Hour glass on calendar concept for time slipping away for important appointment date, schedule and deadlineWhat is the Statute of Limitations?

The Internal Revenue Code limits the time in which the government may assess tax. There are two civil statutes of limitations.  The first is the period during which the IRS can assess an additional tax liability (including penalties and interest).  The second is the period during which the IRS can collect a tax that has been assessed.  The criminal statute of limitations is the period during which the IRS can criminally prosecute. Generally, as to tax crimes, the criminal statute of limitations is six years. (Section 6531)

The application of the statute of limitations can be very confusing and individual facts may determine how the statute of limitations is computed. Also, certain actions suspend the statute of limitations. Continue Reading Statute of Limitations in Tax Cases – The Basics

IRS tax auditor man with a stern or mean expressionThere is a general misconception about what the IRS can and cannot do.  Owing money to the IRS is not like owing any other creditor.  The IRS is one of only a few creditors who can seize and sell your home even though state law may prohibit other creditors from doing the same.

Dealing with the IRS can be confusing, time-consuming and risky for someone who is not familiar with IRS procedures.  Most taxpayers are not very successful in handling their own affairs with the IRS.  The primary reason is the procedures of the IRS are extremely complicated, and most taxpayers do not understand how to protect themselves.  In addition, some taxpayers become too emotionally involved which reduces their effectiveness in dealing with the IRS.  However, no taxpayer should be afraid to CHALLENGE THE IRS.  Although most taxpayers have a great fear of the IRS, they know little about how it works and the IRS benefits from this ignorance. Continue Reading The Basics of the IRS and Tax Audits

Tax forms, close up

Once a taxpayer overpays a tax, it is necessary to file a claim for refund before any action can be undertaken to seek a refund of such tax from the government. The purpose of the claim for refund is to place the IRS on notice of an alleged overpayment.  A taxpayer cannot require the IRS to make a credit or refund without filing the claim.  In addition, a claim for refund is a prerequisite for suing in the U.S. District Court or the U.S. Court of Federal Claims.  It also protects the overpayment of taxes if the statute of limitations expires.  Claims for refund take many forms, but most typically are Forms 1040X and 1120X, amended returns for individual and corporate income taxes.  Refund of other taxes requires regular forms which should be marked “amended” and show an overpayment.  The courts have recognized many forms of claims for refund, including informal letters from taxpayers to the IRS.  Form 843 should be used when filing claims for refunds for any taxes other than income taxes.

The preparing and filing of a claim for refund should be handled with care.  Only one taxable period and one type of tax should be set forth on any claim. The claim may cover several different issues for the same taxable period and type of tax.  The claim must be in writing under the penalties of perjury, and each and every ground upon which the taxpayer relies must be set forth in detail, plus sufficient facts to place the IRS on notice as to the taxpayer’s claim.  The claim should demand the dollar amount sought as a refund, plus any other amounts which are legally refundable – including interest.  In addition, the claim must be signed by the person who signed the return or, if a corporate return, by an officer of the corporation.  To file a claim for refund there must have been an overpayment of tax, which could include: Continue Reading Claims for Refund

Safely mailing an application for ballot for 2020 election at a  drive-up mailbox at the US Post OfficeDeadlines are important in legal matters, especially when it relates to tax issues.  There are estimated tax deadlines, tax return filing deadlines, and a host of deadlines if a return is audited and any adjustments are challenged. Once you get to court in a tax dispute – more deadlines. Anytime a taxpayer misses a deadline they usually lose some portion, if not all, of the rights associated with that deadline. Imagine, however, that a taxpayer attempts to meet the deadline by mailing a document that the IRS claims they never received. Continue Reading The Dangers of Improper Mailing to the IRS

The new Biden administration is clearly signaling that renewable energy will be a key focus of its plan going forward. For example, the Biden administration has set a goal to deploy 30 gigawatts of offshore wind generation capacity by the year 2030. Therefore, it can be expected that tax advisors will be seeing more questions about renewable energy tax incentives as investment in the sector increases. A large driver of investment in renewable energy is caused by specific tax credits offered as part of the deal structure. However, tax credits are strictly construed by both the IRS and the courts and must follow specific guidelines. Joshua D. Smeltzer, former Department of Justice Tax Division litigator now at Gray Reed, recently published an article in Taxes The Tax Magazine (a monthly scholarly journal published by CCH Inc.) examining renewable energy tax credits. A reprint of the article is available here.

Lawyers, tax or otherwise, understand that privileged information must be protected to encourage a full and frank dialogue between clients and their attorneys. Tax information, in particular, contains some of the most private information for both individuals and businesses. Gray Reed attorneys Joshua D. Smeltzer, David Gair and Larry Jones recently published an article in the Journal of Tax Practice & Procedure (a quarterly scholarly journal published by CCH Inc.) examining privilege before a dispute arises through litigation in court. A reprint of the article is available here.

Midsection of tax auditor examining documents with magnifying glass at table in officeField examinations involve returns with more complex issues, thereby requiring examination by someone more knowledgeable in the field of accounting and the Internal Revenue laws.  Field examinations are conducted by Revenue Agents and are normally performed at the taxpayer’s place of business where the Revenue Agent can examine the taxpayer’s books and records and decide on the taxpayer’s correct taxable income and correct tax liability.  The Revenue Agent is supposed to make an appointment with the taxpayer at a time and place that will be convenient for the taxpayer.  The arrangement of the time and place can be done by telephone; however, the telephone contact cannot be used to verify items appearing on the income tax return. Continue Reading Field Examinations with the IRS

Close-up Of A Pink Piggybank With Eyeglasses And Calculator On Wooden DeskSeveral abusive tax shelters in the 1970s and 1980s caused Congress to enact rules to prevent taxpayers from deducting losses when a taxpayer doesn’t materially participate in the activity.  These passive loss rules apply to individuals (including partners and S Corp shareholders), trusts, estates, personal service corporations and sometimes closely held corporations. In short, these rules are a wide net that catches a lot of businesses and can impact a lot of taxpayers.  If an activity is determined to be a passive activity it may not only effect the losses claimed but could trigger a 3.8 percent increase from the net investment income tax. Knowing the passive activity rules, and how they apply, can help avoid a dispute or streamline arguments if the IRS questions business activities.   Continue Reading Understanding IRS Rules on Passive Activity Losses

silhouette of young designer team standing with a white blank screen laptop and notebook in hands while discussing/talking about them new project with the modern office as background.While dealing with the IRS generally involves submitting documents or legal authority to support a client’s position, in most cases the element of negotiating is present.  Negotiating becomes particularly important in dealing with the IRS where documentation may not exist, or the law is in the gray area.  Most practitioners will find that when dealing with the Examination Division, Appeals Office, and Collection Division, negotiating skills and techniques are helpful in resolving issues in favor of the client.

Almost everything is negotiable–even when dealing with the IRS.  Negotiating face to face with someone is generally more effective than negotiating over the telephone.  Accordingly, it is good policy to always arrange a meeting with the representative of the IRS.

In all levels of negotiations there is no substitute for preparation.  This includes knowing the facts of your case, the Internal Revenue Code, the Regulations, Internal Revenue Rulings and Procedures, the Internal Revenue Manual, Circular 230 and other ethical requirements.  Also, you should have a network of other professionals with whom you can discuss your case.

The following are general negotiating tips which, if followed, should give you a greater chance of success in dealing with the IRS: Continue Reading Tips for Negotiating with the IRS