Category Archives: Dealing With The IRS

Transactions Lacking Economic Substance Form 8275 – Paul Gaulkin CPA


If the IRS determines that a transaction lacks economic substance, the underpayment of tax attributable to the disallowance of tax benefits will be subject to a 20% penalty. The penalty will increase to 40% if the taxpayer does not adequately disclose the relevant facts affecting the tax treatment on their return or on a statement attached to the return. Amending the Return An amendment made to a return is not taken into account if it is filed after the taxpayer … Read more

Correspondence Audit Request for Conference – Paul Gaulkin CPA


A correspondence audit is an audit conducted by an IRS Service Center and involves issues that can be resolved either by mail or over the phone. In some cases, the taxpayer may wish to request a conference to discuss issues that they are having trouble communicating in writing or over the phone. Requesting a Conference It is simple to request a conference with the IRS to discuss a correspondence audit; however, it becomes more complicated if details are left out … Read more

Delinquent Return Refund Hold Program – Paul Gaulkin CPA


The IRS started a program called the Delinquent Return Hold Program to search for and withhold the refunds that belong to non-filing taxpayers until their delinquent tax returns are filed. Delinquent Return Refund Hold Program Under the Delinquent Return Refund Hold Program, the IRS holds refunds and credits when a taxpayer files a current year tax return but has at least one unfiled tax return within the prior five year period. The purpose of the program is to get the … Read more

IRS Power of Attorney Signature Requirement Form 2848 – Paul Gaulkin CPA

signing with a pen

When filing a Power of Attorney with the IRS it is important to understand the signature requirement because it is different depending on the type of taxpayer. POA Signature Requirement For individuals, all that is required is their signature to appoint a representative of their choice. However, for rules for other taxpayers are more complicated: 1. As of March 1, 2012, a husband and wife that file a joint tax return must each file a separate Power of Attorney on … Read more

IRS Innocent Spouse Relief does not Abate Tax – Paul Gaulkin CPA


When a taxpayer applies for innocent spouse relief, they are not actually applying to have the tax liability abated; rather, they are applying to have the tax liability reduced to zero to prevent the IRS from pursuing collection activities against them. Innocent Spouse Relief This is an important distinction because the IRS has the ability to reverse the grant for relief if it is determined that the relief was inappropriately issued to the taxpayer. Because the liability has not been … Read more

IRS Penalties for Inability to Obtain Records – Paul Gaulkin CPA


In the event that a taxpayer is unable to obtain records to comply with tax obligations, they may or may not be subject to penalties. This will depend on whether the taxpayer can establish reasonable cause for not being able to obtain those records. Reasonable cause may be established if the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond his or her control, was unable to comply with the tax obligation. Establishing Reasonable Cause When establishing … Read more

Rejected Offer in Compromise – Paul Gaulkin CPA

Rejected Stamp

When the IRS rejects an Offer in Compromise proposal, they will generally send prompt notice to the applicant explaining the reasons why the Offer in Compromise has been rejected. All cash payments that were made to the IRS when the Offer in Compromise was submitted will not be refunded to the taxpayer. This is important for any taxpayer to remember, it can be very frustrating to have thousands of dollars not be refunded when your offer is rejected. Submitting New … Read more

Statute of Limitations on Tax Returns – Paul Gaulkin CPA

Pocket watch

There are a variety of different statutes of limitations that apply to a variety of different situations. Below is a list of these situations and the proper statute of limitations that will apply. Statute of Limitations on Tax Returns 1. Assessment and collection of taxes on returns not filed on or before their proper due date – Statute of limitations expires three years after the return is properly filed with the IRS. 2. Assessment and collection of taxes on tax … Read more

Material Advisor & Form 8918 – Paul Gaulkin CPA


A material advisor in regard to a tax shelter is any person who: 1. Has provided any material aid or advice in order to help with the organizing, promoting, selling, implementing, insuring, or carrying out any reasonable transaction and 2. Derives gross income in excess of a threshold amount determined by the IRS for the assistance or advice. All material advisors are required to register with the IRS and receive a reportable transaction number. The advisor must provide this number … Read more

TEFRA Partnership Exception – Paul Gaulkin CPA

Strength in Numbers

The TEFRA rules do not apply to certain entities called small partnerships. These small partnerships have two requirements that must be met for the exception to disallow TEFRA rules. These requirements include: 1. The partnership must have 10 or less partners. 2. All partners are natural persons who are U.S. citizens or resident aliens, C corporations, or estates of deceased partners. These two requirements are generally viewed as mandatory and must be present to waiver the TEFRA rules. Thus, a … Read more