Publications

Tips To Help NonProfits Avoid Conflicts Of Interest

By Claude M. Millman
New York Nonprofit Media
June 2017 Edition

If you’re at a nonprofit funded by the city of New York, and you’re thinking you don’t have to worry about the city’s internal staff ethics rules, think again.

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Meet John Doe Summonses

By Megan L. Brackney
Journal of Passthrough Entities
May - June 2017 Edition

"John Doe” summonses have been in the news again.[1] On January 24, 2017, a federal district court unsealed an order authorizing the Department of Justice (DOJ) to serve a John Doe summons upon a third party to obtain information about U.S. taxpayers who may hold offshore accounts established by Sovereign Management & Legal LTD, a Panamanian Entity.[2] The John Doe summons sought records of U.S. taxpayers who had been issued debit cards that could be used to access funds in such a manner as to hide assets offshore. Previously, another federal court authorized John Doe summonses on eight entities, including FedEx, DHL, UPS, Western Union and HSBC USA, for records that would assist the IRS in identifying U.S. taxpayers who used Sovereign’s services to establish or maintain foreign financial accounts or other offshore assets.[3] On November 30, 2016, another federal district court authorized DOJ to serve a John Doe summons on Coinbase, a virtual currency exchanger on the grounds that convertible virtual currency,[4] such as Bitcoin, is difficult to trace and there is a reasonable basis for believing that some virtual currency users have failed to comply with federal tax law. [5]

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Reasonable Cause For International Information Return Penalties - What Is The Standard?

By Henry Stow Lovejoy
The CPA Journal
April 2017 Edition

The Internal Revenue Code (IRC) requires the filing of a number of different information returns with respect to foreign entities or transactions. These “international information returns” include Form 5471 (for US persons who own shares in certain foreign corporations), Form 5472 (for U.S. corporations that are 25% owned by foreign persons), Form 8865 (for U.S. persons who are partners in certain foreign partnerships), Form 3520 (for transactions with foreign trusts and for the receipt of certain foreign gifts) and Form 8938 (for foreign assets generally). For each, there is a significant penalty for failing to timely and correctly file the form. But the penalty does not apply if the failure was due to reasonable cause (sometimes with the additional condition that the failure was not due to willful disregard). But what is “reasonable cause?”

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Could Trump's Budget Priorities Threaten Existing Contracts?

By Claude M. Millman
New York Nonprofit Media
March 2017 Edition

Nonprofits receiving contract awards from New York City or the state should carefully monitor President Donald Trump’s budget policies for potential retroactive effects on pre-existing contracts.

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The New “Partnership Representative”

By Megan L. Brackney
Journal of Passthrough Entities
January - February 2017 Edition

Under the new Bipartisan Budget Act of 2015 (the “BBA”), there are significant changes to the partnership audit rules. Like TEFRA, the BBA requires partnership-level resolution of partnership income, gain, loss, deduction, and credits. Unlike TEFRA, under the BBA, the IRS will assess tax at the partnership level (as opposed to the partner level) based on an imputed underpayment amount at the highest applicable federal tax rate, subject to some key exceptions. The BBA also contains numerous changes to the procedures for assessment and collection of tax, and for judicial review.

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United States v. Adlman: Defining the scope of the Kovel Privilege and Work Product Doctrine

By Juliet L. Fink
The CPA Journal
January 2017 Edition

Although the attorney-client privilege has long been recognized under common law, there is no corresponding taxpayer-accountant privilege [other than a limited privilege for “tax advice” in some non-criminal matters under Internal Revenue Code (IRC) section 7525]. Criminal and civil tax cases, however, often involve complex accounting principles that may necessitate the engagement of an accountant to aid the attorney in giving effective advice to the client.

Under such circumstances, the attorney-client privilege extends to communications with the accountant for the purpose of assisting the attorney in rendering legal services to the client; this is known as the Kovel doctrine after United States v. Kovel [296 F. 2d 918 (2d Cir. 1961)]. The attorney-client privilege (and by extension, the Kovel privilege) belongs to the client, who has the burden of proving its applicability when asserting it. This applicability must be established by the existence of specific facts; a simple blanket assertion is insufficient.

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How Not to Waive Privilege When Consulting Non-Attorney Experts or Professionals

By Caroline Rule
Criminal Litigation
December 2016 Edition

Frequently, defense counsel in criminal investigations and prosecutions - particularly in tax-related prosecutions, but also in many other complex matters - cannot provide effective assistance to his or her client without consulting a non-attorney expert or professional, such as an accountant. The Second Circuit's seminal decision in United States v. Kovel, 296 F2d 918 (2d Cir. 1961), established that, if the non-attorney expert or professional is engaged by an attorney to assist the attorney in representing a client, and the services of the non-attorney expert or professional are necessary to translate, interpret, or explain client communications so that the attorney fully understands them, then communications between the attorney, the client, and the non-attorney expert or professional (hereafter, the "Kovel expert") are protected under the attorney client privilege. 

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Filing a Qualified Amended Return to Avoid Accuracy Penalties

By Megan L. Brackney
NJ Taxing Times
Winter 2016 - 2017 Edition

NEITHER THE INTERNAL REVENUE CODE (“I.R.C.”) nor Treasury Regulations requires taxpayers to file amended returns. However, the ethical rules of Circular 230, the NAEA, and the AICPA call for tax practitioners to advise their clients about errors or omissions in their tax filings. Once you have advised your client about an error, the client likely will ask you “should I correct the error, and, if so, how?” Under certain circumstances, a qualified amended return, or “QAR,” may provide a method for correcting an error without penalties.

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Complying with U.S. Requirements for Foreign Pension Plans

By Cassandra Vogel
The CPA Journal
November 2016 Edition

The migration of workers into and out of the United States is a fact of the modern interconnected world. Consequently, many U.S. taxpayers acquire an interest in a foreign pension plan or other deferred compensation arrangement during time spent working abroad. Because of the beneficial tax treatment of these plans in the originating country, a taxpayer might easily—but incorrectly—assume that there are no U.S. tax implications or reporting requirements for these foreign plans. It is a mistake to overlook a taxpayer’s interest in a foreign pension plan for U.S. tax purposes, and thus it is important to be well versed in the rules relating to foreign pensions, as well as how to bring previously non-compliant individuals into compliance.

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Tips For Navigating New York City's Integrity Disclosure Forms

By Claude M. Millman
New York Nonprofit Media
November 2016 Edition

New York City’s Vendor Information Exchange System (VENDEX) is an annoyance for organizations dependent on city funding. While it’s tempting to treat VENDEX compliance as clerical, it warrants attention from top executives. Perfect VENDEX compliance can be difficult, and complacency can lead to the filing of false data. 

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