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Weekly IRS Roundup August 24 – August 28, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 24, 2020 – August 28, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. August 24 2020: The IRS published a memorandum concerning guidance to the field on the criteria that should be applied in considering if a request for designation for litigation should be made to the Office of Chief Counsel. The memorandum also provides interim guidance on the requirements of Section 1001 of the Taxpayer First Act (TFA) with respect to the limitation on designation of cases as not eligible for referral to the IRS Independent Office of Appeals. August 25, 2020: The IRS published a Summer 2020 Statistics of Income Bulletin. The Summer 2020 Bulletin focuses individual income tax shares, 2017; foreign recipients of US income, calendar year 2017; effects of post-filing adjustments on...

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Skip Jail and Clean Up Your Tax Problems

If you have knowingly failed to report income or claimed deductions you know you are not entitled to, or just decided not to file your tax returns and pay the tax owed, you may be liable for civil penalties and even jail time for criminal tax evasion. Taxpayers with civil and criminal tax exposure may want to fix their past mistakes but are afraid of what will happen if they “come clean.” So, the majority of offenders keep offending year after year. But did you know there is an Internal Revenue Service (IRS) program that can help taxpayers get out of that “evasion” cycle, and clean up past tax issues, usually without criminal liability? The IRS has a longstanding program through which taxpayers can make voluntary disclosures of tax underreporting and tax criminal evasion. Such disclosures may help taxpayers limit their criminal exposure, although disclosure does not automatically guarantee immunity from criminal prosecution. The latest iteration of the...

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Tax Court Holds That Form 870-AD Is Not a Binding Settlement Agreement

A recent US Tax Court Memorandum Opinion held that a settlement agreement embodied in Internal Revenue Service (IRS) Form 870-AD does not preclude the IRS from reopening an audit and issuing a notice of deficiency. In Howe v. Commissioner, T.C. Memo 2020-78, the Tax Court held that equitable estoppel did not bind the Commissioner to an agreement in Form 870-AD. Only settlements that comply with Internal Revenue Code (IRC) sections 7121 and 7122 are binding on both the taxpayer and government, and an IRS Form 870-AD does not comply with those provisions. Further, the Court held that equitable estoppel did not bar the IRS from asserting a larger deficiency against the taxpayer because, even if true, the alleged failures to follow internal IRS procedures would not rise to the level of affirmative misconduct. An IRS revenue agent initially began an audit of the 2008 tax return for the taxpayer, who was CEO and majority shareholder of a healthcare company, in...

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Tax Court Holds IRS Chief Counsel Attorneys May Make Initial Penalty Determination

In general, section 6751 requires that a supervisor give written approval before penalties can be asserted against a taxpayer. In Koh v. Commissioner, T.C. Memo. 2020-77, authored by the US Tax Court’s (Tax Court) most recent addition—Judge Travis Greaves—the Tax Court affirmed that an attorney from Internal Revenue Service (IRS) Chief Counsel may be authorized to assert such penalties in an answer to a Tax Court petition. In Koh, the IRS sent the taxpayer a notice of deficiency that included a determination related to penalties under section 6662(j). The taxpayer filed a petition with the Tax Court contesting the IRS’s determination. In its answer, the IRS Chief Counsel attorney asserted that the taxpayer was liable for accuracy-related penalties under section 6662(b)(1) or (2), in the alternative to the section 6662(j) penalties assessed in the original deficiency notice. The taxpayer sought partial judgment on the pleadings on the grounds that IRS Chief...

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Weekly IRS Roundup May 18 – May 22, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 18 – May 22, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. May 18, 2020:  The U.S. Tax Court announced that comments to the proposed amendments to the Rules of its Practice and Procedure should be emailed to Stephanie A. Servoss, Clerk of the Court, at Rules@ustaxcourt.gov. The Tax Court has not received mail since March 19, 2020. May 18, 2020:  The IRS added approximately 3,500 phone operators to answer Economic Impact Payment (EIP) questions. May 19, 2020:  The Large Business & International (LB&I) released information regarding the Swiss Bank Program Campaign. The program allows Swiss financial institutions to provide information on the U.S. persons with beneficial ownership of foreign financial accounts. The campaign will address noncompliance of such...

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Andy Keyso To Head IRS Appeals

On May 20, 2020, the Internal Revenue Service (IRS) announced that Andy Keyso has been named Chief of the IRS Independent Office of Appeals. He replaces Donna Hansberry, who retired in December 2019. Mr. Keyso is a long time veteran of the IRS, with more than 25 years of service. During his career, he has held numerous positions within the IRS, including serving as the IRS Chief of Staff, 18 years in various positions in the IRS Office of Chief Counsel, including as Associate Chief Counsel of the Income Tax and Accounting Division. Mr. Keyso also served as Special Counsel to the Chief Counsel and as an attorney in the Procedure and Administration Division. Before coming to Washington, DC, Mr. Keyso worked in the field as a revenue agent in the former Newark, New Jersey District, where he later served as a technical advisor to the Chief, Examination Division. Since July 2017, Mr. Keyso has been the Deputy Chief of Appeals and acting Appeals Chief. Keyso is a...

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IRS Appeals Large Case Pilot Program Ends

More than three years ago, the Internal Revenue Service (IRS) revised the Internal Revenue Manual to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. The IRS also started a three-year initiative for taxpayers under the Large Business & International (LB&I) Division with cases assigned to Appeals Team Case Leaders (ATCLs). Under the initiative, LB&I personnel from Exam and Counsel were invited to the non-settlement portion of the taxpayer’s Appeals conference to test whether the participation of both parties would assist Appeals in narrowing and resolving complex factual and legal differences. The IRS announced that the initiative ended on May 1, 2020. The IRS has invited comments from the public about the initiative and its effectiveness. Such comments should be submitted by August 31, 2020. The practice of...

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Fifth Circuit Rules that Law Firm Clients’ Identities Are Not Privileged

In Taylor Lohmeyer Law Firm P.L.L.C. v. United States, No. 19-50506, the United States Court of Appeals for the Fifth Circuit held that a Texas-based estate and tax-planning law firm (Firm) could not invoke the attorney-client privilege against an Internal Revenue Service (IRS) summons seeking the identity of its clients. According to an IRS revenue agent’s declaration submitted in support of the summons, the Firm became a target for IRS investigation following an audit of one of its clients, an individual who had used the Firm’s services to establish and operate various foreign accounts and entities, through which the individual had funneled millions of dollars of unreported income. The IRS issued a John Doe summons to the Firm seeking, amongst other things, the identities of other clients for whom it had established foreign accounts or entities. The Firm filed a petition to quash the summons in the US District Court for the Western District of Texas,...

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Weekly IRS Roundup February 17 – 21, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 17 – 21, 2020. February 18, 2020:  The IRS issued a revenue ruling providing various prescribed rates for federal income tax purposes for March 2020, including various applicable federal rates (AFRs) for purposes of IRC section 1274(d) and adjusted AFRs for purposes of IRC section 1288(b) and section 382(f). The revenue ruling also contains the federal rate to determine the present value of annuities and other future interests for purposes of IRC section 7520. February 19, 2020:  The IRS issued a revenue procedure establishing a safe harbor under which the IRS will treat partnerships as properly allocating, in accordance with IRC section 704(b), the credit for carbon oxide sequestration under IRC section 45Q. In a related news release, the IRS stated that the safe harbor is similar to the safe harbors developed for...

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IRS Issues Transition Tax Compliance Campaign

On November 4, 2019, the Internal Revenue Service (IRS) announced a new Large Business and International (LB&I) compliance campaign regarding Section’s 965 transition tax under the Tax Cuts and Jobs Act (TCJA). This is one of several dozen compliance campaigns that LB&I has announced since the initial 13 campaigns were identified in 2017, and is part of LB&I’s larger goals of improving return selection, identifying issues representing a risk of noncompliance and making the greatest use of limited resources. We have written at length regarding the IRS’s campaigns. Click here for prior coverage of the IRS’s campaigns. This announcement comes just over a month after the Treasury Inspector General for Tax Administration (TIGTA) issued a report questioning the effectiveness and efficiency of campaign issue selection. We wrote about the TIGTA report here. The IRS is presumably heeding TIGTA’s recommendation and is focused on Section 965 because of the...

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