Section 199A Final Regulations Issued on Eve of the 2018 Filing Season... [ read ]
The Section 199A Final Regulations were released on January 18, 2019 and a corrected version was issued on February 1, 2019, with a few corrections and clarifications. In this blog post I will address some of the key items in the Final Regulations, as clarified, other than rental real estate, which I cover in a separate blog post.
Divorce Pleadings May Impact a Request for Innocent Spouse Relief... [ read ]
Generally, spouses who file a joint return are subject to joint and several liability for tax deficiencies under the Internal Revenue Code. Yet the IRS may grant a spouse relief from joint and several liability on a joint return in certain circumstances. One mechanism for obtaining relief from the general rule is to seek relief as an "innocent spouse" under 26 U.S.C. Section 6015(f), which authorizes the IRS to grant equitable relief from joint and several liability.
Still No Answer on Late Filing Penalty on Electronically Filed Tax Returns... [ read ]
In a blog post last year, we discussed the parties' oral arguments in the 5th Circuit Court of Appeal hearing in Haynes v. United States regarding the application of reasonable cause and a late filing penalty to an electronically filed tax return. On January 29th, the 5th Circuit issued an opinion in Haynes vacating the district court's grant of the government's motion for summary judgment and remanded the case to the district court for additional consideration. However, in vacating the lower court decision, the 5th Circuit declined to address the question of whether the U.S. Supreme Court decision in U.S. v. Boyle is still valid law in the age of electronic filing of tax returns.
New Partnership Audit Rules: Should the Partnership Agreement be Amended?... [ read ]
In November 2015, as part of the Bipartisan Budget Act (BBA) of 2015, Congress enacted a new centralized partnership audit regime (PAR) to replace the TEFRA partnership rules. The PAR applies to all partnerships and, like TEFRA, IRS examinations and adjustments will be made at the partnership level. However, unlike TEFRA, the IRS will assess and collect tax from the partnership.
Opting Out of the New Partnership Audit Rules... [ read ]
In November 2015, as part of the Bipartisan Budget Act (BBA) of 2015, Congress enacted a new centralized partnership audit regime to replace the TEFRA partnership rules. The new partnership audit regime applies to all partnerships and, like TEFRA, IRS examinations and adjustments will be made at the partnership level. However, unlike TEFRA, the IRS will assess and collect tax from the partnership.
The Tax Balancing Act: Minimizing Estate Tax and Maximizing Income Tax Basis... [ read ]
The lifetime estate and gift tax exemption has risen more than 1600% over the past two decades. In 2017, with an exemption of $5,490,000, there were roughly 5,200 taxable estates but with an exemption of $11,180,000, that tally is expected to fall under 2,000 taxable estates for the 2018 tax year. As fewer estates are subject to federal estate tax, the intersection of estate tax planning and income tax planning is more pivotal than ever before.
Thoughts and Consideration Regarding the Designation of a Partnership Representative... [ read ]
In November 2015, as part of the Bipartisan Budget Act (BBA) of 2015, Congress enacted a new centralized partnership audit regime to replace the TEFRA partnership rules. The new centralized partnership audit regime is generally effective for partnership tax years beginning after December 31, 2017. As a result, the 2018 tax returns for most partnerships will be the first tax return filed under the new regime. One of the first questions partnerships, partners and tax professionals will face is determining who will be the Partnership Representative (PR). Although this would seem to be a simple question to answer, as explained below, it is much more involved than selecting a Tax Matters Partner (TMP) under the old TEFRA regime. This is especially true because any tax liability resulting from an IRS audit under the new centralized partnership audit regime is to be paid by the partnership in the current year, unless the PR takes affirmative steps otherwise. Failure by the PR to take action on a timely basis could result in a mismatch of tax burdens and tax benefits between current and former partners in a partnership.
IRS Updates Guidance on Disclosures and Accuracy Related Penalties... [ read ]
On December 20th, the IRS released Revenue Procedure 2019-9 providing guidance on whether disclosure of an item or position taken on a tax return is adequate for purposes of reducing or eliminating the Substantial Understatement of Income Tax Penalty (IRC Section 6662(d)) and the Return Preparer Penalty (IRC Section 6694(a)). Rev. Proc. 2019-9 updates Rev. Proc. 2018-11 and makes editorial but "no additional substantive changes". Rev. Proc. 2019-9 applies to any income tax return filed on 2018 tax forms for a tax year beginning in 2018, and to any income tax return filed in 2019 on 2018 tax forms for short tax years beginning in 2019.
New Rules in the United States Tax Court... [ read ]
The Tax Court has recently adopted amendments to its Rules of Practice and Procedure. These amendments come more than two years after the Tax Court proposed amendments to its rules to accommodate electronic filing of petitions and other documents. Pursuant to the new amendments to its rules, the Tax Court will soon allow electronic filing of Tax Court petitions and other documents. (The Tax Court will provide detailed information regarding the implementation of electronic filing on its website once the Tax Court is ready for electronic filing.) Under the new rules, if a Tax Court petition is filed electronically, an original signature is no longer required from the taxpayer or the taxpayer's representative.
IRS Revises Voluntary Disclosure Practice... [ read ]
On November 20th, the IRS issued Memorandum LB&I-09-1118-014 updating the process for both domestic and foreign voluntary disclosures. The IRS voluntary disclosure program is found in section 9.5.11.9 of the Internal Revenue Manual and is a long standing practice of the IRS to provide taxpayers who have potential criminal exposure a means to come into compliance with the law and potentially avoid criminal prosecution. In a prior blog post , we discussed the basics of the IRS voluntary disclosure program.
