Category Archives: From Live Blog

On May 14, 2019 we posted Available IRS Payment Plans - Part I, where we discussed that for the 2019 filing season, the IRS projects that more taxpayers than ever will file and owe and that many will be able to pay, but a lot of them will need to make other arrangements because they can’t pay their full tax bills to the IRS. We also discussed that the IRS has three simplified payment plans:

• Guaranteed Installment Agreements (GIA): 36-month payment terms for balances of $10,000 or less.
• Streamlined Installment Agreements (SLIA): 72-month payment terms for balances of $50,000 or less.
• Streamlined Processing for Balances Between $50,000-$100,000: 84-month payment terms for balances between $50,000 and $100,000.

Here we would like to discuss a few other tips related to these simple agreements:

1. Avoid a tax lien – pay down the balance to get into a SLIA. Here’s the best plan for taxpayers who owe more than $50,000: Get an extension to pay of up to 120 days, get funds to pay the balance down to under $50,000, and obtain a SLIA. Doing so will avoid the filing of a tax lien.

2. For SLIA, it’s the “assessed” balance – not the total amount owed. The $50,000 SLIA threshold is based on the taxpayer’s assessed balance – not the total amount they owe. The assessed balance includes tax, assessed penalties and interest, and all other assessments for each tax year. It doesn’t include accrued penalties and interest after the original assessment. For example, if a taxpayer’s original assessment is under $50,000 for an older tax year, he may accrue additional penalties and interest that puts the total balance over $50,000. In this situation, they would still qualify for a SLIA based on the original assessed balance. Taxpayers can also designate payments to reduce their “assessed balance only” to help them qualify for a SLIA.

3. Apply and pay automatically to reduce fees. The IRS increases installment agreement setup fees if taxpayers pay by check. Reduce the setup fee by agreeing to automatic direct debit payments. Automatic payments also avoid a monthly reminder letter from the IRS about the payment due.

4. Pay by direct debit or payroll deduction to avoid default. IRS installment agreements have a high default rate. To avoid a default, taxpayers must make their monthly payments. The best way to avoid missing a payment is to have the payment automatically deducted from the taxpayer’s financial accounts.

5. Don’t owe again. The second most common cause of defaulted installment agreements is filing future tax returns with unpaid balances. Taxpayers need to change their withholding and/or make estimated tax payments to avoid owing taxes that they can’t pay in the future.

6. Taxpayers can miss one payment a year. Most IRS payment plans allow taxpayers to miss one payment per year and not default. It’s best for the taxpayer to notify the IRS in advance if they can’t make a payment.

7. If the taxpayer’s financial situation worsens, get an ability-to-pay plan. Taxpayers can always renegotiate their payment plans if their financial circumstances change. For example, if a taxpayer loses their job, they may not be able to pay the IRS. In these cases, the taxpayer can contact the IRS and provide documentation on their ability to pay. This may mean a lower payment or even payment deferral (called currently not collectible status). Be careful here: If the taxpayer owes more than $10,000 and can’t pay within 72 months, the IRS is likely to file a tax lien.

8. Remember to ask for penalty abatement at the end of the plan. One important action to take at the end of a payment plan is to request abatement of the failure to pay penalty. Taxpayers should consider using first-time abatement or reasonable cause abatement if they qualify.

Each year, more than 3 million taxpayers get into a payment plan with the IRS. With tax reform, we can expect that more taxpayers will need a payment plan in 2019. Taxpayers who owe less than $100,000 should first look at 36-, 72-, or 84-month payment plans with the IRS. Many will also benefit from the help of a qualified tax professional to find the best option.

  

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:

accountingTODAY

IRS.gov
 

Previously we posted on August 1, 2013 Federal Courts Authorize John Doe Summonses Seeking Identities of Credit Card Use For Norweign Tax Authority!  where we discussed that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California had entered orders authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway.  

Now the DOJ, petitioned the U.S. District Court for the Western District of North Carolina to authorize IRS summonses to uncover the identities of Finnish residents using U.S.-issued payment cards in Finland. The DOJ and IRS are pursuing this matter under the U.S.-Finland tax treaty and at the request of the Finnish government.

“Yesterday’s effort reflects that the U.S. will return this help by working under the law with tax administrators in other nations to help them in their fight against tax evasion and avoidance. A global economy should not be allowed to serve as a possible vehicle for tax evasion in any country.”

The petition states: "Finnish taxpayers may use fo's reign payment cards in an attempt to avoid reporting income and paying Finnish income tax. Such Finnish residents divert income to a U.S. bank, maintain an account there, and use the account to make purchases in their home country through payment cards issued by the U.S. bank."

The Court granted the request, authorizing the IRS to serve "John Doe" summonses to identify the individuals who hold three payment cards issued by Bank of America, Charles Schwab and TD Bank. Each of the cards was used to make withdrawals and purchases in Finland worth between $85,000 and $135,000 in the period from 2013 to 2014.

The DOJ stated that it does not allege that Bank of America, Charles Schwab or TD Bank violated any U.S. or Finnish laws with respect to the card accounts. 

 

Becoming A Believer That Fiscal Transparency Really Exists?

 

Have Undeclared Income from an Offshore Account?

Want to Know if the OVDP Program is Right for You?

 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

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Now that Tax return filing season has just past, a recent US Court of Appeals for the Fifth Circuit decision, Haynes v. United States, No. 17-50816 (5th Cir. Jan. 29, 2019), indicates that many of those taxpayers will face uncertainty if their returns are late due to preparer errors or technological issues when electronically filed (e-filed).

The court in Haynes declined to rule on whether the Supreme Court decision in United States v. Boyle, 469 US 241 (1985), applied to e-filing a tax return. The court instead remanded the case to resolve factual issues.

To exacerbate this uncertainty or solidify the IRS' continue position that United States v. Boyle, 469 US 241 (1985), should be applied to not allow reasonable cause for taxpayers who rely on their accountant to e-file their return, unless they request proof of e-filing; the government notified the court that the IRS had refunded the late-filing penalty at issue, effectively mooting the case and leaving this issue unresolved.

Internal Revenue Code Section 6651(a)(1) excuses a taxpayer from penalties for failure to file a return on time if they show the failure was “due to reasonable cause and not due to willful neglect.”

In Boyle, an estate executor hired an experienced lawyer to prepare estate tax returns, but the lawyer failed to put the filing date on the calendar. Nevertheless, the court held that determining a deadline and meeting it did not require any special skills, and therefore relying on an agent was unreasonable. Accordingly, the Court in Boyle did not excuse late filing, and the taxpayer was subject to penalty.

How Boyle applies to e-filing original tax returns remains an open question; as Boyle was decided in 1985 when e-filing did not exist. In late February, the taxpayer in Haynes filed a petition for rehearing with the Fifth Circuit, specifically focusing on the application of Boyle.

However, during the week of March 4, 2019, the government notified the court that the IRS had refunded the late-filing penalty at issue, effectively mooting the case.

This Open Question For Now.

 

As reflected in the Boyle case, it is still the IRS's position that Boyle controls e-filing and failure of the taxpayer to request and obtain confirmation of e-filing, is negligence on behalf of the taxpayer, which voids the reasonable basis argument. Really?

A court tackling this issue in today’s e-commerce environment may likely come up with different reasoning on how “reasonable cause” should apply when an original return is e-filed. The Electronic Tax Administration Advisory Committee found 79.9 percent of major return types were filed electronically in 2017.

Over the last few years, the Internal Revenue Service (IRS) has required e-filing for an ever-increasing number of returns. Currently, all “specified return preparers” must e-file. This definition includes anyone who accepts compensation to prepare returns and expects to file more than 10 returns per year.

Taxpayers who use “specified return preparers,” i.e., almost any paid return preparer, must rely on the preparers to e-file their returns. Even those taxpayers who use over-the-counter software to file their own returns rely on intermediaries to transmit the return to the IRS. Taxpayers may face risks even if these intermediaries operate properly. To process returns, the IRS relies on some of the oldest computer systems in the federal government and this risk/reliance was illustrated in the 2018 system crash on the last day of filing season.

The Current State Of The Law Has Not Kept Pace With Our Digital Economy.

 

 

The Ever-Increasing Reliance On E-Filing Presents Numerous Questions That Are Not Adequately Addressed

In Cases Like Boyle.

At the center of this quandary is whether a taxpayer can have reasonable cause where he relies upon a third party to perform a ministerial act, like e-filing an original tax return. A negative response will thwart the efficiencies gained by technology. A positive response will usher in a whole host of proof issues surrounding how to show that the taxpayer reasonably relied on the third-party agent.

Even the Taxpayer Advocate has addressed this issue in its 2018 Annual Report to Congress: 

"In several cases, taxpayers argued they had reasonable cause for failure to file their tax returns due to alleged malfunctions in their tax return electronic filing software. The courts uniformly rejected this defense.45 

In Spottiswood v. United States, married taxpayers attempted to file their joint income tax return electronically using TurboTax software.46 The IRS rejected taxpayers’ return because the social security number and last name of a dependent on the return did not match the IRS’s records.47 TurboTax informed the taxpayers of the electronic filing rejection on or about the same day that they filed the return. However, the taxpayers did not check the email account associated with their TurboTax account, nor did they use the "check e-file status" TurboTax screen to confirm the IRS had accepted their return until many months later.48 As a result, the court held that the taxpayers failed to establish reasonable cause for failing to file a return.49

Circumstances suggesting reasonable cause are typically outside the taxpayer’s control.50 In Haynes v. United States, taxpayers argued that the failure of the tax software to notify them when the IRS rejected their return was a circumstance beyond their control.51 The court rejected this argument, holding that "an alleged software failure does not rise to the level of the Supreme Court’s definition of a circumstance beyond Plaintiffs’ control—disability, infirmity, objective incapacity—in Boyle."52 

Furthermore, the court noted that taxpayers had the option of filing their tax return on paper, electronically, or through any number of tax return preparers.53 The court was careful in distinguishing cases in which reasonable cause may exist when taxpayers rely on erroneous advice of counsel on a question of law.54 

Accordingly, while it may have been reasonable for the taxpayers to retain an expert accountant to electronically file their return, their decision to do so does not rise to reasonable cause for the abatement of late-filing penalties. 

This case had generated much interest in the tax practitioner community.55 On appeal, the Fifth Circuit vacated the judgment and remanded the case back to the district court, holding that it was not yet necessary to consider whether an exception to the Boyle standard should be created for taxpayers who e-file.56”

____________________________

 45 See, e.g., Spottiswood v. U.S., 121 A.F.T.R.2d (RIA) 1595 (N.D. Cal. 2018), appeal docketed, No. 18-16103 (9th Cir. June 14, 2018); Haynes v. U.S., 119 A.F.T.R.2d (RIA) 2202 (W.D. Tex. 2017), vacated and remanded, No. 17-50816 (5th Cir. Jan. 29, 2019).

46 Spottiswood v. U.S., 121 A.F.T.R.2d (RIA) 1595 (N.D. Cal. 2018), appeal docketed, No. 18-16103 (9th Cir. June 14, 2018).

47 Id.

48 Id.

49 Id. 

50 McMahan v. Comm’r, 114 F.3d 366, 369 (2d Cir. 1997) (citation omitted), aff’g T.C. Memo. 1995–547.

51 Haynes v. U.S., 119 A.F.T.R.2d (RIA) 2202 (W.D. Tex. 2017), vacated and remanded, No. 17-50816 (5th Cir. Jan. 29, 2019).

52 Haynes v. U.S., 119 A.F.T.R.2d (RIA) 2202, 2017 U.S. Dist. LEXIS 106252, at *27-28 (W.D. Tex. 2017) (citing U.S. v. Boyle, 469 U.S. 241, 250 (1985)), vacated and remanded, No. 17-50816 (5th Cir. Jan, 29, 2019).

53 Haynes v. U.S., 119 A.F.T.R.2d (RIA) 2202 (W.D. Tex. 2017), vacated and remanded, No. 17-50816 (5th Cir. Jan. 29, 2019).

54 Id. 55 See http://procedurallytaxing.com/delinquency-penalties-boyle-in-the-age-of-e-filing/ (last visited Sept. 4, 2018). The American College of Tax Counsel has filed an amicus brief in support of the taxpayers.

____________________________

Been Assessed a Late Filing Penalty For

An E-Filed Return?

 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:
 
Taxpayer Advocate Service — 2018 Annual Report to Congress

JDSUPRA

56 Haynes v. U.S., vacated and remanded, No. 17-50816 (5th Cir. Jan. 29, 2019).