IRS Innocent Spouse Relief does not Abate Tax

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Marshmellow

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 →

Dealing With The IRS ,

IRS Penalties for Inability to Obtain Records

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reasonable

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 →

Dealing With The IRS ,

Civil Penalty for Tax Fraud

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fraud

Section 6663 covers the information dealing with the civil fraud penalty and how it is administered. The penalty is equal to 75% of the underpayment of tax that is directly or indirectly due to fraud. The burden of proof rests with the IRS on proving that the underpayment was due to fraudulent activity. Defining Underpayment In this situation, underpayment means the difference between the correct tax liability and the amount of tax reported on the return plus the amount of … Read more →

Tax Law ,

Rejected Offer in Compromise

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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 →

Dealing With The IRS ,

Statute of Limitations on Tax Returns

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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 →

Dealing With The IRS ,

Material Advisor & Form 8918

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tax-shelter

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 →

Dealing With The IRS ,

TEFRA Partnership Exception

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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 →

Dealing With The IRS ,

IRS Imputed Interest on Corporate Loan Transactions

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loan signature

If a formal or informal loan has taken place between a corporation and the owner, a Revenue Agent will be able to see if an appropriate interest rate has been paid under IRC Sec. 7872. Recently, the applicable federal rate for loans has fallow to very low levels. This can be beneficial to taxpayers who can now replace existing higher interest loans with new lower rate loans or convert demand loans to term loans to lock in lower rates. As … Read more →

Dealing With The IRS ,

Quick Refund of Corporate Estimated Taxes Form 4466

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Tax refund check

A corporation that has an overpayment of its estimated tax for the year can file Form 4466 (Corporation Application for Quick Refund of Overpayment of Estimated Income Tax) to get a quick refund from the IRS. For purposes of a quick refund, an overpayment equals the excess of the corporation’s estimated tax payments over its expected final tax liability for the year. Form 4466 Form 4466 must be filed in paper form after the close of the tax year. The … Read more →

Dealing With The IRS ,

Executor Tax Liability Discharge Form 5495

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living trust and estate planning

The executor or administrator for a decedent can request a release from personal liability for the decedent’s income and gift taxes by filing Form 5495 (Request for Discharge from Personal Liability Under Internal Revenue Code Section 2204 or 6905). This request must be in writing and must be filed after the income or gift tax return has been filed with the IRS. After the tax return has been filed, the IRS has nine months to notify the executor of the … Read more →

Dealing With The IRS ,