A corporation that failed to obey an IRS wage levy on one of its employees was liable for the employee’s delinquent taxes and for a penalty under Code Sec. 6332(c)(2) (United States v. Heli USA Airways, Inc., DC Nev., 2011-2 ustc ¶50,728). The corporation’s argument that it’s Chief Financial Officer, who was responsible for responding to the notices, suffered from mental health breakdown and that it was unaware that he ignored the notices, was not reasonable cause for failure to honor the levy. Code Sec. 6332.
Freezing the unemployment tax rate isn’t without precedent. At the beginning of 2010 legislative session lawmakers rushed through a bill that postponed an unemployment tax increase for one year.
The Tax Court has found that a payment from an S corporation to its sole shareholder was not a transfer of funds to be held in a fiduciary capacity (Rogers v. Commissioner, Dec. 58,819(M), TC Memo. 2011-277). The court found it was a distribution to be included in the shareholder’s gross income.
The taxpayer managed several business entities, including an S corporation and a limited liability company (LLC). The taxpayer deposited half of a payment due to the LLC in the S corporation’s bank account. The S corporation subsequently paid the taxpayer a distribution of $732,000, and deducted $513,500 as the cost of legal and professional fees due to the taxpayer. Meanwhile the taxpayer reported the $513,500 on his and his wife’s joint return, but not the remaining $218,500, which the taxpayer claimed to be a distribution to a fiduciary to be held in trust.
The Tax Court held that the unreported amount distributed to the taxpayer was taxable and not a distribution to a fiduciary. The court rejected the taxpayer’s argument state law required the taxpayer to hold funds as trustee, stating that the S corporation was not subject to the state law. Furthermore, the taxpayer held and used the funds without restriction.
Jan 262012
The IRS has announced it holds $153 million in undelivered refund checks owed to nearly 100,000 taxpayers, representing an average of $1,547 per taxpayer (IRS News Release IR-2011-113). The IRS has been unable to deliver the refunds due to mailing address errors.
Taxpayers who wish to check the status of their refund and/or resolve an incorrect or outdated mailing address may use the IRS online tool “Where’s My Refund?” Taxpayers may also contact the IRS at (800)-829-1954.
The IRS does not notify taxpayers by e-mail of pending refunds and cautioned taxpayers who receive purported emails from the agency to report these scams.
To prevent refunds from returning undelivered to taxpayers, the IRS recommended that taxpayers file their tax returns electronically, which reduces errors and also speeds the delivery of refunds. Additionally, taxpayers can reduce mailing errors by taking advantage of the direct deposit option for refunds.
Jan 242012
The Court of Federal Claims has upheld the IRS’s determination that a taxpayer’s Son-of-BOSS transaction lacked economic substance. The court found that potential for profit does not in and of itself establish economic substance, especially where the profit potential is dwarfed by tax benefits.
The new codified standard requires a two-part analysis. First, consideration is given to the objective effects of the transaction on the taxpayer’s economic position. Second, the taxpayer’s subjective motives for engaging in the transaction are considered. In this case, the taxpayer had entered into the disputed transaction before March 30, 2010, which is the effective date of the act.
Case law set forth five principles incorporated in the economic substance doctrine:
The transaction to be analyzed is the one that gave rise to the alleged tax benefit;
The transaction cannot lack economic reality;
The taxpayer bears the burden of proving that the transaction has economic substance by a preponderance of the evidence;
The economic substance of a transaction must be viewed objectively;
Arrangements with subsidiaries that do not affect the economic interests of independent third parties deserve particularly close scrutiny.
Here, the court found that the transaction lacked economic substance. The taxpayer could not show by a preponderance of the evidence that the partnership was formed as a legitimate investment vehicle. Moreover, the transactions did not reflect economic reality as the taxpayer experienced merely fictional tax losses, the court found.
Jan 192012
This is a blog post by Ann Barnhardt dated December 12, AD 2011, and it’s well worth the read:
Possession is nine-tenths of the law. Judging from my email inbox, many of you are realizing EXACTLY what that old adage means right about now. Many of you have requested to liquidate your 401k accounts, and your employers won’t let you do it. I had no problem doing it because I am self-employed and thus I was my own “plan administrator”.
So, this nasty business brings us around to an inevitable question. Was that money ever yours, or has the entire 401k fiasco been nothing more than an underhanded confiscatory tax for the vast majority of folks who have participated in it over the years? I’d have to say, “affirmative” to the latter. If you are denied access to “your money”, then honey, it ain’t “your money” and never was.
If you’re wondering to yourself who EXACTLY is going to “bail out Europe”, or at least make a pathetic attempt at the mathematically impossible so that your friendly neighborhood American oligarchs have enough time to get themselves pre-positioned for the collapse, YOU ARE, MY LITTLE CHICKADEES.
If you are one of the many, many people, or as TPTB call you, “bourgeois, bitterly clinging trash”, stuck in this con, the only things you can do are:
A.) CEASE ALL NEW CONTRIBUTIONS IMMEDIATELY.
B.) If there is a loan option attached to your 401k program, take out the maximum possible loan and set up the SLOWEST possible repayment schedule.
C.) Never again enter into an arrangement wherein “your money” is unavailable to you and is anything less than completely liquid.
Possession truly is nine-tenths of the law, and under a lawless Marxist-Communist-Fascist government where the rule of law no longer exists (such as we are in now), possession is closer to ten-tenths of the law.
The nonbusiness energy property credit is scheduled to expire at the end of 2011 so taxpayers only have a short time to take advantage of this credit. The 2011 credit is more limited than in past years but is still available for qualifying improvements placed in service for the taxpayer’s principal residence located in the United States before January 1, 2012.
Principal residence. The taxpayer must own the home and use it as a principal residence.
Credit. The nonbusiness energy property credit is a credit for making qualifying energy
efficient home improvements. The tax credit is 10% of the cost (up to $500), or a specific
amount, for qualified energy efficient improvements. It must be an existing home and the
taxpayer’s principal residence. New construction and rentals do not qualify.
Eligible items include:
Item Credit Amount
Biomass stoves $300
Heating, ventilating, air conditioning (HVAC) Varies from $50 – $300
Insulation 10% of the cost, up to $500 (does not include
installation costs)
Roof (metal and asphalt) 10% of the cost, up to $500 (does not include
installation costs)
Water heaters (non-solar) $300
Windows and doors 10% of the cost, up to $500, but windows are
capped at $200 (does not include installation costs)—must be ENERGY STAR qualified
Energy Star. For 2011, an Energy Star label is generally sufficient proof that property is
qualifying property for the nonbusiness energy property credit.
Lifetime maximum credit. The lifetime credit for all types of property is $500. Therefore,
a taxpayer is not eligible to claim a 2011 credit if they claimed energy credits in previous
years that exceed $500. Additionally, the credit is nonrefundable and may not be carried
forward.
According to an AP article published November 12, 2011, the IRS is having problems securing personal taxpayer data and is not doing enough to prevent “unauthorized users” from accessing that information, according to a new report.
The Government Accountability Office this past week warned that the IRS continues to suffer from a “material weakness” in information security. While the report praised the IRS for encrypting more files and taking other steps to address the problem, the GAO said the agency is still at “increased risk of compromising confidential IRS and taxpayer information.”
Specifically, the report said testing showed IRS systems “did not effectively prevent access from unauthorized users or excessive levels of access for authorized users.” One of the challenges cited was the fact that the IRS still receives many “hard copy” tax returns every year, despite an increase in electronic filings. With the heap of hard-copy returns comes the risk that documents could be lost or inappropriately disclosed.
The report said some sensitive data is also still not encrypted.
