Tax Law Blog | IRS Tax Attorneys

The Internal Revenue Service today announced several additional steps it is taking this tax season to help people having difficulties meeting their tax obligations because of unemployment or other financial problems.

The steps –– an expansion of efforts that began more than a year ago –– include additional flexibility on offers in compromise for struggling taxpayers, a series of Saturday “open houses” offering taxpayers extra opportunities to work out tax problems face to face with the IRS, special outreach with partner groups to unemployed taxpayers and the availability of more information on a special section of the IRS Web site.

“Times are tough for many people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain,” IRS Commissioner Doug Shulman said. “We continue to make adjustments to key programs and expand ways for people to get help. We’re doing everything we can to help ease the burden on struggling taxpayers.”

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Threats against Internal Revenue Service workers and facilities continue to pour in following last month’s plane crash at agency offices in Austin.

IRS watchdogs are investigating more than 70 reported instances of inappropriate comments made to agency workers by taxpayers, union officials said earlier this week.

Despite earlier reports suggesting it was 70 actual threats, National Treasury Employees Union President Colleen M. Kelley clarified on Wednesday that workers have received a mix of inappropriate comments — including jokes or statements of support for pilot A. Joseph Stack III — and more serious threats. Kelley said she learned of the threats from the Treasury Inspector General for Tax Administration, which tracks threats against IRS workers.

Neither TIGTA nor the IRS would confirm an actual number of threats or share details of ongoing investigations.

“TIGTA is actively and aggressively investigating all threats made against IRS employees, infrastructure and property,” said J. Russell George, the treasury inspector general for tax administration.

IRS workers are instructed to report threats made against them to TIGTA immediately. The watchdog has established a toll-free hotline, e-mail address and internal messaging system for workers to quickly report potential threats.

“It would be a little naïve to think that we don’t get some threats over the course of doing business,” said IRS Communications Director Terry Lemons.

As The Eye has reported previously, attacks and threats against IRS workers and facilities happen frequently and are not confined to the annual tax filing season. The most recent attack at the Austin offices comes amid a wave of attacks at government and military facilities in the last six months.

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The IRS billion unclaimed funds total $1.3 billion in refunds from 2006. More than 1.4 million tax payers didn’t file a return. If you are one of those individuals, there are no penalties to pay if you have a refund.

The best thing to do is file your taxes by using a 2006 Form 1040. Yes, sometimes good things can happen. The average refund is approximately $800.

The refunds are owed in every state, as well as residents of U.S. territories and military personnel who didn’t file returns in 2006. California is home to the most taxpayers, almost 160,000, who didn’t send in returns. It accounts for $151 million of the total.

In addition to the regular refund amount, a 2006 return will get most taxpayers at least $30 and possibly up to $60 in extra cash back from the government. This money is courtesy of the repealed Telephone Excise Tax Refund. It was paid out based on the number of exemptions taxpayers claimed on their 2006 returns.

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Massachusetts Tax Attorney Kevin Kilduff was barred from practicing before the Internal Revenue Service for 48 months for failing to file one federal tax return and for filing another five returns late.

“Professionals who demonstrate a lack of respect for our tax system by failing to meet their own tax filing obligations should not expect to retain the privilege to practice before the IRS,” said Karen L. Hawkins, Director of the IRS Office of Professional Responsibility (OPR).

The OPR had originally sought the 48-month suspension, alleging Kilduff’s conduct was willful and disreputable. OPR enforces standards of conduct under Treasury Circular 230, which governs enrolled agents, attorneys and certified public accountants. Kilduff formerly worked for the IRS Office of Chief Counsel.

The Administrative Law Judge (ALJ) subsequently set the penalty at a 24-month suspension. Kilduff appealed the ALJ decision to the Secretary of the Treasury’s Appellate Authority, which in fact ultimately imposed the harsher 48-month suspension.

Kilduff’s suspension is for a minimum of 48 months. OPR has sole discretion regarding his reinstatement to practice before the IRS. At the very least, Kilduff must file all federal returns and pay all taxes he is responsible for, or enter an acceptable installment agreement or offer in compromise.

The complete decisions of the ALJ and the Appellate Authority are available on the OPR page on this web site.

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The Internal Revenue Service’s downtown office will be open Saturday to answer taxpayer questions regarding their 2009 returns.

IRS employees currently provide assistance for taxpayers from 8:30 a.m. to 4:30 p.m. Monday through Friday at the office at 324 25th St. The office will be open from 9 a.m. to 2 p.m. Saturday to help taxpayers who may not be able to come in during the week.

“This year, due to the American Recovery and Reinvestment Act of 2009, there are several tax credits, deductions and allowable expenses that may help individuals save money on their taxes,” IRS spokesman Bill Brunson said in a prepared statement. “For example, a person may qualify for Earned Income Tax Credit for the first time because their income dropped due to fewer hours worked, were laid off or worse — lost a job. The average Earned Income Tax Credit for Utahns last year was slightly more than $2,000. Don’t guess, find out if you qualify for this credit and other tax breaks by going online to www.irs.gov or calling the IRS toll-free or dropping by the Ogden IRS office.”

IRS employees are available to answer questions on the full range of tax law provisions, such as the new allowance for $2,400 of tax-free unemployment compensation benefits, said Brunson. The most commonly requested tax forms and publications can also be picked up, and assistance in Spanish is available, he said.

IRS employees will also offer, as time permits, free tax preparation and electronic filing for individuals who earn $49,000 or less.

Utah residents who are not able to pay all their taxes owed by the April 15 filing deadline can obtain information about payment plans. Individual taxpayers will also be able to get assistance with existing issues, such as levies on wages or bank accounts, IRS notices and letters.

In addition to help at the IRS Ogden office, there are several free tax preparation sites across Utah run by community organizations partnering with the IRS.

The Volunteer Income Tax Assistance program assists people who earn $49,000 or less, and the Tax Counseling for the Elderly program assists individuals 60 and older, Brunson said. Both programs provide free tax preparation for the 2009 tax return and free electronic filing.

Many of these sites have Saturday hours while others offer assistance at various times during the week. Call 211 to locate the free tax help site nearest you.

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The Internal Revenue Service today released the 2010 version of its discussion and rebuttal of many of the more common frivolous arguments made by individuals and groups that oppose compliance with federal tax laws.

Anyone who contemplates arguing on legal grounds against paying their fair share of taxes should first read the 80-page document, The Truth about Frivolous Tax Arguments.

The document explains many of the common frivolous arguments made in recent years and it describes the legal responses that refute these claims. It will help taxpayers avoid wasting their time and money with frivolous arguments and incurring penalties.

Congress in 2006 increased the amount of the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.

IRS highlighted in the document about 40 new cases adjudicated in 2009. Highlights include cases involving injunctions against preparers and promoters of Form 1099-Original Issue Discount schemes and injunctions against preparers and promoters of false fuel tax credit schemes.

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The U.S. Department of the Treasury and the Internal Revenue Service today announced the allocation of a second round of authority to Indian tribal governments to issue Tribal Economic Development Bonds under the American Recovery and Reinvestment Act of 2009 (ARRA).

The IRS awarded 76 tribal governments a combined $1.005 billion of bond issuance authority, also known as volume cap. The bonds can be used to finance virtually all types of public works projects. The ARRA provided for a total of $2 billion issuance of economic development bonds by Indian tribal governments.

The IRS received 86 applications requesting a total of over $3 billion of volume cap under the second round. Allocations were prorated to maintain the legal limit.
For those applicants who elected to consent to public disclosure, the IRS is releasing an allocation schedule showing the names of the Indian tribal governments, the types and locations of the projects described in the applications and the amounts of the awarded allocations.

In September 2009, the IRS allocated the first portion of Tribal Economic Development Bonds issuance authority to 58 tribal governments. See IR-2009-81 for more details.

In June 2009, the IRS issued Notice 2009-51, which clarifies how the $2 billion of Tribal Economic Development Bonds are to be allocated under section 7871(f) of the Internal Revenue Code. Section seven of the notice provides that the volume cap is to be allocated in at least two rounds, or tranches, with no Indian tribal government receiving more than $30 million of volume cap per round of allocations.

Tribal Economic Development Bonds and certain other types of municipal bonds are subject to legal limitations on how much can be issued, commonly known as volume caps.

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IN the digital age, filing income tax returns should be a snap. The important data from employers and financial institutions have already been sent to the government’s computers. Yet taxpayers are still required to perform the anachronistic chore of preparing a return from scratch. And, in many cases, they pay a software company for the privilege.

Requiring taxpayers to file returns without being told what the government already knows makes as much sense “as if Visa sent customers a blank piece of paper, requiring that they assemble their receipts, list their purchases — and pay a fine if they forget one,” said Joseph Bankman, a professor at the Stanford Law School.

Many developed countries now offer taxpayers a return containing all information collected by the taxing authority — to “get the ball rolling by telling you what it knows,” Mr. Bankman says.

It’s a stunningly reasonable idea. When you prepare your return, why can’t you first download whatever data the Internal Revenue Service has received about you and, if your return is simple, learn what the I.R.S.’s calculation of your taxes would be? You’d have the chance to check whether the information was accurate, correct it as needed and add any pertinent details — that you’re newly married, for example, or have a new child — before sending it. Far better to discover problems early with the I.R.S., whose say matters more than third-party software’s best guess.

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The Internal Revenue Service has appointed tax attorney Michael Danilack as deputy commissioner (international) of the IRS’s Large and Mid-Size Business Division.

Danilack comes to the IRS from the Washington, D.C., office of Burt, Staples and Maner LLP, a law firm that specializes in international tax law. Prior to that, he worked as a principal at Deloitte Tax LLP, focusing on cross-border tax matters. From the mid-1990s to 2000, Danilack served as IRS associate chief counsel (international) overseeing the legal staff responsible for the interpretation, enforcement and litigation of all international provisions of the U.S. revenue laws.

In his new position, Danilack will oversee a wide range of issues relating to international tax matters. These include ensuring consistent tax treatment of U.S. taxpayers concerning international issues, providing timely and effective implementation of tax treaty and tax information exchange and advising the Large and Mid-Size Business commissioner on issues involving international tax administration.

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The Internal Revenue Service today released the new form that eligible homebuyers need to claim the first-time homebuyer credit this tax season and announced processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time homebuyer credit.

The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.

With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns. Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit.

Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.

In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

• A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
• For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:

• Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
• Property tax records or
• Homeowner’s insurance records.

The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.

The IRS encourages taxpayers to use direct deposit to speed their refund. In addition, taxpayers can use Where’s My Refund? on IRS.gov to track the status of their refund.

More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov.