Tax Blog/Blawg

IRS ERC ANNOUNCEMENT (IR-2024-169, June 20, 2024) - Following a lengthy review of numerous Employee Retention Credit ("ERC") claims, the IRS has announced plans to deny tens of thousands of “improper high-risk ERC claims” (about 10-20% of total ERCs) while starting a new round of processing lower-risk claims to help eligible taxpayers. During the review period, the IRS processed 28,000 claims worth $2.2 billion and disallowed more than 14,000 claims worth more than $1 billion. Various estimates of total ERC claims have exceeded $240 billion.

The IRS' review involved months ...

I think Rocky is a great film series; especially Part IV four where Rocky fights Ivan Drago. During the fight, we see Rocky taking some pretty impressive punches, falling to the ring hard.  Yet, every time, Rocky gets back up and keeps fighting. Eventually, in the fifteenth round, Rocky lands a series of hard punches that knock Drago out, and Rocky wins the fight.

Imagine if Rocky had to fight Ivan Drago, Clubber Lang and Apollo Creed all at the same time in the same fight. It ain't about how hard you hit; it's about how hard you can get hit and keep moving forward, but let’s face it, it would be an ...

It should come as no surprise that for a significant segment of the population, social media is rapidly replacing traditional print and television media as the primary source of news and information.  That trend is troubling enough because of questions about accuracy, objectivity and competency.  But perhaps an even more troubling trend is the increasing reliance on social media for advice on matters of import, particularly those that delve into traditional fields of expertise that involve legal issues. Relying on, “advice” on federal income tax matters from so called “tax ...

The National Taxpayer Advocate recently released her 2023 Annual Report to Congress and, while it is chock-full of newsworthy and important data, this blog entry focuses on the report’s discussion of the “wizard behind the curtain” problem, which impedes the independence of the IRS Appeals function.

As background, when taxpayers disagree with audit adjustments proposed by the IRS’ examination division, they have an opportunity to protest the adjustments to a different division within the IRS, known colloquially as Appeals.  The IRS first established this ...

Background:

Millions of Employee Retention Credit (ERC) claims have been filed with the IRS as a result of the COVID-19 pandemic, with millions of taxpayers already receiving their refunds and others still waiting to receive refund checks. The IRS audits and Appeals work has commenced with a fury at a dizzying pace. While many appropriate ERC claims have been filed, the IRS has seen a number of erroneous claims as well. On December 21st, the IRS launched a new initiative to address the issue of erroneous ERC claims. The Voluntary Disclosure Program, part of a broader IRS effort to ...

On November 20, 2023, the U.S. Court of Appeals for the Sixth Circuit in Mann Construction ruled that its 2022 decision – which had held that sub-regulatory pronouncements labeling transactions as “listed” or “reportable” (and thus subject to penalties for failure to disclose) are invalid under the Administrative Procedure Act – applies only to taxpayers in the Sixth Circuit because the IRS shrewdly mooted the case before the district court on remand was able to issue a nationwide vacatur.

As background, Congress has given the IRS a panoply of potent weapons to combat ...

Recently, the IRS has been devoting substantial resources to its investigation of Malta Pension Plans.  Just this month, the IRS Criminal Investigation division served summonses on multiple entities and persons who it believes were involved with such plans, and has proposed making the transaction a “listed” transaction.  Either action would be noteworthy, but that combined activity tells a story of deep IRS scrutiny.  This article discusses that activity, and provides some high-level options for affected taxpayers.

The Latest Listed Transaction: the Maltese Pension

On June ...

Every five years the Bureau of Economic Analysis (BEA) is required to collect information and compile statistics on the scale of foreign-owned business activities in the United States under the International Investment and Trade in Services Survey Act of 1976. This information is used by the federal government to analyze the impact of foreign investment on the U.S. economy. In general, with few exceptions, if a foreign person (an individual or an entity) owned or controlled, directly or indirectly, 10% or more of the voting securities in a U.S. entity at the end of the of the ...

For taxpayers challenging IRS notices and regulations designating transactions as “reportable transactions” or “listed transactions,” the Mann Construction case keeps getting better. 

In 2022, the U.S. Court of Appeals for the Sixth Circuit in Mann Construction held that IRS Notice 2007-83, which labeled a certain type of transactions as a “listed transaction,” was invalid due to the IRS’ violation of the Administrative Procedure Act in promulgating the notice. Last week, on remand, the district court amplified the IRS’ loss by vacating the IRS notice not only ...

Back in July 2022, the media reported that two of President Trump’s rivals, former FBI Director James Comey and his deputy, Andrew McCabe, had both been selected for IRS examinations under the National Research Program (NRP).  There were allegations that President Trump had sicced the IRS on his political foes.  That Comey and McCabe were both selected for NRP audits seemed at best a statistical anomaly given the low nationwide audit rate.  At worst, it conjured images of Nixon’s enemies list.  

In a report dated November 28, 2022, the Treasury Inspector General for Tax ...