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Recovering Fees from the IRS

By: Megan L. Brackney
The CPA Journal
June 2019 Edition

Although some are unaware of the fact, taxpayers can recover fees and costs from the government if the IRS has taken an unreasonable position against them. The IRS may be responsible for fees due to unreasonable positions that it took during audit, on appeal, in connection with a refund claim or collection matter, or as related to a summons.

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Bryan C. Skarlatos quoted in "Personnel, Tech Changes Could Help IRS Buck Audit Declines", Law360

A continuing decline in Internal Revenue Service audit rates could soon reverse course due to an influx of workers to conduct examinations and a plan to modernize technology at the agency.

The IRS Data Book released in May showed the audit rate for the largest corporations fell to just under 50% in 2018 from over 91% in 2013, and the rate for the highest-earning individuals dropped to 6.7% in 2018 compared with an audit rate of nearly 35% in 2015.

IRS officials have blamed the yearslong drop in audit rates on dwindling agency funding over the past nine years and staff retirements that drain the agency's knowledge base. However, the decline may soon be reversed due to developments that will likely give the IRS more resources than it has had in the past, according to Bryan C. Skarlatos, a partner at Kostelanetz & Fink LLP.

“I'm thinking things are going to start trending up,” he said. “It may take more than a year to get it up, but I think by 2020 you'll see audit rates go up.”

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Ian Weinstock quoted in "Foreign Individuals, Trusts Face New U.S. Tax on Some Income", Bloomberg Tax

Wealthy foreigners who live in the U.S. face the prospect of an unexpected new tax on non-U.S. income.

Drafters of the 2017 tax overhaul repealed a rule that kept some foreign-held assets outside the U.S. tax net, meaning foreigners who become U.S. residents now have to report the worldwide income of their families’ foreign businesses in the U.S. and pay tax on the income of each company and subsidiary.

The repeal of tax code Section 958(b)(4) not only affects multinationals and private equity firms that have foreign subsidiaries but also domestic trusts, partnerships, and estates in ways that leave the U.S. individual with tough options: pay taxes on more income, dispose of foreign shares, or leave the U.S—a move that could bring its own income and estate tax consequences.

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Caroline D. Ciraolo moderated the panel titled "The Current State Of The IRS, Personal Income Tax Committee" at the New York City Bar

For years Congress has asked the IRS to do more with less. Notwithstanding budget cuts, the Service remains responsible for, among other things, civil and criminal tax enforcement and assisting millions of taxpayers comply with their legal obligations. This Town Hall addressed how fiscal constraints affect the IRS’s ability to execute its mission. Caroline Ciraolo, the former Acting Assistant Attorney General of the Department of Justice's Tax Division, moderated a discussion of the Service’s current enforcement priorities as well as its efforts to assist taxpayers and taxpayer representatives facing bureaucratic hurdles and complex tax issues.

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Michael Sardar quoted in "Massive College Fraud Scheme Could Showcase New Sentencing Rules", TaxNotes Today

New rules from the First Step Act and sentencing guidelines amendments could be on display when judges start deciding on punishment for participants in the recent massive college bribery scheme.

The sentencing hearings will begin in June for those facing charges, including tax and fraud charges, in the “Operation Varsity Blues” college admissions scandal, with the hearings for the parents who have pleaded guilty to start in the fall.

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Caroline D. Ciraolo moderated the panel titled "Whistleblowers: Protections And Privacy" at the 4th International Conference on Taxpayer Rights

This panel explored the role of whistleblowers in tax administration, including the whistleblower’s access to information about the taxpayer and progress on the investigation, and the taxpayer’s access to information about the whistleblower’s proffer. 

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Caroline D. Ciraolo participated in a panel titled “Exchange of Tax Information is Everywhere! Knowing the Rules, Understanding the Landscape,” at the 2019 Audits and Appeals Seminar, Tax Executive Institute

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Michael Sardar quoted in "Data Analytics Are Coming to an IRS Special Agent Near You", TaxNotes Today

Ever since CI started talking about its new data analytics strategy, the division has been fielding privacy and disclosure concerns.

Asked if the IRS has the right to apply its new sophisticated data analytics tools to a taxpayer’s data, Michael Sardar of Kostelanetz & Fink LLP said that the standard search and seizure analyses involve situations in which the government needs to spend a large amount of resources — for example, with visual surveillance or telephone wiretapping. “There’s a parallel in terms of how much effort the government has to put in versus what they are going to get out of it, and that’s how you determine
what is reasonable,” he said.

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Sharon L. McCarthy participated in a panel presentation titled "The Life-Cycle Of A Criminal Tax Case" at the 3rd Annual Criminal Tax Day

This panel walked attendees through the entire life cycle of a criminal tax case: from referral to CI through investigation, Department of Justice Referral, Indictment, Plea and Sentencing. Whether you have worked 10 criminal tax cases before or never been involved in any, our panel brought attendees up to speed with an explanation and exhibits.

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