Is the Deadline to File a Tax Court Petition Jurisdictional?
Whether the deadlines to file a United States Tax Court petition are jurisdictional has been a developing issue over the last two years and has been discussed in previous issues of the EA Journal (see the Fall 2023 and Spring 2024 Tax Cou... Thomas Gorczynski, EA, USTCP
When Did Congress Intend the New §4973 Statute of Limitations to Take Effect?
If a taxpayer contributes more than the allowed amount to an individual retirement account (IRA), §4973 imposes a 6 percent excise tax on those excess contributions. Before the SECURE... Thomas Gorczynski, EA, USTCP
Deadline Postponement Regulation Found Invalid
Section 7508A was added to the Internal Revenue Code (IRC) in 1997. Section 7508A(a) authorizes the Internal Revenue Service (IRS) to postpone certain tax actions for up to one year for a taxpayer affected by a §165(i)(5)(... Thomas Gorczynski, EA, USTCP
Late-Filed Collection Due Process Requests May Now Be Honored
If a taxpayer has an unpaid tax debt, the Internal Revenue Service (IRS) may take certain enforced collection actions provided it gives the taxpayer a right to contest those actions. Under §632... Thomas Gorczynski, EA, USTCP
Recent Passport Cases in the Tax Court
In 2015, Congress added §7345 to the Internal Revenue Code (IRC). Under §7345(a), if the Internal Revenue Service (IRS) certifies that a taxpayer has a “seriously delinquent tax debt,” a taxpayer may h... Thomas Gorczynski, EA, USTCP
What Happens When a Tax Court Petition Is a Few Minutes Late?
The United States Tax Court is a court of limited jurisdiction; it cannot consider every tax dispute in the United States. Historically, for the Tax Court to have jurisdiction over a specific matter, the Internal Revenue Code (IRC) must allow the Tax Court to review the Inte... Thomas Gorczynski, EA, USTCP
Say Goodbye to Most Form 5471 Penalties
Alon Farhy used two Belize corporations to attempt to evade United States income tax. While he was not prosecuted for these actions, he also never filed Form 5471, Information Return of U.S. Persons With Respect to Certain Fore... Thomas Gorczynski, EA, USTCP
If the IRS Timely Responded, Your Offer Is Not Deemed Accepted
Brown v. Commissioner, 158 T.C. No. 9 (2022) Brown has shined light onto a provision in the Internal Revenue Code (IRC) that asserts that an offer is deemed accepted 24 months after submission if not explicitly rejected.Ruben D. Valdes, EA, USTCP
An Innocent Spouse Victory When the Taxpayer Knew the Tax Would Not Be Paid
Recently, I represented a United States Tax Court case related to innocent spouse relief, Jessica Lynn Grady a.k.a. Jessica Lynn Gans v. Commissioner (16411-17S). The evidence was substantial (supporting h... Cindy Agostini, EA, USTCP
Can a Taxpayer Deduct Payments if no Form 1099 Is Issued?
The United States Tax Court recently took up an interesting case which, on its surface, seems a run-of-the-mill case (it is a memorandum decision). However, it has some interesting perspectives related to documentation of payments to contract... Thomas Gorczynski, EA, USTCP
Collection Due Process as Viewed by the Tax Court
Internal Revenue Service Collection Process When taxpayers cannot pay their taxes, the Internal Revenue Service (IRS) has voluntary and enforced collection alternatives available. Taxpayers can enter into installment agreements that... Sherrill Trovato, EA, USTCP
Reasonable Reliance on a Tax Adviser as Viewed by the Tax Court
Circular 230, §10.35 Competence Enrolled agents, certified public accountants, and attorneys must demonstrate competence in their work before the Internal Revenue Service (IRS). According to Circular 230i §10.35(a), practitione... Sherrill Trovato, EA, USTCP
What Jurisdiction Does the Tax Court Have Over Passport Actions Under §7435(b)?
Vivian Ruesch, Petitioner v. Commissioner of Internal Revenue, Respondent 154 T.C. 13 | Filed June 25, 2020 Vivian Ruesch (154 T.C. 13 (6/25/20)) provides the first Tax Court guidance on Internal Revenue Code (IRC) §7345, captioned “Revocat... Sherrill Trovato, EA, USTCP
Is an Identity Protection Personal Identification Number a Required Element of a Taxpayer Signature for Purposes of the Assessment Statement of Limitations?
Robin J. Fowler (155 T.C. 7 (September 9, 2020)) answers the question of whether the Internal Revenue Service (IRS) can choose to reject a validly e-filed tax return because it is missing the identity protection personal identification number (IP PIN). T... Sherrill Trovato, EA, USTCP
Is Timely and Meaningful IRS Supervisor Approval Needed in Order to Assess Penalties?
Jesus R. Oropeza and Fabiola Anaya Oropeza, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. memo, 2020-111 | Filed July 21, 2020 The Internal Revenue Code (the Code) requires the IRS to come forward with sufficient evidence that indicates the impositi... Steven R. Diamond, CPA, USTCP
What Conditions Must Exist for IRS to be Considered Abusing Their Discretion in a Collection Action?
In order for a taxpayer to prevail in Tax Court regarding a collection issue, the taxpayer must demonstrate the IRS abused its discretion when it decided the case. An abuse of discretion can occur when the IRS fails to consider relevant information, or when the IRS acts in an arbitrary and cap... Steven R. Diamond, CPA, USTCP
What Does a Taxpayer Have to Do in Order to Show Abuse of Discretion in a Collection Due Process Case?
Valerie Bishop, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. memo, 2020-36 | Filed March 17, 2020 In this collection due process (CDP) case, the taxpayer has the option of selecting a collection alternative such as an installment agreement or offe... Steven R. Diamond, CPA, USTCP
Can a Taxpayer Prove Timely Filing of a Tax Court Petition If There Is No Postmark on the Envelope?
Michael J. Seely and Nancy P. Seely, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. memo, 2020-6 | Filed January 13, 2020 If a taxpayer receives a statutory notice of deficiency (90-day letter) and wishes to petition the Tax Court, the taxpayer has 90 da... Steven R. Diamond, CPA
What Qualifies as Real Estate Professional Hours for Passive Activity Purposes?
Ronnie Hairston and Gloria Cruz Hairston, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. memo, 2019-104 | Filed August 20, 2019 Individual taxpayers can deduct passive activity losses for real estate rental activities, subject to limitations based on ad... Steven R. Diamond, CPA, USTCP
Last Known Address as Viewed Through Duane Lee Chapman and Alice E. Smith, Deceased (T.C. Memo 2019-110, 8/29/19)
If as a tax professional you use your office address as a mailing address for your clients’ tax returns, or are ever tempted to do so, consider there may be unintended consequences. FACTS Mr. Chapman and his late wife operated their bail bonds operation on Queen Emma Street in Hono... Sherrill Trovato, EA, USTCP
What Constitutes Sufficient Notification to a Taxpayer When the Commissioner Mails out a Notice of Deficiency?
Damian K. Gregory and Shayla A. Gregory, Petitioners v. Commissioner of Internal Revenue, Respondent 152 T.C. No. 7 | Filed March 13, 2019 Internal Revenue Code (IRC) §6212 authorizes the Commissioner to send out a notice of deficiency to a taxpayer by certified ... Steven R. Diamond, CPA, USTCP
Reasonable Reliance on a Tax Pro to Avoid Accuracy Related Penalties as Viewed Through Carlos Langston and Pamela Langston v. Commissioner
Mr. Langston has a bachelor’s degree in business administration and a master’s degree in petroleum engineering. Since graduating in 1990, he has been self-employed in the oil and gas industry. Mrs. Langston holds a bachelor’s degree in accounting and a Juris Doctor degree. Whil... Sherrill Trovato, EA, USTCP
Does IRS Refusal of a Taxpayer’s Proposed Offer for an Installment Agreement Constitute an Abuse of Discretion?
James Loveland, Jr., and Tina C. Loveland, Petitioners v. Commissioner of Internal Revenue, Respondent 151 T.C. No. 7 | Filed September 25, 2018 The Tax Court abides by the “abuse of discretion standard”i when it reviews administrative determinations m... Steven R. Diamond, CPA, USTCP
Conflict of Interest
Clark J. Gebman and Rebecca Gebman v. Commissioner T.C. Memo. 2017-184) Even if we never practice in the U.S. Tax Court, as taxpayer representatives we must always be aware of our ethical duties. This is especially true when representing a husband and wife who previously filed a ... Sherrill Trovato, EA, USTCP
Does IRS Refusal of a Taxpayer’s Proposed Offer for an Installment Agreement Constitute an Abuse of Discretion?
Kenneth Pitner, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. Memo 2016-237 | Filed December 29, 2016 The IRS will pursue collection activities if a taxpayer has an unresolved outstanding debt with them. If the taxpayer disagrees with the amount of tax the ... Steven R. Diamond, CPA, USTCP
For Purposes of the Passive Activity Rules under IRC §469, How Can a Real Estate Professional Credibly Establish Hours of Participation so as to Avoid Limitations on the Amount of Losses Claimed?
Roberta Birdsong and William H. Birdsong, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. Memo 2018-148 | Filed September 10, 2018 A passive activity is one that involves the conduct of any trade or business in which the taxpayer does not mater... Steven R. Diamond, CPA
Fraudulent Tax Returns, Penalties, and Amended Tax Returns
Generally, a taxpayer may correct an error in a tax return without incurring interest or penalties by filing an amended return and paying any additional tax due on or before the due date (last day prescribed for filing). An amended return filed after the due date may be accepted, rejected, or ignored by the IRS in its sole discretion. It has been held that where the taxpayer files a false or fraudulent tax return but later... Steven R. Diamond, CPA, USTCP
Is an Analysis of the Thought Process of the Approving Supervisor Required in a Case Involving a Trust Fund Recovery Penalty?
Under IRC §§6320 and 6330, taxpayers have the right to a collection due process (CDP) hearing, which provides them with an independent review by the IRS Office of Appeals of the decision to file a Notice of Federal Tax Lien or the IRS’s proposal to undertake a levy action. At the hearing, the taxpayer has a statutory right to raise any relevant issues related to the unpaid tax, lien, or proposed levy, including the appropriateness of ... Steven R. Diamond, CPA
Does Good Faith Reliance on a Tax Preparer Allow a Taxpayer to Avoid a Substantial Understatement of Tax Penalty?
Does Good Faith Reliance on a Tax Preparer Allow a Taxpayer to Avoid a Substantial Understatement of Tax Penalty? Gregory S. Larson, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. No. 2018-30, Filed March 19, 2018 By Steven R. Diamond, CPA IRC §§6662(a) and (b)(1) and (2) impose a 20 percent accuracyrelated penalty on an underpayment of federal income tax that is... Steven R. Diamond, CPA
When Does the Six-Year Statute of Limitations Apply to the Reporting of Specified Foreign Financial Assets?
When Does the Six-Year Statute of Limitations Apply to the Reporting of Specified Foreign Financial Assets? Mehrdad Rafizadeh, Petitioner v. Commissioner of Internal Revenue, Respondent 150 T.C. No. 1 Filed October 2, 2017 By Steven R. Diamond, CPA The Foreign Account Tax Compliance Act (FATCA) provides that any individual who holds an interest in a specified foreign financial as... Steven R. Diamond, CPA
Does a Tax Treaty Govern the Taxability of Unemployment Compensation?
Pei Fang Guo, Petitioner v. Commissioner of Internal Revenue, Respondent 149 T.C. No. 14 Filed October 2, 2017 By Steven R. Diamond, CPA The United States has income tax treaties with many foreign countries. These treaties provide that residents of foreign countries may be taxed at a lower rate or may be exe... Steven R. Diamond, CPA
May Tax Whistleblowers Always File Their Claims Anonymously So As to Be Protected from Retaliation?
Whistleblower 14377-16W, Petitioner v. Commissioner of Internal Revenue, Respondent 148 T.C. No. 25 Filed June 28, 2017 The IRS Whistleblower Office pays money to persons who blow the whistle on taxpayers w... Steven R. Diamond, CPA
Can a Taxpayer Rely on Tax Preparation Software to Claim Deductions Recommended by the Software?
Barry Leonard Bulakites, Petitioner v. Commissioner of Internal Revenue, Respondent Many taxpayers prepare their own tax returns, without professional help, by using off-the-shelf retail software programs. These programs often offer recommendations based upon the information that is inputted by the taxpayer and may also provide one-toone answers... Steven R. Diamond, CPA
Is an Interest in a Defined Benefit Plan Considered an Asset in Determining Insolvency?
David W. Schieber and Janet L. Schieber, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2017-32 Filed February 9, 2017 Generally, a taxpayer realizes income equal to the portion of a debt that is owed when the debt is canceled or discharged. However, the income from the discharge of the debt may be excluded from income if, among other reasons, the discharge occurs when the taxpayer is insol... Steven R. Diamond, CPA
When Is a Claim for Refund Timely Filed?
Yvonne A. Williams, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2017-10 Filed January 10, 2017 IRC Sec. 6511 provides that a taxpayer may file a claim for refund within three years from the time the return was filed or within two years from the time the tax was paid, whichever is later. IRC Sec. 6402 provides that in the case of an overpayment, the com... Steven R. Diamond, CPA
Is the United States Tax Court a Court of Equity?
Grisel A. Smyth, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2017-29 Filed February 7, 2017 Under the United States Constitution, the U.S. Tax Court is an Article I court. This means that the powers of the Tax Court are more restricted than those of courts that are granted pow... Steven R. Diamond, CPA
When Can A Noncustodial Taxpayer Claim a Dependency Exemption?
William E. Lowe and Tess Lowe, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2016-206 Filed September 26, 2016 RC Sec. 151(c) authorizes a taxpayer to deduct an exemption for each individual who is a dependent of the taxpayer for the taxable year. A dependent is defined as eith... Steven R. Diamond, CPA
Can an Estate Deduct a Theft Loss That Relates to Property Owned by an LLC in Which the Decedent Owned an Interest at the Time of His Death
Estate of James Heller, Deceased, Barbara H. Freitag, Harry H. Falk, and Steven P. Heller, Co-Executors, Petitioners v. Commissioner of Internal Revenue, Respondent 147 T.C. No. 11 Filed September 26, 2016 Internal Revenue Code Sec. 2054 provides that the value of a taxable estate shall be reduced by the value of gross estate losses incurred during the settlement of the estate ... Steven R. Diamond, CPA
Can IRS Levy a Taxpayer If It Previously Mailed a Notice of Deficiency to an Address That Was Not the Taxpayer’s Last Known Address
IRC Sec. 6321 imposes a lien in favor of the United States on all property and rights to the property after the demand for taxes has been made and the taxpayer fails to pay the taxes. The IRS must first notify a taxpayer in writing of his or her right to a hearing on the issue of whether the lien is appropriate. A taxpayer may challenge the existence or amount of the underlying tax liability but only if a notice of deficiency was not ... Steven R. Diamond, CPA
Be Stubborn about Your Goals
I just finished my twenty-fifth filing season: ten at IRS, two on the Hill, and thirteen here at NAEA’s intergalactic headquarters, where I have been privileged to advocate for a great group of professionals. My accomplishment is a relative one, admittedly. I file one tax return a year— some say ill-advisedly (though often with the advice of my EA, whom I thank here anonymously)—and many of our members have significantly more filing s... Robert Kerr
If the Office of the Clerk of the Tax Court Is Inaccessible, How Is a Time Limitation for Filing a Petition Calculated
Felix Guralnik, Petitioner v. Commissioner of Internal Revenue, Respondent 146 T.C. No. 15 Filed June 2, 2016 The deadline for filing a petition in Tax Court is jurisdictional, which means that the time limit for filing a petition with the Tax Court has been fixed by Congress and, therefore, cannot be extended... Steven R. Diamond, CPA
Can a Deceased Taxpayer Spouse Use the AMT Credit that Arose from ISO Exercised by the Spouse Before Death
Nadine L. Vichich, Petitioner v. Commissioner of Internal Revenue, Respondent 146 T.C. No.12 Filed April 21, 2016 Individuals do not recognize gain or loss when an incentive stock option (ISO) is granted or exercised for regular tax purposes. If the taxpayer's rights are freely transferable or not subject to a substantial risk of forfeiture, an adjustment must be made for alternative minimum tax (AMT) purposes by in... Steven R. Daimond , CPA
What Constitutes a Valid Notice of Determination for Purposes of Starting the Thirty-day Period for Filing a Timely Tax Court Petition
Isaiah Bongam, Petitioner v. Commissioner of Internal Revenue, Respondent Petitioner 146 T.C. No. 4 Filed February 11, 2016 After a taxpayer has filed a Request for a Collection Due Process Hearing, the IRS will send the taxpayer a Notice of Determination detailing the outcom... Steven R. Daimond
How Can A Taxpayer Substantiate Expenses for Automobile Travel
David L. Charley and Julia A. Charley, Petitioners v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2015-232 Filed December 2, 2015 A taxpayer may generally deduct from gross income the ordinary and necessary expenses of carrying on a trade or business that are paid... Steven R. Diamond, CPA
Our Lobbyists, Who Art in DC
2015 was an interesting year in many respects: the Patriots won Super Bowl XLIX and we all learned the numbers of pounds per square inch in a fully inflated football; Queen Elizabeth II became England’s longest reigning monarch; and the broad market bounced all over the place only to land where it began and to consign all of us consulting our 401(k) balances to yet another year at our desks. At the same time, 2015 was an i... Robert Kerr
Is a Postmark made by Stamps.com Evidence of a Timely Filed Petition with the U.S. Tax Court?
Robert H. Tilden, Petitioner v. Commissioner of Internal Revenue, Respondent T.C. Memo. 2015-188 The jurisdiction of the U.S. Tax Court to redetermine a deficiency in income tax depends upon the issuance of a valid notice of deficiency and a timely filed petition by the taxpayer. The taxpayer normally has 90 days (150 days if the notice is addressed to a person outside the United States) to... Steven R. Diamond, CPA