The taxpayer in the case of Palsgaard and Kelley v. Commissioner, TC Memo 2018-82 argued that his social security disability insurance (SSDI) benefits should not taxable under IRC §104.  But the Tax Court did not agree with the taxpayer.

The opinion noted that the taxpayer had been disabled by a physical injury:

Petitioner had a successful medical practice in California until March 2009, when she suffered a physical injury that left her disabled within the meaning of section 72(m)(7). This injury resulted in a long-lasting physical impairment of indefinite [*3] duration that substantially interfered with her ability to engage in gainful employment. She retired from the practice of medicine shortly thereafter.

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The Fourth Circuit Court of Appeals affirmed the Tax Court’s determination that an individual who filed her Tax Court petition on the date IRS representatives twice told her was the final day to file had missed the deadline and the case could not be heard.  The case in question is Nauflett v. Commissioner, CA4, Case No. 17-1986.

The matter that Shari wanted to be heard by the Tax Court is described by the Circuit Court panel as follows:

The IRS charged Shari and Derek Nauflett, wife and husband and joint income tax filers, as jointly and severally liable for unpaid taxes, interest, and penalties for tax years 2002–04 and 2008.1 Nauflett requested relief under the innocent spouse doctrine. The letters of final determination from the IRS denying Nauflett's request were dated June 17, 2015, and contained the following statement: “If you disagree with our decision, you can file a petition with the United States Tax Court to review our denial. You must file your petition within 90 days from the date of this letter. . . . [T]he IRS cannot change the time period.” E.g., J.A. 15.

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The IRS continues to revise its guidance with regard to the Section 965 transition tax adopted as part of the Tax Cuts and Jobs Act.  In News Release IR-2018-131 the IRS announced waivers of certain penalties impacted by that tax and revisions to its frequently asked questions regarding the tax maintained on the IRS web site.

The IRS has added three new questions and answers to the 965 tax frequently asked questions (FAQs) page on its website (Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns).

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The problems of attempting to develop summary explanations for training purposes (like this article) of tax material was discussed in Chief Counsel Email 201822028.  A person inside the IRS was raising questions about IRS training materials related to the question of when an employer may “claim” an “adjustment” for income tax withholding and additional Medicare tax.

Specifically, the email begins by noting the matter that had led to the request for clarification:

Your initial inquiry was whether certain training materials were correct in stating that “[a]n employer CANNOT claim an adjustment for [Income Tax Withholding] and additional Medicare taxes after the close of the calendar year for the employee.” The training materials cite to § 31.6413(a)-2(c)(2).

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The IRS has issued proposed regulations in REG-102951-16; 83 F.R. 24948-24950 that will require a larger number of taxpayers to fill all information returns electronically.

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One of the issues in the case of Fiedziuszko v. Commissioner, TC Memo 2018-75, was whether the taxpayer, who received a Form W-2 for his work for 2012, was a “statutory employee.”

The statutory employee definition is found at IRC §3121(d)(3).  The first requirement to be a statutory employee is that the individual not be a common-law employee of the service recipient.  Next, the taxpayer must perform services for pay in one of the following four categories:

• As an agent-driver or commission-driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages (other than milk), or laundry or dry-cleaning services, for his principal;
  

• As a full-time life insurance salesman;
  

• As a home worker performing work, according to specifications furnished by the person for whom the services are performed, on materials or goods furnished by such person which are required to be returned to such person or a person designated by him; or
  

• As a traveling or city salesman, other than as an agent-driver or commission-driver, engaged upon a full-time basis in the solicitation on behalf of, and the transmission to, his principal (except for side-line sales activities on behalf of some other person) of orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments for merchandise for resale or supplies for use in their business operations.

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The various states have laws on their books that require an entity holding “unclaimed property” to turn that property over to the state.  Generally, this transfer takes place when the account owner fails to take any action with regard to the property and the holder of the property is unable to locate that owner.

Such property can include individual retirement accounts.  In Revenue Ruling 2018-77 the IRS rules on circumstances when the payor will or will not be required to withhold taxes from the transfer to the state as well as the reporting requirements on a Form 1099R when such a distribution takes place.

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While the tax law allows deductions for expenses incurred in a trade or business, it does not allow a taxpayer to claim a current deduction while the taxpayer is merely investigating the possibility of entering into a trade or business.  In the case of Samadi v. Commissioner, TC Summary Opinion 2018-27 the Tax Court determined the taxpayer was in just such an investigatory stage and not actually conducting a trade or business.

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Revenue Procedure 2018-32 has been issued by the IRS to provide consolidated guidance for taxpayers to gain assurance that an organization they are making a charitable contribution to qualifies to receive tax deductible contributions.  This ruling consolidates and updates prior guidance found in several prior procedures.

The prior procedures that have been modified and superseded are:

• Rev. Proc. 81-6, 1981-1 C.B. 620;
  

• Rev. Proc. 81-7, 1981-1 C.B. 621;
  

• Rev. Proc. 89-23, 1989-1 C.B. 844; and
  

• Rev. Proc. 2011-25 I.R.B. 887

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