Category Archives: criminal tax law

In IRS Topic No.161 Returning an Erroneous Refund - Paper Check or Direct Deposit, the IRS explains how to return a refund that a taxpayer has received (either via paper check or direct deposit) that is in that exceeds the amount the taxpayer was entitled to receive.

The IRS says in the Tax Topic that an erroneous refund is a refund a taxpayer received that:

1. The taxpayer is not entitled to, or
2. Exceeded the refund amount the taxpayer was entitled to. 

Interest may accrue on an erroneous refund if a taxpayer (1) receives it via check and cashes the check or (2) receives it via direct deposit.

It's an erroneous refund if you receive a refund you're not entitled at all or for an amount more than you're entitled to.

If your refund was a paper Treasury check and hasn't been cashed:

1. Write "Void" in the endorsement section on the back of the check.
2. Submit the check immediately, but no later than 21 days, to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
3. Don't staple, bend, or paper clip the check.
4. Include a note stating "Return of erroneous refund check" and give a brief explanation of the reason for returning the refund check.

If your refund was a paper Treasury check and has been cashed:

1. Submit a personal check, money order, etc., immediately, but no later than 21 days, to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check. If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the assistor that you need information to repay a cashed refund check.
2. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
3. Include a brief explanation of the reason for returning the refund.
4. Cashing an erroneous refund check may result in interest due the IRS.

If your refund was a direct deposit:

1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
2. Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.
3. Interest may accrue on the erroneous refund.

When the amount of the refund (paper check or direct deposit) is different than what was expected, indicating the IRS changed the amount, a notice explaining the adjustment is mailed to your address of record. Please review the information in the notice to determine if the change to the refund is correct. A toll-free telephone number is included on the notice in case you require further assistance.
IRS mailing addresses based on the city (possibly abbreviated) located on the bottom text line in front of the words TAX REFUND on your refund check:

• ANDOVER – Internal Revenue Service, 310 Lowell Street, Andover MA 01810
• ATLANTA – Internal Revenue Service, 4800 Buford Highway, Chamblee GA 30341
• AUSTIN – Internal Revenue Service, 3651 South Interregional Highway 35, Austin TX 78741
• BRKHAVN – Internal Revenue Service, 5000 Corporate Ct., Holtsville NY 11742
• CNCNATI – Internal Revenue Service, 201 West Rivercenter Blvd., Covington KY 41011
• FRESNO – Internal Revenue Service, 5045 East Butler Avenue, Fresno CA 93727
• KANS CY – Internal Revenue Service, 333 W. Pershing Road, Kansas City MO 64108-4302
• MEMPHIS – Internal Revenue Service, 5333 Getwell Road, Memphis TN 38118
• OGDEN – Internal Revenue Service, 1973 Rulon White Blvd., Ogden UT 84201
• PHILA – Internal Revenue Service, 2970 Market St., Philadelphia PA 19104

In a memo entitled LB&I-04-0420-0009: LB&I Compliance Priorities During the COVID-19 Pandemic the IRS Large Business & International (LB&I) Division has clarified its compliance priorities for the period beginning April 14, 2020 and ending July 15, 2020.

This memorandum provides additional guidance regarding LB&I compliance activities which are postponed or allowed through July 15, 2020.

I. Activity Postponed through July 15, 2020

• LB&I will not start an examination of any new return unless it falls within Category II below.
• No time should be charged to new Discriminate Analysis Score (DAS) cases without Senior Director approval.
• Managers have discretion on prior, subsequent, and related returns associated with an existing examination.

II. Activity Continuing

•  Compliance Assurance Process, Large Corporate Compliance, FATCA, Qualified Intermediary programs and current open examinations: proceed as usual, but without in-person contact.
• New examinations arising from Voluntary Disclosure Practice cases, claims, and other pre-refund verification programs: proceed as usual, but without in-person contact.
• Work should continue on Syndicated Conservation Easements campaign, Micro Captive Insurance campaign, IRC 965 campaign and any future campaign related to the Tax Cuts and Jobs Act; but without in person contact. Existing and any new campaigns will be assessed for purposes of categorizing as postponed or allowed with clear communications to follow on which are allowed.
• Workload reviews of existing inventory will continue.
• Examiners can charge time to new cases (e.g., audit planning) where taxpayer contact will not be made until after the emergency declaration is lifted.
• Prior time limits on classification activities are suspended.
• Other consensual work initiated by taxpayers: proceed as usual, but without inperson contact, for example, Pre-Filing Agreements, Refund Claims.

While the IRS cannot anticipate and provide guidelines for every possible situation, it remains vitally important for all LB&I employees to be sensitive to the individual circumstances of taxpayers and provide them with the appropriate tax administrative actions commensurate with the taxpayer’s situation.

 

• Congo, Democratic Republic of the – January 13, 2019;
• Haiti – February 14, 2019; 
• Iraq – May 14, 2019; 
• Sudan – April 11, 2019; and
• Venezuela – January 24, 2019. 

On April 10, 2019, we posted US Taxpayers Are Receiving Automated Penalty Assessments For Late Filed Form 5471's & 5472's - We Can Help!  where we discussed that we have been receiving a many calls from businesses who have received penalty notices regarding late filed or non-filed Form 5471 & 5472's and that we discussed ways to defend against these automatic assessments and request penalty abatement including the Reasonable Cause Defense and First-Time Offender Abatement (FTA) Defense.

The same arguments are equally as effective when defending the even more egregious late filing penalties, associated with Form 3520 & Form 3520-A. 

The key to successfully having these penalties abated, more so today than ever before, is to hire an Experienced Tax Attorney, to develop the facts and distinguish adverse case law, especially when requesting penalty abatement based upon "Reasonable Cause".

Penalties for Late Filing or Failure to File Form 3520

IRC section 6677 provides for stiff penalties if Form 3520 is not timely filed or is incomplete or incorrect. The initial penalty is the greater of $10,000 or—

• 35% of the gross value of any property transferred to a foreign trust if a U.S. person fails to report the creation of or transfer to a foreign trust;
• 35% of the gross value of the distributions received from a foreign trust by a U.S. person who fails to report receipt of the distribution; and
• 5% of the gross value of all of a foreign trust’s assets treated as owned by a U.S. person under the grantor trust rules (IRC sections 671–679) if the U.S. owner fails to report required information. The owner is also subject to an additional 5% penalty if the foreign trust itself fails to file a timely Form 3520-A [“Annual Information Return of Foreign Trust With a U.S. Owner”; see IRC section 6048(b)], does not provide all required information, or provides incorrect information. 

Penalties for Late Filing or Failure to File Form 3520-A

The U.S. owner is subject to an initial penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the trust's assets treated as owned by the U.S. person at the close of that tax year if the foreign trust (a) fails to file a timely Form 3520-A, or (b) does not furnish all of the information required by section 6048(b) or includes incorrect information. Criminal penalties may be imposed under sections 7203, 7206, and 7207 for failure to file on time and for filing a false or fraudulent return.