Publications

Passport Revocation and Denial for Seriously Delinquent Tax Debts: New IRS Procedures Signal More Stringent Enforcement

By: Megan L. Brackney
The CPA Journal
July 2018 Edition

In January 2018, the IRS published procedures to begin enforcement of Internal Revenue Code (IRC) section 7345, which requires the State Department to deny the application for, or revoke the passport of, any individual whom the IRS certifies as having a “seriously delinquent tax debt.” IRC section 7345 was enacted on December 5, 2015, as part of the Fixing America’s Surface Transportation Act (FAST Act).

Prior to January 2018, the IRS had not been enforcing IRC section 7345, and there were many questions about how the passport revocation/denial process would work, such as whether there would be any additional exceptions, how the IRS would exercise its discretion, and how the IRS would interact with the State Department. Recently, the IRS has answered many of these questions through the issuance of Notice 2018-01 (Jan. 16, 2018), new Internal Revenue Manual (IRM) provisions, and updates on its website.

Now that the IRS has procedures in place to enforce IRC section 7345, it is important for CPAs to advise individual clients about this new and very serious consequence to being noncompliant with their tax liabilities. Below is a description of the provisions of IRC section 7345 and the IRS guidance, followed by answers to common questions that affected individuals may have.

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Tax Controversy Corner: Consider The Constructive Partnership Rules Before Reorganizing To Elect Out Of The BBA

By: Megan L. Brackney
Journal of Passthrough Entities
May - June 2018 Edition

The Bipartisan Budget Act of 2015 (the “BBA”) made substantial changes to the audit procedures for passthrough entities. The BBA repealed the prior rules for partnership audits and replaced them with a centralized regime that, in general, assesses and collects tax at the partnership level. Tax professionals have expressed concern that assessment and collection of tax at the partnership level is inconsistent with the long-standing rules of taxation of passthrough entities, and may have unpredictable and incongruous consequences. Not surprisingly, one of the first questions that partners and practitioners asked was “how do we get out this?” Treasury and the IRS, however, want most partnerships to be covered by the BBA, and thus the election out rules have been
a controversial aspect of the BBA.

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Reporting Virtual Currency Transactions to the IRS: Time May Be Running Out for Affected Taxpayers

By: Sharon L. McCarthy
The CPA Journal
May 2018 Edition

IRS Notice 2014-21, issued on March 25, 2014, made it clear that the IRS would treat virtual currencies that can be converted into traditional currency as property for federal income tax purposes (Notice 2014-21). This means that gain from the sale and exchange of virtual currency is subject to taxation. Given that many are attracted to virtual currency because of its anonymous nature, tax preparers should expect that individual clients might not volunteer information about virtual currency transactions at tax time. Recent events suggest, however, that the IRS is not sitting back and waiting for taxpayers to fully disclose their virtual currency activities. Failure to report such transactions may result in penalties and, potentially, criminal prosecution.

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Written Supervisory Approval Of IRS Penalties: When Must It Be Given, And Who May Give It?

By Henry Stow Lovejoy
CPA Journal 
April 2018 Edition

The Internal Revenue Code (IRC) imposes penalties on understatements of tax as a way to encourage voluntary compliance and deter noncompliant behavior.Generally, the revenue agent examining a return will be one who proposes a penalty. Revenue agents are instructed to consider penalties as part of the examination of any return, and they must determine whether and which penalties apply only after the facts and circumstances of the taxpayer’s return have been developed.

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A Long Overdue Check On Prosecutorial Power In Tax Cases

By Caroline Rule and Bob Fink
Law 360

Twenty years ago, we put forward what was then a novel concept — that the IRS and the U.S. Department of Justice were misusing the tax code to make their jobs easier. Our topic was the misuse of a statute that, we contended, was reserved for prosecuting the deliberate obstruction of a specific IRS investigation, audit or collection proceeding, and not for punishing any tax-related misconduct.

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The Enforcement and Impact of John Doe Summonses

By Megan L. Brackney
Tax Notes

In this article, Brackney discusses the John Doe summons procedures and the decision partially enforcing a John Doe summons in Coinbase. She also identifies some practical considerations for taxpayers whose information may be turned over to the IRS in accordance with the summons. 

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United States v. Greenfield: A Triumph of the Fifth Amendment's Act of Production Privilege; or Confirmation that the Privilege Can Be Entirely Abrogated by Any Act of Congress, or Even by a Treasury Regulation?

By Caroline Rule
The Tax Lawyer 

In 1976, in Fisher v. United States, the Supreme Court first recognized the "act of production privilege" as being a necessary component of the Fifth Amendment's privilege against self-incrimination. A grand jury subpoena or Service summons does not violate the Fifth Amendment just because documents the government seeks are incriminating; pre-existing documents are not the result of government compulsion. 

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U.S. Tax Residency: Some Black-and-White Rules, Some Gray

By Ian Weinstock
The CPA Journal
March 2018 Edition

When advising taxpayers or preparing returns, brightline rules are generally the easiest to explain and to handle. In contrast, tax outcomes that depend on facts and circumstances are inherently more difficult to evaluate. It is therefore a relief that many federal tax residency rules applicable to individuals are black-and-white, particularly considering how critical an issue residency is, both in terms of what is subject to tax and what returns are required. Unfortunately, there is a large gray area as well.

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Tax Cuts And Jobs Act Of 2017 Introduces Major Reforms To The International Taxation Of U.S. Corporations

By Jerald David August
Reprinted From The Winter 2018 Issue Of ALI-CLE's The Practical Tax Lawyer
Winter 2018 Edition

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (“TCJA”) of 2017, P.L. 115-97, which introduced a set of tax cuts and other reforms that will affect substantially all U.S. taxpayers, both corporate and individual. The key feature of the new legislation was the reduction by 40 percent of the maximum federal corporate income tax rate from 35 percent to 21 percent, including qualified personal service corporations.

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Pros and Cons of Voluntarily Disclosing Past Wrongs

By Wendy Abkin, George Abney, and Caroline D. Ciraolo
Tax Executive Institute 
February 2018

TO DISCLOSE OR NOT TO DISCLOSE, THAT IS THE QUESTION

Hamlet’s thoughts weighed heavily upon him. Should he suffer the slings and arrows of outrageous fortune, or take arms against a sea of troubles? For the young Prince of Denmark seeking to avenge his father’s death, the choice was action or inaction, and ultimately life or death. Fortunately, most tax problems do not have such grave outcomes. Seemingly inconsequential tax errors can, however, lead to severe financial consequences. And, remote as it may seem, the prospect of imprisonment for tax crimes cannot be overlooked. When a past wrong is discovered, what should you do?

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