Secretary notified the SOS of the certification. 

Rowan held a valid passport when the certification was made, and as of August 2020, the SOS had not taken any action to revoke Rowan’s passport. 

When Rowan received notice of the certification, he petitioned the Tax Court to determine that the IRS’s certification of his tax debt as "seriously delinquent" was invalid.

Rowan claimed that IRC Sec. 7345 is unconstitutional because it infringes on the right to international travel and, therefore, violates the Due Process Clause of the Fifth Amendment to the U.S. Constitution. Rowan also claimed that IRC Sec. 7345 violated his human right to travel under the Universal Declaration of Human Rights (UDHR). 

The IRS responded that it did not err in certifying Rowan’s tax liabilities as seriously delinquent tax debt because: (1) IRC Sec. 7345 is constitutional; (2) UDHR can't be used to invalidate IRC Sec. 7345; and (3) his tax debts are enforceable.

In This First Case To Consider The Merits of a IRC Sec. 7345 Certification, The Tax Court Agreed With The IRS
That It Did Not Err In Certifying Rowan’s Tax Liabilities
As Seriously Delinquent Tax Debt.

The Tax Court rejected as meritless Rowan’s claims that Code Sec. 7345 is unconstitutional because it infringes on his right to international travel.

The Court held that a plain reading of the text of IRC 7345 shows that it doesn’t impose any restriction on international travel, but merely provides a way for the IRS to certify the existence of a seriously delinquent tax debt and for the Treasury Secretary to transmit that certification to the SOS. All passport-related decisions are left to the SOS and the SOS’s authority to revoke a passport doesn’t derive from IRC Sec. 7345, so IRC Sec. 7345 doesn't restrict the right to international travel.

Similarly, the Court summarily rejected Rowan’s arguments regarding the UDHR. Because IRC Sec. 7345 does not impose a limit on the right to travel, the UDHR's protection of the right to travel as a "human right" cannot provide any ground for invalidating the IRS’s certification of Rowan's tax debt as seriously delinquent under IRC Sec. 7345.

Finally, the Court found that the IRS produced Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for Rowen’s tax years at issue. These and other documentation in the record showed that the period of limitations on collection remained open for all relevant years. Therefore, Rowan's tax debts were enforceable. 

The Court noted that the constitutionality of the authority granted to the SOS by FAST Act section 32101(e) was not an issue in the case and, therefore, the Court expressed no view on that issue.

                                                                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) 

Source  

Thomson Reuters

Read more at: Tax Times blog

TIGTA Issued a report entitled Results of the 2020 Filing Season and Effects ofCOVID-19 on Tax Processing Operations which found that unprocessed individual returns, as well as the additional returns and correspondence in the Error Resolution, Rejects, and Unpostables functions and the Accounts Management inventory, include returns, etc. for taxpayers who still have not received their tax year 2019 tax refunds.

As of December 25, 2020, the IRS had more than 11.7 million paper-filed individual and business returns that still needed to be processed. The backlog of returns, correspondence, and other types of work resulting from the pandemic has and will continue to have a significant impact on the associated taxpayers. For example, the unprocessed individual returns, as well as the additional returns and correspondence in the Error Resolution, Rejects, Unpostables functions and the Accounts Management inventory, include taxpayers who have yet to receive their Tax Year 2019 tax refunds. 

The IRS’s ability to resolve these backlogs could be affected by the need to divert resources to issue additional Economic Impact Payments or an unforeseen closure of IRS Tax Processing Centers due to the pandemic. The ability of these taxpayers to contact the IRS to receive updated information about the status of their refunds is a further challenge as staffing issues continue to hinder the IRS’s ability to provide adequate customer service. 

Much of The Work Performed at The IRS’s Tax Processing Centers is Not Conducive To a Telework Environment.

This work includes the receiving, sorting, and distributing of mail and the processing of paper tax returns, which requires manually inputting information from the tax return into IRS systems, correcting errors, and corresponding with the taxpayer, if needed. 

As of November 14, 2020, the IRS had more than 2.9 million pieces of unopened mail and 4.7 million individual paper tax returns to process. In addition, the IRS had more than 600,000 returns in its Error Resolution inventory, nearly 3.7 million cases in its Accounts Management inventory, and more than 1.3 million returns in its fraud program inventories as of this same period. 

When the IRS closed its offices nationwide, it stopped answering 81 of its 87 toll-free taxpayer assistance telephone lines and closed all 358 Taxpayer Assistance Centers. In addition, 10,792 of the 11,014 Volunteer Income Tax Assistance/Tax Counseling for the Elderly partner sites remained closed as of May 24, 2020. The IRS had reopened 80 of its toll-free telephone lines as of November 5, 2020, and 263 of its Taxpayer Assistance Centers as of November 16, 2020. 

 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