PILLA TALKS TAXES
Dan’s newsletter Pilla Talks Taxes is published ten times per year with articles designed to help you stay current on new laws, strategies and defenses. Dan will show you how to protect and defend your clients' rights, new ways to cut taxes and how to avoid problems with the IRS. If it is important for you to know, you will find it in this newsletter! You'll be among the first to know what's going to happen, even before it happens, making you invaluable to your clients.
Pilla Talks Taxes is a must-have for any tax professional. Subscriptions are available direct from WINNING Publications, Inc. for $99/year, however TFI Members receive a free subscription as part of their membership benefits. In addition, our members are able to access a searchable archive of past Pilla Talks Taxes articles. Below is a example of the no-nonsense information you will find in Dan's newsletters.
Pilla Talks Taxes Featured Article
In an effort to help you win your Tax Court case, I have compiled a list of 20 "Trouble Spots" you need to be aware of as you work your case through the Court. These Trouble Spots are the areas where other citizens had problems with their Tax Court cases. Recognizing these potential problems and handling of them properly on the front end can mean the difference between winning and losing your case.
As you read my Tax Court Trouble-Shooting Guide, refer to your copy of the Tax Court Rules of Practice. Where I point to a specific rule, you should read it entirely. And if you haven't done so already, you must read the rules cover to cover. You can make notes as to how the Trouble Spot may be avoided in your own case. This exercise will help ensure that you've followed all the critical rules I discuss here and thus avoid hidden traps that could ruin your case.
If you don't have a copy of the Tax Court's rules, they are easy to obtain. The Rules may be purchased in loose-leaf form from the Clerk's Office by writing to the United States Tax Court, 400 Second Street, N.W., Washington, D.C. 20217. Enclose a check or money order for $20 payable to the Clerk, United States Tax Court. The Court warns you to not send cash. Another way to obtain the rules is to download them directly from the Court's web site. Just go to www.ustaxcourt.gov and click on the "Rules" tab on the home page. You'll be able to download the rules in pdf format.
TROUBLE SPOT 1 – A Timely Filed Petition
You commence a Tax Court case by "filing a petition with the Court." Rule 20, Tax Court Rules. (Note that all references to the "rules" in this discussion are to the Tax Court's Rules of Practice and Procedure, unless otherwise indicated.) But it's not just that simple. The petition has to be filed on time in order for the Court to have jurisdiction of the case. The Tax Court is a court of limited jurisdiction. That means only certain cases can be presented to the Court under certain circumstances. If the Court does not have specific jurisdiction over a case, it will not hear the case. Naturally, a court known as the Tax Court is set up to hear tax cases. And the U.S. Tax Court is designed to hear cases growing from disputes between the IRS and citizens over the amount of their tax liabilities.
There is a broad range of different types of cases the Tax Court has the authority to consider but there are four common cases that a typical citizen or small business might encounter. The time for filing a petition with the Court is controlled by the Internal Revenue Code in each case. Each type of case carries a separate deadline for filing the petition. I explain generally each of the four cases and their petition-filing deadlines below:
a. The deficiency case. When the IRS completes an audit of a tax return and no agreement is reached as to the liabilities, the IRS mails a Notice of Deficiency to the taxpayer. This is the agency's final administrative determination that you owe additional taxes. The IRS must issue a Notice of Deficiency before it can assess and collect any of the taxes the agency claims you owe. If you begin a deficiency action in Tax Court within the time allowed by law, the IRS cannot assess or collect anything until the decision of the Court is final, and then the IRS can collect only the amount the Court says you owe. Code §6213(a) provides that you must file a petition with the Court within 90 days of the date the IRS mails the Notice of Deficiency. For more on the Notice of Deficiency and audit appeals, see my book, Taxpayers' Defense Manual.
b. The Collection Due Process appeal. Before the IRS can legally levy or seize any property to collect an assessed liability, it must first issue Letter 1058 (or in the case of filing a Notice of Federal Tax Lien, Letter 3172). Letter 1058 is a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. See: Code §§6320 and 6330. The filing of a request for a Collection Due Process Hearing stops all collection action and gives you the opportunity to negotiate with the IRS for payment terms or to present other collection alternatives that might ameliorate the hardships of enforced collection. If you cannot come to terms with the IRS on a collection alternative, the IRS issues a Notice of Determination. You have the right to seek Tax Court review of the IRS's determination. Code §6330(d)(1) provides that you must file a petition with the Court within 30 days of the date the IRS mails the Notice of Redetermination. For more details on the Collection Due Process appeal and how to present such an appeal, see my Tax Amnesty Package.
c. The Innocent Spouse appeal. When a joint federal income tax return is filed by a married couple, the law creates "joint and several" liability for entire tax. That is to say, each person owes the entire tax, even if one person had substantially less income than the other (or even none at all). But under several circumstances, a party can be relieved of a joint liability when it is shown that the party is not responsible as outlined in the law. This is known as Innocent Spouse relief and it is controlled by Code §6015. If you present an Innocent Spouse claim to the IRS that is rejected, the IRS must issue a Final Determination setting forth its reasons for rejection. Code §6015(e)(1) provides that you must file a petition with the Court within 90 days of the date the IRS mails the Final Determination. For more details on the Innocent Spouse appeal and how to present such an appeal, see my book, Taxpayers' Defense Manual.
d. The Employment Status appeal. In the course of many business audits, the IRS examines the business's use of independent contractors. If the IRS determines that the company should have treated independent contractors as employees, the IRS issues an Employment Status determination in which it effectively converts the workers to employees and proposes the assessment of all corresponding employment tax liabilities and penalties. Code §7436 gives the Tax Court jurisdiction to review the determination. Code §7436(b)(2) provides that you must file a petition with the Court within 90 days of receiving the IRS's Notice of Determination regarding Employment Status. For more discussion on the issue of independent contractors and employees, see my book, The IRS Problem Solver.
Please understand that each separate filing deadline is fixed by law. I cite the code section in each case that establishes the deadline. Since Congress sets these deadlines not the Tax Court, the Court has no authority to alter, modify, extend or suspend the deadline. Likewise, the IRS has no such authority, despite what certain IRS agents might say to you. This means simply that unless you get your petition filed with the Court by the legal deadline, the Court will not hear your case. The filing deadline is "jurisdictional." If your petition is filed late, the Court lacks jurisdiction to hear your case and you will lose by "default."
The bottom line is that the substantial risks associated with the failure to report offshore income coupled with the increasing likelihood that the IRS will obtain information about offshore financial account holders makes it hardly worth it to not just pay the tax and be done with it. It also bears stating again that if you have or know someone who has an undeclared offshore account, you need to get counsel about what to do to get into compliance regarding the account. Failure to do so is, in a very real way, playing with fire.
This is just the first of the 20 tips, techniques and strategies that are found in the full version of the Special Report: Tax Court Trouble-Shooting Guide. To get the rest of this Special Report as well as monthly cutting edge information that helps you stay current on new laws, strategies and defenses in dealing with the IRS, subscribe to Dan Pilla's electronic newsletter "Pilla Talks Taxes".
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