When a taxpayer files a tax return reporting their income, the IRS gains insight into their earnings and can compare this information with similarly situated taxpayers. One might expect that this regular reporting would be sufficient for tax administration purposes. The IRS could simply identify and audit returns showing unusual drops in reported tax. This……
Tag: Tax Procedure
FBAR Penalties Are Unconstitutionally Excessive
Most tax penalties follow a simple logic. The bigger the tax problem, the bigger the penalty. For example, the civil fraud penalty is one of the most severe penalties in our tax code. This makes sense as fraud is the most severe thing that one can do wrong when it comes to taxes. The civil……
IRS Collection From Business Partner’s Property
Many business owners choose to acquire and operate their businesses with partners. This allows them to divide the responsibilities and share the risks and the rewards. But what happens when one business partner falls behind on their federal taxes? Could the tax-compliant partner’s share of the business and business assets be at risk? Can the……
Conduct During IRS Audit Evidence of Tax Return Fraud
The courts have taken an expansive view as to what counts as fraud for tax matters. Some courts have even said taxpayers can be held accountable for fraud committed by their tax return preparers. When considering fraud, there is a question as to what activities are considered. Take for example the civil tax fraud penalty.……
The IRS’s Challenges With Ghost Tax Preparation
The IRS conducts very few audits. The IRS has recently focused its limited audit resources on higher-income taxpayers who already voluntarily comply with our tax laws. This has made the IRS audit much less effective and even less of a deterrent for most taxpayers. The IRS does have other deterrent measures in its tax enforcement……
Tax Refunds Lost to Timing Rules: Lesson, File Early, Pay Late
You should always pay your taxes on time, right? After all, early payment avoids tax penalties and interest, and shows good faith compliance with tax obligations. This is not always the best approach. Why? Taxpayers who pay early or even on time may be precluded from getting money back from the IRS if they overpaid……
IRS Cannot Assess Foreign Information Return Penalties
Many businesses today have some international transactions. Many U.S. businesses even have operations in foreign countries–which may include ownership of entities, operations, or just sales. Our tax laws include several provisions that require U.S. taxpayers to report most of these foreign business interests and activities. These filings are mostly made by filing various information returns.……
Attorney Fees in Tax Litigation: Jury Says Yes, Judge Says No
In most litigation, each party pays their own attorney fees regardless of who wins the case. This “American Rule” applies even when one party is clearly right and the other clearly wrong. But litigation against the government, such as tax litigation, presents a unique inequity. When taxpayers are forced to defend against an incorrect IRS……
Frivolous Tax Returns Avoid Accuracy-Related Penalties
Our federal tax system depends on voluntary compliance by a large segment of taxpayers. Encouraging compliance, while deterring and punishing non-compliance, remains the IRS’s greatest challenge. To meet this challenge, Congress has armed the IRS with a myriad of civil and criminal tax penalties. These penalties are designed to address different types of non-compliance, from……