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There are circumstances when unpaid taxes can be discharged in bankruptcy. There are a number of rules involved. They all hinge on whether a tax return was filed. The recent United States v. Mayer, No. 16-626-RGA (D. Del. 2018), case provides an opportunity to consider these bankruptcy-tax rules. Facts & Procedural History The case involved the taxpayer’s…Continue…
Tax Articles
Agreeing to an IRS Real Estate Foreclosure Sale
Can you ask the IRS to take real estate to satisfy your unpaid tax liability? The answer is “yes,” but it usually not the best option. The recent order in United States v. Leroy, No. 2:18-cv-01777-MCE-DB (E.D. Cali. 2018) provides an example of this. The Facts & Procedural History Ms. Leroy owed $177,653.70 in unpaid taxes…Continue…
Dormant IRS Levy Precludes Wrongful Levy Suit, IRS Wins
What happens if the IRS issues a levy to someone who does not owe taxes to the IRS, but the IRS does not receive anything from the levy. The levy sits dormant for several years. Everything is good, right? But then the third party pays the IRS. Can the person’s right to challenge the levy…Continue…
When Forged Signatures Suffice: The Tacit Consent Exception
A tax return has to be signed to be valid. But what if the return is signed by someone else? Is a tax return with a forged signature a valid tax return? The court addressed this in Coggin v. United States, No. 1:16-CV-106 (M.D.N.C. 2018). Facts & Procedural History The taxpayer relied on her attorney to…
The Last Filed Rule Overruled? IRS Collections Now Uncertain
Taxpayers will often file tax returns that do not report all of their allowable deductions and credits, with the intent of going back and filing amended returns once they are able to determine the correct deductions and credits. Can the IRS base its collection analysis on the originally-filed but incorrect tax returns? The court recently…Continue…
Avoiding an IRS Wage Levy by Change to Contractor Status
Can you avoid an IRS wage levy by having your employer change your status from that of an employee to a contractor? The court addressed this in Hudiak vs. United States, No. MJG-11-1271 (D. Md. 2018) by ordering the taxpayer to make installment payments to the IRS despite the change in employment status. The Facts &…Continue…
Construing Tax Laws Tied to Activities, Time for a New Rule?
When Congress provides a tax benefit contingent on some activity, there is often a question as to whether the activity can be read broadly to encompass many sub-activities or has to be read narrowly. The NextEra Energy, Inc. v. United States, No. 17-12304 (11th Cir. 2018) case provides a good example of the subjective distinctions taxpayers have make…
Perception Can Be As Important as Substance in Tax Disputes
Taxpayers voluntarily submit information to the IRS. The IRS not only evaluates the substance of this information, but also the taxpayer’s candor in preparing and providing the information. The perception of candor is just as important as the substance in many cases. The Guess v. Commissioner, T.C. Memo. 2018-97, provides an example of how things can…
Loaning Money to Business Triggers Trust Fund Penalty
You work hard to build a business, you find success over the years, and then you find out that your long term accountant did not remit payroll taxes and you owe a significant balance. What do you do? The recent McClendon v. United States, No. 17-20174 (5th Cir. 2018) case provides some answers. The Facts & Procedural…
Shareholder Cannot Make S Corp. Separately Stated Item Election
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…
