5th International Conference on Taxpayer Rights – Registration is Now Open

Sometimes, in the midst of all that is going on in one’s own professional life, it helps to take a step back and think about first principles of tax administration.  It is also fascinating to learn about tax administration in countries not your own – so that you look at your own tax system with new eyes, and think about how things might be done differently.  That is the underlying rationale of the International Conference on Taxpayer Rights, which I first convened as the National Taxpayer Advocate in 2015, and for which the Center for Taxpayer Rights has picked up the mantle.  So I’m pleased to announce that registration is now open for the 5th International Conference on Taxpayer Rights (ITRC), which will be held online.  You can check out the agenda and register for the conference here.

This year, the Center will convene not one, but two (!) conferences, because we had to move back a year the conference originally scheduled for 2020.  The first ITRC will be held on 26 to 28 May, 2021.  For each conference we try to focus our panels around a general theme, and the 5th ITRC theme is Quality Tax Audits and the Protection of Taxpayer Rights.  This theme will be explored in six panels over two days:

  • Foundational audit principles and applicable taxpayer rights;
  • The conduct of tax audits and the intersection of taxpayer rights: case studies;
  • Audits and taxpayer rights in an environment of cross-border cooperation;
  • Audit selection in the twenty-first century;
  • The impact if audits on future compliance; and
  • Criminal investigations and civil tax audits.
read more...

The moderators and panelists represent 15 countries, and come from different disciplines and roles in tax administration.  We have members of the judiciary, tax agency governors, former commissioners and other agency personnel, tax professionals, and professors of tax, economics, psychology, and anthropology, as well as private practitioners and representatives of international organizations.  This is a cross-cultural and interdisciplinary group, and if past conferences are any indicator, the discussions will be fascinating.

New with this conference is a pre-conference Low Income Taxpayer Clinic Workshop on May 26, focusing on Representing Low Income and Small Business Taxpayers in the COVID-19 Economy.  International interest in clinics for low income and other underrepresented taxpayers has been growing over the years, with the movement expanding to Australia, UK, and Ireland.  Through this workshop, which is free, people can learn about starting an LITC in their country and learn about the work of existing LITCs.  We also plan to continue this workshop as part of future ITRCs, with different topics each year.  You can learn a bit about international LITCs by watching the Center’s Tax Chat! with several directors of LITCs from different countries.  Access the Tax Chat! here.  (By the way, subscribe to our YouTube channel so you can learn about future Tax Chats!)

Normally, we rotate holding the conference in a different part of the world each year, but of course the coronavirus pandemic threw a spanner in the works on that plan.  This year we planned to be in Athens, Greece, and we still have the National and Kapodistrian University of Athens School of Law as our host organization, but we will be holding the conference online.  The hours of the sessions each day are scheduled on Central European Summer Time, which might be early for Pacific Coast folks, but if you register and miss the first session, we will send you a link to the recording the same day so you can watch it then, albeit a bit out of order.

As I mentioned earlier, we plan to hold a second conference this year – the rescheduled 2020 conference.  The theme of the 6th International Conference on Taxpayer Rights is Taxpayer Rights, Human Rights: Issues for Developing Countries.  This will be a fascinating conference, and I am hopeful we all will be able to meet on October 6 and 7, 2021 at the University of Pretoria in South Africa.  You can see the agenda for the 6th ITRC here.  And if you’d like to get a bit of a preview of this conference, check out the Center’s Tax Chat! video with Riel Frantzen, Annet Oguttu, and Asha Ramgobin of the University of Pretoria here.

So.  Please take a look at the conference.  This is not your normal tax practice continuing education program.  It is a venue for thinking about how we might improve tax administration and enhance the protection of taxpayer rights.  It’s an opportunity to learn from other countries, other cultures, other tax administration.  I’ve learned so much from the conferences in the past.  I just wish we could meet in person in Athens!

Hope to “see” you online though – you can register for the conference here.

Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit

Last week, Assistant Secretary for Tax Policy nominee Lily Batchelder floated the latest in the Biden Administration’s efforts to provide tax relief to the nation’s millions of people suffering due to the pandemic: a $250 refundable tax credit for families with children under the age of 18 who have pets in their household.

President Biden with his dog, Major
Photo by Stephanie Gomez/Delaware Humane Association, via NY Times/Associated Press
read more...

In speaking at the Tax Policy Center webinar entitled “Thinking Outside the Box Tax Policy Ideas”, Batchelder cited the overwhelming research showing that the presence of certain family pets has a strong correlation with positive outcomes in children, including health, education and lifetime earnings. (See, for example this recent research study by Robert Matchock, Pet Ownership and Physical Health)

Insisting that the Biden Administration will continue its evidence based approach to good governance, current Assistant Secretary Mark Mazur noted that evidence has tied positive outcomes to only certain pets-namely dogs and cats. As such, the Treasury officials expected that the legislative language they would support would not extend to other household friends. Mazur acknowledged that the research to date has not studied other animals nearly as much as dogs and cats although there is preliminary research showing that larger rodents (such as chinchillas) have had a positive impact on mental health across age ranges.

Facing questions about whether this might be expanded to older Americans, as the data strongly correlates pet ownership with positive health outcomes among seniors, Mazur was noncommittal, though he emphasized that the Administration’s focus in the near term was on improving conditions for families with children.

“It might be the camel’s nose in the tent,” said Mazur, “but for now we are tying this to our proposals to make permanent the expanded child tax credit that Congress enacted last month.”

Needless to say the proposal generated quite a stir in the webinar. Former NTA and current Executive Director of the Center for Taxpayer Rights Nina Olson asked if Treasury expected IRS to expand its nonfiler portal to allow nonfiling taxpayers to enter pet information alongside their children. Commissioner Rettig, also on the panel, in noting that he is the first Commissioner in IRS history to own not one but two adopted retired Greyhound racers, suggested that Congress should allocate an additional $100 million to its proposed upgrade of technology in order to allow it to build the pet database. 

Panelist and Tax Notes’ tax historian Joseph Thorndike noted that many of these pets may be the direct descendants of pets removed from being claimed as dependents in 1986 when Congress began requiring taxpayers to list the social security number of dependents which caused almost seven million dependents to disappear in one year.  He noted that the ancestors of today’s household pets would no doubt be smiling down as pets once again returned to the 1040.

While not on the panel, former Treasury Secretary Larry Summers, who was slated to speak on a separate panel with former Commissioner Rossotti about the Rossotti/Sarin/Summers tax gap proposal, interrupted Batchelder, stating that the “last thing poor people need is more money in their pockets. I worry about the inflationary impact in the important pet sector.”

As with any proposed credit expansion, there are lots of ancillary issues. PT’s own Keith Fogg notes that “in the 1860s in the predecessor to Section 6334 Congress allowed as part of the property exempt from levy one cow, three pigs, five sheep and the wool thereon. Although that was changed to livestock in 1954 it’s good to see animals formally entering the code again.”

Click here for a link to a video of the webinar.

Today: Third Annual UCI Law – A. Lavar Taylor Symposium Hosted by UC Irvine

UC Irvine is hosting the third annual UCI Law – A. Lavar Taylor Tax Symposium today. The panels start at 11:30 AM ET. The theme is taxation in time of crisis. Panels include looks at tax relief, tax administration, and tax policy.  The afternoon keynote is from Eric Hylton, the Commissioner of SB/SE.  Lavar, who readers of PT my recall for his outstanding guest posts, will be offering closing remarks this evening. 

Christine Speidel and I will be on during panel 2, starting at 1:10 ET. We will discuss our work in progress When Tax Procedure Meets COVID 19: An Uneasy Relationship  

 Registration link is here 

ABA Tax Section Midyear Meeting This Week

The Tax Section of the ABA is holding its midyear meeting this week in a virtual format. It’s less expensive to register in this format and certainly less costly in time and money to attend. The program kicks off this afternoon with a New Attendee Orientation Reception at 4:00 p.m. and an opening plenary Tuesday at 10:30 a.m. EST, featuring Mark J. Mazur, Deputy Assistant Secretary, Tax Policy, US Department of the Treasury, and Janice Mays, Managing Director, Tax Policy Services at PwC US, exploring tax changes expected from the new administration and the new Congress.

The meeting has several panels addressing issues recently discussed in PT, which are detailed below. In addition, readers of this blog should find interesting the panels happening at the Administrative Practice, Individual & Family Taxation, Court Procedure & Practice, Tax Collection, Bankruptcy and Workouts Committee, and Teaching Tax Committees. There are too many excellent panels to highlight here. The full program is here, and the schedule at a glance is here.

read more...

On Thursday morning January 28, the Pro Bono & Tax Clinics committee is presenting two sessions on the EIP, which we have covered extensively on PT. One of the panels includes Yaman Salahi who was part of the team of attorneys representing incarcerated individuals who won their case to receive the EIP in the fall of 2020.

EIP for Incarcerated Individuals. Panelists will provide lessons learned and an update on the latest from the Scholl et al. v. Mnuchin class action lawsuit ordering that the EIP be disbursed to incarcerated individuals. They will also discuss the process by which inmates may claim the payment, any systemic issues that have arisen since the court ordered that the payments be made, and the ways in which the pro bono and tax clinic community can be helpful.
Panelists: Yaman Salahi, Partner, Leiff Cabraser Heimann & Bernstein, San Francisco, CA; Amy Spivey, Visiting Assistant Professor & LITC Director, UC Hastings Law School, San Francisco, CA

Caleb Smith is a speaker on the second panel, which has a broader focus. Les recently blogged on key differences between the advance payment of the EIP and the recovery rebate credit here.

The National Taxpayer Advocate, EIP Issues and What to Expect in Filing Season. The National Taxpayer Advocate will provide a review of the 2020 Annual Report to Congress, and panelists will troubleshoot some of the most common problems likely to arise with EIPs during the filing season. Topics will include assisting those that the IRS thinks have received the EIP already but never actually did, misdirected deposits, or issues with joint bank accounts and domestic violence. Additionally, the panel will address questions concerning individuals that did receive payments but shouldn’t have and whether IRS can recoup such payments under either assessment/deficiency procedures, as erroneous refunds, or under general offset authority.
Moderator: Terri Morris, Attorney and Christine Brunswick Fellow at Community Tax Law Project, Richmond, VA
Panelists: Erin Collins, IRS National Taxpayer Advocate, Washington, D.C.; Dietra Grant, IRS Wage & Income, Atlanta GA; Nancy Rossner, Attorney Community Tax Law Project, Richmond, VA; Caleb Smith, Clinical Professor University of Minnesota Law School, Minneapolis, MN

If you enjoyed the blog post on premature assessments of Tax Court cases or the mailing of 12 million notices weeks or months after the dates on the notices (and its unfortunate recurrence), you could attend a panel on which Keith will participate, for the Tax Collection, Bankruptcy and Workouts Committee. 

The Impact of Late-Issued Collection Notices in Bankruptcy and Tax-Related District Court Litigation. After the expiration of the hiatus on collection and enforcement under the People First Initiative, the IRS mailed millions of notices with expired action and response dates. In addition, the inability of the IRS and the Tax Court to process mail during the COVID emergency caused the IRS to make premature assessments of some tax liabilities. The panelists will discuss the effect of misdated notices and premature assessments on the validity of assessments and the effect of these notices and assessments in bankruptcy and tax-related collection litigation commenced by the U.S. Department of Justice Tax Division.
Panelists: Janice Feldman, Volunteer Attorney at the Federal Tax Clinic, Harvard Law School, Jamaica Plain, MA; Professor Keith Fogg, Director of the Federal Tax Clinic, Harvard Law School, Jamaica Plain, MA; A. Lavar Taylor, Law Offices of A. Lavar Taylor, Santa Ana, CA

On Thursday afternoon, guest blogger Omeed Firouzi moderates a panel for the Diversity Committee which should be of interest to all tax lawyers.

Inequality, Race, & Tax: Systems, Laws, & Enforcement. The United States exhibits wider disparities of wealth than any other major developed nation. Over the past five decades, wealth has increasingly concentrated among the highest-income households. These households are disproportionately White and male. In 2018, three White men held aggregate wealth greater than the aggregate wealth of one-half of all Americans. The median White household has 41 times more wealth than the median Black household and 22 times more wealth than the median Latinx household. On average women earn less than men in all industries. At the intersection of race and gender, the gaps are even more shocking. Women of color are disproportionately poor, suffering poverty rates of 21.4% Black women, 18.7% Latinas, and 22.8% Native American women, as compared to 7% for White men. Moreover, education, work, marriage and other attributes that fall under the rubric of “personal responsibility” do not remedy these disparities. White heads of household without a high school education have on average more wealth than college educated Black heads of households. White households with a single white parent have more than twice the net worth of two parent Black households. White households with an unemployed head have a higher net worth than Black households with a head who is working full time. In short, something must be done to reverse these racist trends. Tax and spending systems are the most profound fiscal tools under the government’s control. Many aspects of United States tax systems worsen inequality, especially the racial wealth gap. Three nationally recognized expert panelists will provide a deep dive into institutional racism in tax systems. The panel will begin with a broad overview, focusing on racism in tax systems targeting Black and Latinx taxpayers. The focus will then narrow further, looking at the disparate impact of taxpayer audits on communities of color. Finally, panelists will suggest concrete strategies to start to remedy these wrongs.
Moderator: Omeed Firouzi, Staff Attorney, Philadelphia Legal Assistance
Panelists: Donnie Charleston, Director, Public Policy & Advocacy, E Pluribus Unum; Francine Lipman, William S. Boyd Professor of Law, University of Nevada, Las Vegas; Jackie Vimo, Economic Policy Justice Analyst, National Immigration Law Center

Finally, on Friday Les and Nina are participating in a session at the Individual & Family Taxation Committee meeting, which promises a fascinating and important discussion of how best to address tax underreporting by individuals.

Fresh Look at an Old Problem: Reducing the Tax Gap. The tax gap, or the difference between total taxes owed and taxes paid on time, is a longstanding problem. This panel highlights recent proposals to reduce the tax gap, with a focus on the underreporting tax gap associated with individuals.
Moderator: Leslie Book, Professor of Law, Villanova University Charles Widger School of Law, Villanova, PA
Panelists: Mark J. Mazur, who was recently returned to Treasury as Deputy Assistant Secretary, Tax Policy, (he was previously the Director at the Tax Policy Center, Urban Institute, Washington DC); Nina Olson, Executive Director of the Center for Taxpayer Rights, Washington DC; Charles O. Rossotti, Senior Advisor, Carlyle Group, Washington DC; Natasha Sarin, Assistant Professor of Law, University of Pennsylvania Law School & Assistant Professor of Finance at the Wharton School of the University of Pennsylvania, Philadelphia, PA

Year in Review – Court Cases

This review of 2020 Tax Court cases is partially cribbed from a presentation given by LaKesha P. Thomas, Esq., Clinic Director at Three Rivers Legal Services (FL); William Schmidt, Clinic Director at Kansas Legal Services; and Caleb Smith, Associate Professor of Clinical Law at University of Minnesota Law School.

In this post several of the cases of particular importance this year are highlighted.  Litigation during 2020 seemed to take a back seat to general tax administration which the pandemic through into thorough disarray.  Nonetheless, the EIP cases offered some interesting crossover litigation and other cases explored important areas of tax procedure as well.

Note that some of the Tax Court cases discussed below are not linked, as online opinions are currently unavailable through the Tax Court site due to the ongoing implementation of the DAWSON system.

read more...

EIP Litigation:

Scholl v. Mnuchin, Dk. No. 20-cv-05309-PJH discussed here, here, here and here.

  • IRS withholding EIPs to incarcerated individuals and encouraging those that received them to pay them back.
  • Statute does not include incarceration as disqualifying otherwise eligible individuals. Only legal authority is IRS online FAQs.
  • Class Action Suit: Victory for Incarcerated Individuals
  • Importance for Practitioners:
  • Using admin law as your way into Court
  • Increasing reliance by IRS on FAQs and sub-regulatory guidance in fast-changing circumstances

Amador v. Mnuchin, Dk. No. 20-cv-01102-TDC (D. Md.) discussed here.

  • IRS denying EIPs to U.S. citizens who filed joint returns with a non-citizen spouse (filed as a class action).
  • Court denied gov’t motion to dismiss on sovereign immunity, standing, and 12(b)(6) grounds.
  • Related case: Doe v. Trump, Dk. No. 20-cv-00858 (C.D. Cal.) (granting government motion to dismiss and sustaining CARES Act spousal exclusion under rational basis review), appeal pending, Dk. No. 20-56019 (9th Cir.)

R.V. v. Mnuchin, Dk. No. 20-cv-01148-PWG (D. Md.)

  • IRS denying EIPs to U.S. citizens who are the underage children of undocumented immigrants.
  • Court denied gov’t motion to dismiss on standing and 12(b)(6).

What is a return:

Fowler v. C.I.R., 155 T.C. No. 7 (2020) discussed here and here.

  • Individual attempted to e-file return multiple times but was rejected for lacking “IP PIN.” Later mailed in return.
  • IRS began deficiency procedures within 3 years of later mailed return, but not within 3 years of e-filed attempts. If those (rejected) e-filed returns were valid, IRS deficiency untimely. Which is what Court held.
  • E-filed returns are rejected all the time when they otherwise would be valid
  • ASED date arguments (and by consequence, CSED)
  • Late filing penalty arguments

Quezada v. IRS, No. 19-51000 (5th Cir., Dec. 11, 2020) see discussion of Fifth Circuit’s opinion here and prior opinions here and here

  • Taxpayer failed to file Form 945 for backup withholding.
  • In bankruptcy, IRS sought to collect assessed tax, penalties & interest; taxpayer argued that the 3-year statute of limitation had expired, because his filed 1040 & 1099 were a “return” that triggered the SOL.
  • Fifth Circuit found the 1040 & 1099 combination sufficient to constitute a “return” and reversed bankruptcy court and district court, which had both agreed with the IRS.

Coffey v. Commissioner, No. 18-3256 (8th Cir., Dec. 15, 2020), rev’g, 150 T.C. 60 (2018) (fully reviewed and very fractured Tax Court opinion), see discussion of Eighth Circuit’s opinion here and previous discussions here, here and here

  • Taxpayers claimed to be residents of Virgin Islands.
  • Taxpayers filed returns with Virgin Islands and gave copy of portion of returns to IRS
  • Tax Court found submissions triggered running of statute of limitations and 8th Circuit reversed

Innocent Spouse Cases

Sutherland v. C.I.R., 155 T.C. No. 6 (2020) discussed here, here, here and here.

  • Taxpayer First Act (TFA) changed scope of review of Tax Court in Innocent Spouse (I/S) cases mostly to admin record at time of IRS determination (IRC 6015(e)(7))
  • Problem is taxpayers can get into Tax Court before (or without) IRS making a determination in I/S (IRC 6015(e)(1)(A)). What does Tax Court Review? Sutherland kicks the can… TFA provision only applies for petitions filed after 7/1/2019

Jacobsen v. C.I.R., 2020 U.S. App. LEXIS 4544 (7th Cir. 2020) discussed here and here.

  • Tax Court and 7th Circuit determining how to weigh factors in Innocent Spouse relief where taxpayer has “actual knowledge” of items leading to understatement
  • Taxpayer seeking equitable relief under IRC 6015(f) with all positive factors except knowledge… both courts say, “no dice.”
  • Highlights the need to argue no actual knowledge!!! (If at all possible)
  • Recognize extreme uphill battle of getting reversal on Appeal for I/S

CDP Cases

Lander v. C.I.R., 154 T.C. No. 7 (2020) discussed here, here, here and here.

  • Collection Due Process Issue: When is a taxpayer precluded from raising the underlying tax because they had a “prior opportunity” to dispute? (IRC 6330(c)(2)(B))
  • Tax Court held that taxpayer request for audit reconsideration (with Appeals) was “prior opportunity” precluding right to raise underlying liability
  • Importance for Practitioners:
    • Don’t request audit reconsideration (i.e. wait until CDP to raise the issue)?
    • Take it to appellate court? Don’t use S-Case designation…

Patrick’s Payroll Services v. Comm’r, No. 20-1772 (6th Cir.) discussed here

  • Taxpayer arguing that 6330(c)(2)(B) imposes a disjunctive test (i.e. non-receipt of notice of deficiency or no prior opportunity) that allows a taxpayer to contest their underlying liability if one of the conditions is satisfied

Amanda Iris Gluck Irrevocable Trust v. Comm’r, 154 T.C. No. 11 (2020), discussed here.

  • Taxpayer sought to challenge underlying liability resulting from IRS computational adjustments.
  • Judge Lauber found that the taxpayer did not have a prior opportunity and that Court had jurisdiction to review a computational adjustment in CDP cases.

Cue v. Comm’r, No. 21404-18SL (T.C. 2019), discussed here.

  • Taxpayer challenged filing of federal tax lien on basis that a FTL would prevent him from keeping his job as a banker. At Appeals, the settlement officer declined to withdraw the lien and the taxpayer lost his job.
  • In a bench opinion, Judge Goeke found that the SO abused her discretion by failing to consider that the taxpayer would lose his job if she failed to withdraw the lien. Judge Goeke reversed and declined to sustain the notice of determination.

Barnhill v. Comm’r, 155 T.C. 1 (2020), discussed here.

  • Taxpayer did not receive a letter from the IRS scheduling an Appeals conference to dispute assessment of a Trust Fund Recovery Penalty (TFRP).
  • Judge Gustafson held that the taxpayer did not have a prior opportunity to dispute and thus was able to challenge the filing of a federal tax lien on the merits.

Timely Filing as Jurisdiction or Claims Processing Rule

Organic Cannabis Foundation v. Comm’r, No. 17-72874 (9th Cir.)

  • 9th Cir. panel affirmed Tax Court and held that IRC 6213(a)’s time limit is jurisdictional

Boechler, P.C. v. Comm’r, No. 19-2003 (8th Cir.) discussed here

  • 8th Cir. panel affirmed district court and held that IRC 6330(d)(1)’s 30-day CDP time limit is jurisdictional.

Castillo v. Comm’r, No. 20-1635 (2d Cir.)

  • Briefs submitted – arguments by taxpayer and amici for non-jurisdictional nature of CDP filing deadline & that IRC 6330(d)(1) should be interpreted to allow jurisdiction on late-filing when CDP notice was not received by petitioner within 30-day period

Year in Review – Administration

This review of 2020 legislation is cribbed from a presentation given by LaKesha P. Thomas, Esq., Clinic Director at Three Rivers Legal Services (FL); William Schmidt, Clinic Director at Kansas Legal Services; and Caleb Smith, Associate Professor of Clinical Law at University of Minnesota Law School.

The biggest administrative action taken by the IRS in 2020 derived from its power under 7508A which gives the IRS the power to waive many requirements when a declared disaster occurs.  We discussed 7508A and the power it grants to the IRS as well as the power the IRS exercised in numerous posts over the year.  You can find them here, here, here, here and here.  In addition to the “normal” powers granted to the IRS under 7508A, 2020 also brought the possibility of new power and postponement created by 7508A(d) passed just before the pandemic arrived in the United States but without thought of how it would operate in the setting of a global pandemic.  Figuring out exactly what 7508A(d) means is something still underway as we discussed here.  In general, the IRS exercised its power to postpone in a broad manner through Notice 2020-23 and other notices exercising the power granted in IRC 7508A.

read more...

Notice 2020-23: Tax Action Relief

Taxpayers have until 7/15/2020 to perform the following time-sensitive tax actions if normally due on or after 4/1/2020 and before 7/15/2020:

  • File U.S. Tax Court petition
  • Filing a claim for refund or credit
  • Filing a suit for a claim for refund or credit
  • All actions listed in Rev. Proc. 2018-58
  • 180-day qualified opportunity zone investment period
  • Related Tax Changes IR-2020-59 -Installment Agreements:
  • Payments between 4/1/2020 and 7/15/2020 are suspended.
  • The IRS will not default IAs during this period.

Notice 2020-18

Pursuant to this notice certain federal income tax payments and income tax returns due on 4/15/2020 were postponed until 7/15/2020 creating perhaps the longest filing season ever.This relief applied to:

  • Individuals filing the Form 1040 series
  • Trusts and estates filing a Form 1041
  • Partnerships filing Form 1065
  • Corporations filing the Form 1120 series
  • 2019 federal income tax payments, and •2020 federal estimated income tax payments. The relief does not apply to: •Federal payroll taxes, and Federal information returns.
  • If the TP needed beyond 7/15/2020 to complete a postponed tax returnthe taxpayer could file Form 4868 or Form 7004 by 7/15/2020 extending the due date until 10/15/2020

-Under IRS FAQs, the following were permitted until 7/15/2020:

2019 IRA and HSA contributions, and 2019 employer contributions to qualified retirement plans.

-Interest, penalties, and additions to tax for failure to pay began to accrue on 7/16/2020 for all federal income tax payments subject to postponement.

There was no stated relief from 2020 estimated tax underpayment penalties.

Taxpayer First Act –

Expands/Strengthens Taxpayer Rights and Reforms the IRS

List of different IRS actions here.  The IRS issued several News Releases:

  • IR-2020-206, IRS adds six more forms to list that can be signed digitally; 16 now available
  • IR-2020-188, IRS updates procedures for designating taxpayer disputes for litigation, implementing provisions of Taxpayer First Act
  • IR-2020-55, IRS announces waivers for Offer in Compromise applications
  • IR-2020-27, IRS launches Identity Theft Central
  • IR-2019-206, IRS: Recent legislation requires tax exempt organizations to e-file forms

Suspension of various IRS activities from April 1 to July 15 (installment agreement payments suspended, initiating new liens and levies suspended, etc.)

List of changes here.

COVID-related collection procedures – Taxpayers owing less than $250,000 wanting an installment agreement may not need to submit a financial statement may not have a notice of federal tax lien filed in their case.  List of changes here.

Current E-Signature and e-communication procedure –electronic signatures and e-mailing more accepted by IRS

The IRS announced that next year it will introduce a secure portal to submit Forms  2848 and 8821 and a Tax Pro Account for e-signing 3-party authorizations.  The disruption caused by the shut-down of the IRS for several months left practitioners unable to access eServices and ascertain information about their client’s accounts in addition to being unable to call the IRS to learn about the accounts.  Creating a secure electronic system that allows practitioners to have access to this information has become more critical.  Even after the IRS employees began returning to work the low staffing of the CAF units left practitioners without an effective means of using eServices.

Even as the IRS returned to work in the summer it acknowledged that taxpayers continued to need relief and that it had to temper its collection activities until it could work through the huge backlog of mail awaiting its staff as they returned to work.  It created the Taxpayer Relief Initiative:

Under the new IRS Taxpayer Relief Initiative, changes to collection procedures are as follows:

  • Payment plan extensions. “Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days,” the IRS said.
  • Less documentation required. Certain qualified individual taxpayers who owe less than $250,000 may set up installment agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient. 
  • Tax liabilities automatically added. The IRS will automatically add certain new tax balances to existing installment agreements. The agency says this new “taxpayer-friendly approach” will help some taxpayers avoid defaulting the agreement.
  • More flexibility. In cases where taxpayers are temporarily unable to meet the payment terms of an accepted Offer in Compromise, the IRS says it will be “offering additional flexibility.” 
  • Option to make changes online. Instead of having to talk to the IRS about having changes made to an existing installment agreement, qualified taxpayers with installment agreements paid by direct debit will now be able to make changes online. The IRS said, for example, that taxpayers could “propose lower monthly payment amounts and change their payment due dates.”

It allowed individuals entering into an installment agreement for 2019 taxes to have no notice of federal tax lien filed for tax liabilities up to $250,000.  It will be interesting to see what long term changes to IRS collection practices may result from the pandemic both in the way taxpayers and practitioners contact the IRS and in the decisions the IRS makes regarding collection from outstanding accounts.

Preserving Tax History and the People Who Make It

One of the unexpected side benefits of participating in a blog is the connections that it allows you to make with others.  Through the connection I have established with long-time commenter of the blog post, Bob Kamman, and the chance publication of my first name in one post, he provided me with the genealogical history of my family dating back to the first person from my father’s family who landed in Virginia in the 17th century. 

A recent post has brought in another interesting connection.

Bill Elliott, who practices in the Dallas area and who I have known for many years because of his publication of an excellent book on tax collection, Federal Tax Collections, Liens and Levies, Warren Gorham & Lamont, New York, New York (2d. ed. 2019), read the recent post in which I mention Judge Vasquez and the new book about the judge.  Bill reached out to me to point me to his extensive video interviews of Judge Vasquez which you can find here, here and here.  These interviews are part of a series of video interviews Bill has conducted with major figures in the tax world sponsored by the Tax Section of the State Bar of Texas.  The video interviews provide a glimpse of the individuals impossible to achieve through the written word.  Congratulations to Bill and the Texas State Bar for their project.

If you enjoy getting to know about individuals involved in tax and prefer a medium other than writing, you might also check out the People in Tax podcast series created by James Creech through the ABA Tax Section.

Remember Low Income Taxpayer Clinics and Other Tax Charities on Giving Tuesday

Procedurally Taxing readers are probably being bombarded by fundraising requests from all sorts of nonprofits today, which somehow has become designated as a global “Giving Tuesday”.   No doubt, in this time of the pandemic and economic stress, there are many worthy causes if one is inclined to give.  In the face of job losses, unemployment, illness, and racial injustice, it would be easy to overlook the important work being done by Low Income Taxpayer Clinics (LITCs) and other tax charities like the Tax Assistance Public Service (TAPS) endowment.  I would just like to encourage PT readers to take a moment out of their day and reflect on the work of the LITCs and consider contributing to (and volunteering with) their local clinic.

read more...

2019 was the 20th anniversary of the federal LITC grant program, which was created by the IRS Restructuring and Reform Act of 1998 (RRA 98) and IRC section 7526.  (Full disclosure: I testified before the House Ways and Means Oversight Committee and the Senate Finance Committee during the RRA 98 hearings about the importance of a grant program for LITCs, and the LITC I founded is a grant recipient.  I also oversaw the LITC grant program from 2004 to 2019, as the National Taxpayer Advocate.  So I am little biased in favor of LITCs!)  It is thrilling to see that twenty of the LITCs that were in the first round of grantees in 1999 are still participating in the federal grant program today.  In grant year 2019, the IRS issued $11.7 million in grants to 131 organizations.

As I discussed in my post last week, part of the mission of the Center for Taxpayer Rights is to promote and support the LITCs.  I briefly covered all the work the clinics have been doing on behalf of vulnerable taxpayers throughout the pandemic. Not only have they successfully litigated access to Economic Impact Payments (EIPs) for millions of taxpayers, but on a day-to-day basis LITCs have been up and running, in virtual environments, helping tens of thousands of taxpayers in tax disputes with the IRS.

A quick look at the 2019 LITC Program Report provides some eye-popping statistics – For grant year 2018 (the most recent grant cycle for which numbers are publicly available):

  • 19,513 taxpayers were represented by LITCs in tax controversies with the IRS;
  • 16,595 taxpayers received consultations or advice from LITCs;
  • 3,199 taxpayers were brought into filing compliance by the LITCs; and
  • 4,261 taxpayers were brought into collection compliance.

If those numbers don’t demonstrate the important role LITCs play in the lives of low income taxpayers, maybe these statistics will drive the point home:

  • Over $4.7 million in refunds were secured by LITCs;
  • Over $123 million in tax liabilities were decreased or corrected by LITC representation; and
  • 8,516 taxpayers facing collection action received relief through LITC representation.

Clinics represent taxpayers in all manner of disputes, including collection due process hearings, offers in compromise, currently not collectible classification, non-filers, earned income tax credit and child tax credit audits and audit reconsiderations, and worker classification.  The 2019 LITC Program Report (page 20) contains many “success stories” which everyone should read, but this one really shows the life-changing impact of LITC representation:

LITC Helps a Veteran and His Wife Find Relief From Debt and Saves Their Home

The taxpayers were a senior couple with no children. The husband had served in the military and was disabled during combat operations. He had a construction business, and together he and his wife invested large amounts of time and money into renovating their home into a bed and breakfast.

After years of financial setbacks, the couple lost their home and long-time business, resulting in a large outstanding federal tax debt. The taxpayers filed for bankruptcy. At that time, they were living on a fixed income of Social Security and a small Veterans Administration pension in a subsidized senior apartment that they were told they could not live in if they had more than $10,000 in tax debt.

The couple came to the LITC after they began receiving certified mail notices from the IRS about the federal tax debt. The clinic called the IRS to place a 60-day hold on collection while the clients gathered documents for an OIC. The couple then received a notice of intent to levy their Social Security benefits, and the clinic requested a CDP hearing, where it helped the couple settle their entire federal tax debt with an OIC for $1.

The taxpayers returned a customer satisfaction survey to the LITC and acknowledged the work of the staff attorney by saying, “Wonderful you have such a smart, kind, and caring man on your staff. Thank you so much for everything.”

128 LITCs participated in the Tax Court’s Clinical Program, whereby the Court includes “stuffer letters” from the LITCs in various notices to pro se petitioners and LITCs and other pro bono programs attend calendar calls and pre-calendar settlement days, as well as enter appearances before the court on behalf of low income taxpayers.  Over 9 percent of all LITC cases in grant year 2018 involved litigation, with the majority in Tax Court.

Now, what can PT readers do?  Well, for one, you can contribute.  Remember that LITC federal grant funding is dependent on LITCs raising a dollar-for-dollar match – either through hard cash or the fair market value of in-kind contributions, including volunteer time.  As I mentioned in last week’s post, many small and rural LITCs have a hard time raising matching funds – so your contributions will literally bring in a dollar for every dollar you contribute.  The Taxpayer Advocate Service website has a map that lists all the LITCs currently funded along with their websites, and Publication 4134 contains LITC grantee names, locations, and telephone contact information. 

If there is a clinic in your vicinity, please consider volunteering for their pro bono panel as well as giving – LITCs need help from all manner of taxpayer professionals – attorneys, CPAs, enrolled agents.  And your volunteer time counts as matching funds – in grant year 2018, over 1,887 volunteers gave 56,971 hours.  If there isn’t a clinic near you, consider giving to a rural or other clinic that has not yet received the full $100,000 annual federal grant.  You can find the list of 2020 grantees and the grant award here.

And please don’t forget the Tax Assistance Public Service (TAPS) Endowment.  PT has long been an advocate for this important program, as witnessed by the link button on PT’s website.  Through the TAPS endowment fund, the American Bar Association Section of Taxation provides stable, long-term funding for its tax-related public service programs. The TAPS endowment fund primarily supports the Christine A. Brunswick Public Service Fellowship program, which provides two-year fellowships for recent law school graduates to work for non-profit organizations offering tax-related legal assistance to underserved communities.

In its four-year existence, the TAPS endowment fund has supported 20 fellows. Not only have the fellows produced impressive results, but many have secured positions in the field of low-income tax assistance and continue to serve low-income communities and train a new generation of law students to provide these services. Other fellows have clerked for judges of the U.S. Tax Court who value their experiences working with underserved taxpayers and their perspectives gained from their first-hand involvement in low-income tax issues. Fellows who practice tax law in other settings such as major law firms and the government, continue to contribute to the Tax Section by remaining active in pro bono initiatives, speaking on panels, leading committees, drafting comments, and mentoring fellows and other new lawyers. This program has been incredibly successful both in serving taxpayers who otherwise might not have representation, making systemic change in local communities and in providing a springboard to careers in low-income tax services. Consider giving to the TAPS endowment fund today by clicking on the button on the PT website.

Of course, Keith, Les and I also would welcome any contributions to the Center for Taxpayer Rights as well – the Center now has its own “donate” button on this blog – but your contribution to any of the these LITCs not only will provide much-needed funds but also will show the hard-working clinicians that their work on behalf of low income taxpayers is deeply appreciated by the entire tax community.

So.  On this Giving Tuesday, or really any other day, those of us in the tax profession have a broad array of opportunities for giving in the tax field.  We, more than anyone else, know the difference representation can make in the lives of taxpayers.  Please take a moment out of your day to look at the website of your local LITC and consider giving.  Even the smallest donation can help with an IRS match and other expenses.  And, on behalf of Procedurally Taxing, thank you!