Tax Blog/Blawg

As part of its current Offshore Voluntary Disclosure Initiative (“OVDI”), the IRS is strongly encouraging taxpayers against making so-called “quiet” disclosures, in which taxpayers file amended tax returns, pay the applicable taxes and interest, and hope that the IRS doesn’t identify them for further investigation.  These disclosures are described as quiet because they involve neither alerting the IRS to the amended returns nor offering to pay any applicable penalties.  Because taxpayers may rightfully perceive the 25-percent penalty required to participate in ...

With the IRS’s increasing emphasis on transfer pricing and other tax issues that depend upon economic and scientific concepts and analyses, tax attorneys frequently rely on non-legal professionals to provide expert assistance in areas with which an attorney might not be familiar.  While this non-legal expertise helps facilitate the attorney’s representation of her client, the introduction of these non-legal professionals into the attorney-client relationship poses an obvious concern about breaching the attorney-client privilege.  Ordinarily, if someone other than ...

Following the Supreme Court’s decision in Mayo Foundation v. United States, in which the Court ruled that tax regulations receive deference from courts under the Chevron doctrine that applies to non-tax regulations, many commentators acknowledged the decision’s anticipated impact on disputes about the validity of tax regulations.  The new standard gives the IRS much wider latitude in issuing regulations that fill gaps caused by statutory ambiguities. In our prior discussions of the decision, we speculated:

The IRS may be wise to keep in mind that neither it, nor the courts ...

As many of our readers probably saw, the IRS recently published Notice 2011-39, inviting public comment on issues to be included on the Treasury Department's 2011-2012 Guidance Priority List. You can find a copy of the notice here. The Guidance Priority List helps Treasury and the Service identify tax issues to address in the coming year through published guidance - e.g., regulations, revenue rulings, and revenue procedures - with an emphasis on promoting the clarification of ambiguous areas of the law.

In response to the Notice, Chamberlain Hrdlicka intends to submit a comment ...

Last week, the United States Department of Justice asked a federal court in San Francisco to force HSBC India to disclose the names of U.S. customers whom the Justice Department suspects are evading U.S. tax laws.  According to the Justice Department’s brief, HSBC India solicited U.S. residents of Indian origin to open bank accounts.  HSBC apparently advised those individuals that the bank would not disclose the existence of the accounts, or any interest earned on those accounts, to the U.S. government.

Meanwhile, two individuals recently pled guilty to tax evasion in connection ...

A little more than a year after introducing The Bipartisan Tax Fairness and Simplification Act of 2010, Senator Ron Wyden (D-Ore.) has returned with a new partner, Dan Coats (R-Ind.), to push for much-needed simplification of the Internal Revenue Code.  As with the earlier proposal, the Wyden-Coats proposal focuses on broadening the tax base and generally lowering statutory tax rates.

For some of the mixed reactions to the proposal, see the Tax Foundation and The Hill.

For businesses, the proposal would:

• Lower the corporate tax rate to a flat 24 percent;

• Eliminate the “deferral” ...

During a webinar the other week regarding the impact of the Mayo Foundation decision on taxpayers, I discussed the effect of Mayo on taxpayers’ decisions to take positions that are contrary to IRS rules or regulations.  Part of that discussion examined the 20-percent accuracy-related penalty that can be imposed on such positions under Code section 6662.

As our readers may know, if a taxpayer takes a position on a return that is contrary to an IRS rule or regulation, the taxpayer may avoid the imposition of the accuracy-related penalty by following the requirements of Treas. Reg. § 1.6662-3.  In general, that regulation provides that, when a taxpayer takes a position contrary to a regulation, the penalty for disregarding rules or regulations does not apply if (i) the position is disclosed on “a properly completed and filed Form 8275-R,” (ii) the position represents a “good faith challenge” to the validity of the regulation, and (iii) the taxpayer has a reasonable basis for the position.  Treas. Reg. § 1.6662-3(a), (c)(1), (c)(2).

At the end of the webinar, an audience member asked whether the requirement to disclose a position on Form 8275-R included a position that was contrary to a revenue ruling.  As so often happens in tax law, the answer creates as many questions as it resolves.  Because one person’s question is likely shared by others, it seems appropriate to discuss the issue in a blawg post.

Anxious tax departments can rejoice!  By a 87-12 vote, the Senate passed legislation repealing the Form 1099 provision, which was included in health care reform.

Currently, Forms 1099 are required for payments of more than $600 to unincorporated service providers.  The health care reform bill expands this requirement for 2012 to goods as well as services and applies to all types of vendors.  Senate passage of the bill, which previously cleared the House, sends the bill to President Barack Obama for his signature.  Once signed into law, the additional information reporting ...

Five days ago, this would have seemed like just another April Fools'  Day joke, but it is apparently quite real.  Via the Washington Times, an excerpt:

There's at least one government function some taxpayers might not miss in a government shutdown: IRS tax audits.

A senior administration official, briefing reporters on potential effects of a shutdown, said "the performance of tax audits will be shut down or suspended for this period."

Overall, the official said he expects about 800,000 government employees to be furloughed if Congress and the president aren't able to agree on spending ...

For the last several years, the Internal Revenue Service has been increasing the number of "correspondence" audits that it conducts. There seems to be an assumption that it costs less and requires less manpower than field or in-person audits, and that assumption is doubtless true. However, there is a real question about the quality of such examinations and in particular IRS follow-up.

Since no later than 2007, various groups have been complaining to the IRS that correspondence audits were not being administered professionally. The principal complaint was that the IRS was issuing ...