Failure to Object to Tax Shelter By Tax Preparer Treated As Recommendation of Shelter, Insurance Carrier Allowed to Deny Coverage

August 07, 2015 by Ed Zollars, CPA

A tax preparation firm discovered that its preparation of a tax return ended up being treated as part of a promotion of an illegal tax shelter by its liability insurance carrier, which meant the carrier refused coverage when clients sued the firm when the IRS came after the programs. The Sixth Circuit’s decision in the case of Financial Strategy Group, PLC v. Continental Casualty Company, CA6, Docket No. 14-6296, 2015 TNT 152-16 may prove surprising to some since it turns out the firm did not have the protective net it thought it did against these claims.

The firm in this case prepared LLC returns for two clients who had been convinced by financial advisers with a national accounting firm (which is not the firm in this suit) to enter into a program to buy and sell distressed debt that the national firm advised them would reduce their tax bills. For the year they entered into the program the national firm prepared the LLC tax return for the partnerships through which these investments were held.

Financial Disability Suspension of Statute of Limitations Does Not Apply to Net Operating Loss Special Statute Rules

April 18, 2015 by Ed Zollars, CPA

A person who is unable to manage their financial affairs due to a disability has the statute of limitations for claiming refunds suspended generally under §6511(h). However, in Chief Counsel Advice 201515019 the IRS National Office concluded that the suspension is limited in one very important way—it does not suspend the special extended period for filing a net operating loss claim under IRC §6511(d)(2).

Penalty Relief Procedure Published by IRS for Those Receiving Erroneous Forms 1095-A for 2014

April 17, 2015 by Ed Zollars, CPA

The continuing saga of the erroneous Forms 1099-A received official IRS guidance in the form of Notice 2015-30. While the IRS had previously announced they would grant various forms of relief, this notice provides specifics on relief in a standard (and binding on the IRS) form.

Preparer's Use of Forms 1099C as "Collection Technique" Discussed by Office of Professional Responsibility

February 10, 2015 by Ed Zollars, CPA

The IRS Office of Professional Responsibility has issued Alerts from the Office Professional Responsibility Issue 2015-02 that discusses the implications of a preparing using Form 1099C as a “collection tool” to encourage clients to pay the balances due to the professional.

The alert specifically avoids giving a direct answer on whether the proposed conduct violates federal law and/or provisions of Circular 230, but certainly raises areas of concern.