Wrong Dates on Form 872 Did Not Control, Facts Make Clear the Taxpayer's Attorney/CPA Was Aware IRS Meant to Extend Year Under Exam

In the case of Hartland Management Services, et al v. Commissioner, TC Memo 2015-8, the taxpayer argued that since the IRS put the wrong years on Forms 872, Consent to Extend the Time to Assess Tax, (which the taxpayer signed) the statute of limitations for the real years under examination had expired by the time the IRS actually issued notices of deficiency.

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Reimbursement of Individual Plan Premiums by an Employer: The Issue and How to Deal with Clients Impacted by It

An important new notice was issued on February 18 that provides relief for many affected taxpayers through June 30, 2015.  See the write-up elsewhere on this site regarding Notice 2015-17.

Much confusion and angst has resulted from the recent discovery by some of the impact of a ruling issued by the IRS (with an identical DOL ruling) in September of 2013 that, for most employers, makes impractical the reimbursement of individual health policies.  

This article tries to outline what the position of the agencies are, the underlying law that resulted in these rulings, plans that do and do not run afoul of these rules and how to deal with a client that has been operating in ignorance of these rules and running an impermissible arrangement.

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Special Procedures to Handle Payroll Tax Issues on Transit Benefits Made Retroactively Nontaxable by Tax Increase Prevention Act of 2014 Issued

The IRS has issued procedures for employers who paid transit benefits during 2014 that were included in employee’s income, but which since qualified as excludable benefits due to the increase in the limits for such benefits from $130 to $250 per participating employee due to Section 103 of the Tax Increase Prevention Act of 2014.  The guidance is found in Notice 2015-2.

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Attorney's Malpractice in Misleading Estate Regarding Having Filed for an Extension Was Not Reasonable Cause to Avoid Late Filing Penalty

In the case of the Estate of Escher v. United States (USDC SD Ohio, Case No. 1:13-cv-00705, 2015 TNT 5-12) the issue involved whether a taxpayer should be found to have reasonable cause for the late filing of a tax return if the client’s attorney misled the estate into believing the attorney had filed an extension for filing the return

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Letter from Registered Agent That Stated 1099 Had Been Issued to Taxpayer and Dividends Paid Not Found Sufficient for IRS to Carry Burden Under §6201(d)

The IRS computers regularly issue CP2000 notices to taxpayers based on Forms 1099 that the IRS receives which show income not reported on the taxpayer’s return.  Such matching programs allow the IRS to obtain taxes in what is, for the agency, a relatively “painless” and “low friction” process where they start with the numbers on the Form 1099 and presume that income is taxable to the taxpayer.

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Attorney's Expenses Related to Aircraft Primarily Found to Be Personal in Nature, Most Deductions Disallowed

IRC §274(d) provides additional documentation requirements for a taxpayer to obtain a deduction for certain items, including travel related to listed property—which, in the case at hand, was an airplane.  The decision in the case of Peterson v. Commissioner, TC Memo 2015-1 deals with the fact that it’s not enough to have records—those records also have to support the deduction in question.

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Entertainment Items Offered to Purchasers of Advertising Treated as Reductions of Purchase Price and Not Subject to §274 Limitations

If a taxpayer purchases travel and entertainment items to give to customers who purchase specified amounts of advertising from the taxpayer, does the taxpayer treat that as a cost of sale or some other expense?  And, regardless, does the taxpayer have to take into account the disallowance provisions of §274, such as the 50% disallowance of business entertainment? 

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No Relief Under §7430 for Administrative Fees Where No Notice of Deficiency Issued and Appeals Ruled in Favor of Taxpayer

IRC §7430 is a provision in the tax law meant to allow taxpayers to recover costs when the IRS acts unreasonably.  However, not all unreasonable conduct by the IRS that results in costs to the taxpayer will find redress in the provisions of IRC §7430, as the taxpayer in the case of Milligan v. Commissioner, TC Memo 2014‑259 discovered.

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Taxpayer Claimed American Opportunity Credit in Wrong Year, No Credit Allowed

Most tax professionals are fully aware that a tax benefit must be claimed in the specific year it is allowed and, generally, a taxpayer cannot pick and choose which year a benefit should be claimed in.  But taxpayers, even if they aren’t trying to game a system, may find it difficult to figure out which year a benefit should be claimed.

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Ruling Outlines Proper Treatment of Earn-Out When Sale Eventually Determined to Be a Loss Event Due to Failure to Meet Earn-Out Milestones

When a taxpayer sells a business the sales price often is both payable over time and, rather than being a fixed amount, ends up being a number based on the performance of the acquired business.  The latter is most often referred to as an “earn-out” provision and most often extends over a period of years.

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Memo Analyzes Proper Deduction of Mortgage Interest Where There are Multiple Obligors on the Note

Dealing with a home mortgage interest deduction when the property is held by more than one person and those individuals are paying on the mortgage but not filing a joint income tax return creates issues when preparing the tax returns for those individuals.  While taxpayers often believe the rule is “we can split it however we want,” Chief Counsel Advice 201451027 reminds us that there are rules that apply in these situations.

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