Tax return filing season is fast approaching, and taxpayers big and small are preparing to file their returns. 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. In declining to examine the application of Boyle, the decision leaves in place uncertainty for many taxpayers who e-file their returns.

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.
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On March 13, 2018, the Internal Revenue Service (IRS) announced that it will begin ramping down the current Offshore Voluntary Disclosure Program (OVDP) and urged taxpayers with undisclosed foreign assets to apply for the program prior to its close on September 28, 2018. We have previously reported on developments in the OVDP.

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On April 5, 2017, in an unanimous court reviewed opinion, the United States Tax Court determined that disclosure of a worker’s tax return information to absolve the employer from liabilities arising out of the employer’s withholding requirement is not subject to the general prohibition against disclosing taxpayer return information pursuant to Internal Revenue Code (IRC) Section 6103, and does not shift the burden of proof to the Internal Revenue Service (IRS).

In Mescalero Apache Tribe v. Commissioner, 148 T.C. 11 (2017), the IRS determined that a number of the Mescalero Apache Tribe’s workers were not independent contractors, but employees. If the IRS prevailed in its worker reclassification determination then, as the employer, the Mescalero Apache Tribe would be jointly and severally liable for Federal income tax that should have been withheld on the workers’ earnings. To prevent double taxation, IRC Section 3402(d) provides that the IRS cannot collect from the employer the withholding tax liability if the employees have already paid income tax on their earnings. To prove its position that the workers were independent contractors and alternatively to reduce any potential withholding tax liability if the workers were classified as employees, the Mescalero Apache Tribe asked each worker to complete Form 4669, Statement of Payments Received. However, the Mescalero Apache Tribe had trouble locating each of its workers because many had moved or lived in hard-to-reach areas without phone service or basic utilities.
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