Offer In Compromise

IRS Seized Properties

August 22, 2008 | Mike Habib, EA

TIGTA reviews IRS methodology for selling seized property [Audit Report No. 2008-30-144]:

IRS management needs to provide better oversight to ensure that employees consistently follow the requisite procedures for the storage and sale of seized property, according to a recent audit by the Treasury Inspector General for Tax Administration (TIGTA).

As described in the audit, when a taxpayer owes delinquent tax and thorough consideration has been given to all aspects of the case and alternative collection methods, IRS can seize taxpayer property for payment of the tax. The seized property can be sold by public auction or by public sale under sealed bids.

Hiding Income Offshore?

August 21, 2008 | Mike Habib, EA

To disclose or not to disclose, that is the question.

Hiding Income Offshore is not the way to go.

Mike Habib, EA

Fuel Tax Credit

August 21, 2008 | Mike Habib, EA

Yes, we are all fed up with the cost of fuel.

No, I’m sorry to report, not everyone is eligible for the fuel tax credit.

Fuel Tax Credit Scams

MO AG Sues Tax Resolution Firm

August 18, 2008 | Mike Habib, EA

JK Harris didn’t provide promised services to Missourians who sought help with tax problems, Nixon says in lawsuit

Jefferson City, Mo. – A South Carolina company that advertises it can help consumers resolve their state and federal tax problems didn’t provide the services it promised, Attorney General Jay Nixon says. Nixon filed a lawsuit today seeking full restitution from JK Harris & Company LLC (JKH) for its Missouri customers who received neither the services for which they paid as much as $4,500 each nor the refunds they requested.

“JK Harris promises it can help consumers who are having tax problems, but the Missourians who complained to my office told a different story – one of unreturned phone calls, lost paperwork, and a worse financial situation than when they started,” Nixon said.

The JKH Web site tells consumers the company has a step-by-step strategy – known as “The Process” – to help consumers with their tax problems. According to JKH, “The Process” includes providing immediate relief to consumers by attempting to stop collection activities by the IRS; assigning a case specialist to review the consumer’s information and begin work on resolving the customer’s tax problems; and submitting an offer to the IRS to resolve the customer’s tax problems.

Mortgage Interest Deductibility

August 18, 2008 | Mike Habib, EA

Beneficial owners can deduct home mortgage interest and taxes The Tax Court held that taxpayers were entitled to deduct mortgage interest and real estate taxes they paid on property owned by their son, because they were the beneficial owners of the property.

The taxpayers resided at the property for all of 2003. During that time, title to the property was in the name of their son, as was the mortgage on the property. Their son had obtained a mortgage loan and took title to the house to procure it for the taxpayers who were unable to secure a loan because of financial difficulties. The son did not live on the property, and the taxpayers paid for all maintenance of, and taxes on, the property. Mortgage payments from 2001 until the time of the trial were made through Camrock General Engineering, Co. Camrock was the taxpayers’ company; one taxpayer was its registered agent and the other its president. After the taxpayers moved from the residence, they served as landlords; they rented the property to a tenant and performed all services related to that tenancy

The taxpayers claimed on their 2003 federal income tax return deductions for home mortgage interest and real estate taxes of $3,522 and $3,194, respectively, on the residence property. The IRS contended that because the taxpayers had no legal obligation to make the mortgage payments and did not hold title to the property, they were not entitled to deduct the mortgage payments. The Service further argued that the taxpayers did not make the mortgage payments; the payments were made by Camrock.

IRS pledges better collection of business taxes

August 13, 2008 | Mike Habib, EA

IRS official pledges improved collection of billions in unpaid payroll taxes from businesses

WASHINGTON (AP) — A top IRS official promised Congress Tuesday that the agency “will do better” in collecting billions in taxes that businesses supposedly withheld from employees’ paychecks but never remitted to the government.

Linda Stiff, a deputy Internal Revenue Service commissioner, agreed with senators — who criticized the agency’s enforcement efforts — that the loss of about $58 billion in payroll taxes estimated to be owed the government is unacceptable. She said the IRS has made collecting those taxes a high priority.

While too high, the $58 billion “represents a snapshot of unpaid employment taxes” as part of a long-term improvement effort, Stiff testified at a hearing of the Senate Homeland Security Committee’s investigative panel. “Our numbers show dramatic improvement in the last several years, but we know we still have a long way to go.”

IRS Demutualization Ruling

August 12, 2008 | Mike Habib, EA

Court rebuffs IRS and allows policyholder to escape gain on demutualization

Eugene A. Fisher et al. v. U.S. (Ct Cl 8/6/2008) 102 AFTR 2d ¶ 2008-5150

The Court of Federal Claims has applied a variation of the open transaction doctrine with the result that a policyholder had no gain to report when it chose a cash option in connection with a demutualization of an insurance company. Under this option, the shares awarded to the policyholder were immediately sold by the company and the proceeds were then paid to the policyholder in cash. IRS said that the policyholder was taxable on the full amount of the gain without being able to allocate any of his basis in the contract to offset the sales proceeds. The Court allowed the policyholder to use his basis in the contract (which greatly exceeded the amount of the sales proceeds) to fully offset the proceeds and thus to report no gain.

Tax Shelter IRS Resolution

August 8, 2008 | Mike Habib, EA

New IRS settlement initiative for LILO and SILO transactions

Mike Habib, EA

IRS recently announced a settlement initiative for Lease-In/Lease-Out (LILO) and Sale-in/Lease-Out (SILO) transactions. Under this initiative, more than 45 of the nation’s largest corporations that participated in these shelters will receive a letter with an offer. Shelter participants will have 30 days to make a decision to accept the offer. Taxpayers would have to concede 80% of certain claimed tax breaks but they would not be hit with accuracy-related penalties.

Charitable Contribution

August 7, 2008 | Mike Habib, EA

Proposed regs explain strict charitable contribution substantiation & appraisal rules Preamble to Prop Reg 08/06/2008; Prop Reg § 1.170A-15, Prop Reg § 1.170A-16, Prop Reg § 1.170A-17, Prop Reg § 1.170A-18

Mike Habib, EA

IRS has issued proposed regs explaining the charitable contribution substantiation changes made by the American Jobs Creation Act of 2004 (AJCA) and the Pension Protection Act of 2006 (PPA). The proposed regs, which would be effective for contributions made after the date final regs are issued, also would provide guidance on what constitutes qualified appraisals and qualified appraisers for purposes of the substantial rules for noncash gifts.

Identity Theft Tax Problem

August 7, 2008 | Mike Habib, EA

Finance Chairman Baucus wants more action and details on IRS strategy to combat identity fraud [Press release dated Aug. 5]:

A recent IRS update on its Identity Protection Strategy has failed to satisfy the concerns of Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee.

The report, submitted to Baucus on July 21 by IRS Commissioner Douglas Shulman, was provided in response to a request the senator made at a committee hearing held in April. It summarized IRS’s efforts in three areas: assistance to taxpayers in resolving tax issues associated with identity theft; outreach to increase taxpayer awareness of identity theft; and prevention of identity theft by building programs to address the problem.