The National Taxpayer Advocate recently released her 2023 Annual Report to Congress and, while it is chock-full of newsworthy and important data, this blog entry focuses on the report’s discussion of the “wizard behind the curtain” problem, which impedes the independence of the IRS Appeals function. As background, when taxpayers disagree with audit adjustments proposed by the IRS’ examination division, they have an opportunity to protest the adjustments to a different division within the IRS, known colloquially as Appeals.  The IRS first established this  ..read more

Background: Millions of Employee Retention Credit (ERC) claims have been filed with the IRS as a result of the COVID-19 pandemic, with millions of taxpayers already receiving their refunds and others still waiting to receive refund checks. The IRS audits and Appeals work has commenced with a fury at a dizzying pace. While many appropriate ERC claims have been filed, the IRS has seen a number of erroneous claims as well. On December 21st, the IRS launched a new initiative to address the issue of erroneous ERC claims. The Voluntary Disclosure Program, part of a broader IRS effort ..read more

On November 20, 2023, the U.S. Court of Appeals for the Sixth Circuit in Mann Construction ruled that its 2022 decision – which had held that sub-regulatory pronouncements labeling transactions as “listed” or “reportable” (and thus subject to penalties for failure to disclose) are invalid under the Administrative Procedure Act – applies only to taxpayers in the Sixth Circuit because the IRS shrewdly mooted the case before the district court on remand was able to issue a nationwide vacatur. As background, Congress has given the IRS a panoply of potent weapons to combat  ..read more

Back in July 2022, the media reported that two of President Trump’s rivals, former FBI Director James Comey and his deputy, Andrew McCabe, had both been selected for IRS examinations under the National Research Program (NRP).  There were allegations that President Trump had sicced the IRS on his political foes.  That Comey and McCabe were both selected for NRP audits seemed at best a statistical anomaly given the low nationwide audit rate.  At worst, it conjured images of Nixon’s enemies list.   In a report dated November 28, 2022, the Treasury Inspector Gene ..read more

On December 29, the Eleventh Circuit in Hewitt v. Commissioner gave taxpayers a nice victory to ring in the New Year.  There, the Court struck down a 1980’s era conservation easement regulation and reminded Treasury and the IRS that the notice-and-comment cornerstone of the Administrative Procedures Act (APA) requires that agencies genuinely consider and address legitimate public comments received on proposed regulations. In 1995, the Supreme Court in Perez v. Mortg. Bankers Ass'n, had described an essentially four-step procedure for notice-and-comment rulemaking: (1) an  ..read more

As Democrats continue to finalize their now-$1.75 trillion tax-and-spending plan, the Federal income tax deduction for state and local taxes (the “SALT deduction”) has once again reared its head in partisan politics playing out in deliberations over a major piece of legislation.  As prior blog installments have discussed, the SALT deduction cap became a political lightning rod in 2017 when a Republican-controlled Congress passed the Tax Cuts & Jobs Act.  Four years later, here we go again.  Interestingly, for the SALT deduction’s first 150 years, it was not a partisan issue ..read more

Greek philosopher Plutarch is famous for posing the Ship of Theseus Paradox.  The mythical hero Theseus, upon sailing back to Athens after an epic battle, replaces, one-by-one, the old, decayed planks of his mighty ship with new and stronger timbers.  The thought experiment is whether the ship which has been restored by replacing each and every one of its wooden planks is still the same ship.  If not, when did it become a new ship?  When half of the planks were replaced?  When the last plank was replaced?  In a recently issued appellate court decision, Schneider N ..read more

The road to obtaining a large tax refund can sometimes feel like the journey of a 1000 miles. In prior postings we have discussed the single step with which the journey typically begins – the refund claim. Today we’ll touch on a final step in the journey – review by the Joint Committee on Taxation (JCT). Introduction to JCT’s Role in Tax Refunds The JCT is a bicameral committee of the U.S. Congress charged with several responsibilities including the review of large tax refunds. Specifically, in the case of tax refunds in excess of $2,000,000 ($5,000,000 in the case of a C  ..read more

When the IRS reaches (in the words of Tax Court Judge Mark Holmes) the “we're taking your stuff” stage to collect back-taxes, taxpayers generally have the right to a collection due process (CDP) hearing at which a CDP hearings officer is duty-bound to independently and genuinely evaluate whether it’s proper for the IRS to move forward with seizing a taxpayer’s property.  On May 20, 2021, the Tax Court, in Mason v. Commissioner, concluded the IRS had abused its discretion in the CDP process when it gave the green-light to the IRS collection division to take the taxpayer’s stuff  ..read more

London’s Underground (which is a subway to us Yanks) is known for its iconic warnings to “mind the gap.”  That’s the spatial crevice between the train and the station platform.  In D.C., a different gap is garnering attention: the tax gap.  This is the delta between taxes owed to the government and actually paid. On May 20, 2021, as part of the Administration’s pitch for an $80 billion increase in IRS funding, Treasury released a report that outlines the magnitude and categorical causes of the tax gap, and in broad strokes how it would deploy the $80 billion over a 10-year perio ..read more