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S corporation’s account for separately stated items that flow through to the shareholder’s tax returns. They are computed on page 3 of the Form 1120S and then listed separately on the Schedule K-1. The idea for breaking these items out separately is that they can impact the shareholder’s individual returns differently. That makes sense, but…
Category: Houston
IRS Cannot Collect Taxes Discharged in Bankruptcy
In Internal Revenue Service v. Murphy, No. 17-1601 (1st Cir. 2018), the taxpayer discharged his unpaid taxes in bankruptcy. The IRS continued to try to collect the discharged tax debt. The case is a must read for taxpayers who find themselves in this same situation. The Facts & Procedural History The taxpayer in Murphy filed Chapter…Continue…
Can I Deduct My Clothing Costs?
Can you take a deduction for clothing? What if you purchase the clothing for work and would not otherwise have purchased the clothing? What if the clothing is only worn at work? This is a common dispute that comes up on audit with the IRS. The Farolan v. Commissioner, T.C. Summary Opinion 2018-28, case provides…Continue…
The Statutory Employee Classification Post-TCJA
The Tax Cuts and Jobs Act (“TCJA”) made several changes to our tax laws. One such change is that employees are no longer able to deduct unreimbursed expenses incurred as an employee. Given this change, employers and their workers may need to re-evaluate their relationship. For some workers, this may mean re-evaluating whether the worker…
The Ins and Outs of the IRS’s Bank Deposit Analysis
The IRS almost always checks for unreported income when it audits an income tax return. The IRS does this by analyzing the deposits made in the taxpayer’s bank accounts. But what if a deposit was not taxable, as in the case of an amount received for a third party and paid out to a third…Continue…
Deducting Mileage for Business With Minimal Activities
Can you deduct car and truck expenses, such as mileage, if your business has minimal activities? The court addressed this in Samadi v. Commissioner, T.C. Summary Opinion 2018-27, which provides an opportunity to consider the question. Facts and Procedural History The facts and procedural history for the case are not unusual. The taxpayer obtained a real…Continue…
Court Says No Legal Right to IRS Appeals Review
Does the Taxpayer Bill of Rights create a legal right to have a tax dispute considered by the IRS Office of Appeals? The court recently addressed this question in Facebook, Inc. v. Internal Revenue Service, No. 17-cv-06490-LB (N.D. Calif. 2018), concluding that there is no legal right to have an administrative appeal for a tax dispute. Facts…
When the IRS Raises A New Matter on the Eve of Trial
During the course of litigating a tax matter, the IRS may increase the amount of tax, penalties, and interest that it alleges the taxpayer owes. The IRS is typically allowed to do this. If it does, the IRS may have a harder time prevailing on this type of issue. This “new matter” rule was recently…
Transferring Property to a Spouse After IRS Lien
There are a number of difficult questions that come up when one spouse owes the IRS and also owns property jointly with their spouse. The question is often whether the spouses can transfer the property to the non-liable spouse. The answer is, maybe. The court recently addressed this in U.S. v. Gerard, No. 1:14-CV-67-TLS (N.D.…
Applying Tax Overpayments to Later Years is Usually a Bad Idea
Instead of requesting a refund, taxpayers can ask the IRS to hold the overpayment and apply it to the taxpayer’s tax liability for the following year. These tax payment credits can result in significant headaches. The recent Schuster v. Commissioner, No. 17-11647 (11th Cir. 2018) case provides an example of why taxpayers should request refunds…