Tax Exempt Organizations: The Identity of Applicants for Tax-Exempt Status is Not Confidential Return Information Protected Under the Internal Revenue Code

teapartyIn 2013, a major scandal broke over the treatment of “Tea Party” groups that applied for tax-exempt status, as the public learned that the IRS had singled out certain groups for special scrutiny that created long delays in processing their applications. Shortly after the scandal broke, a class action was filed against the United States, seeking damages. Complaint, NorCal Tea Party Patriots v. IRS, No. 1:13-cv-00341-SJD (S.D. Ohio).

On March 22d, the Sixth Circuit addressed a discovery dispute over the confidentiality of the names of the groups that were members of the plaintiff class, denying a mandamus petition filed by the government and ordering it to comply with the district court’s prior orders to produce the information.… Read More

Interview with Victor Song, Former Chief of IRS Criminal Investigation (CI)

IRS Buidling

I had the opportunity to speak with the former Chief of Internal Revenue Service Criminal Investigation (CI), Victor Song, about the future of international tax enforcement.  International enforcement has been a top priority for the IRS for many years, and Mr. Song has had a critical role in that effort.  Mr. Song’s tenure with the IRS spanned 30 years. He joined in 1981 and became a special agent in 1983. He rose to the position of deputy chief of CI in 2007, was appointed CI chief in January 2010, and retired from CI in December 2011. Mr. Song then served as the Executive Vice President of Compliance and Advisor to the CEO for Samsung Electronics America; he currently runs Victor Song Consulting, concentrating on services for tax controversy, anti-money laundering, corporate compliance and internal investigations.… Read More

Employment Tax Forum to Take Place February 25th in Philadelphia

Employment Banner - Tax

Throughout 2015, the IRS made clear that employment tax enforcement is a current priority. This is something we’ve discussed in past posts, as well heard first hand from IRS agents and officials at conferences and other venues.

Against this backdrop, we’re pleased to announce that we’ll hold The Employment Tax Forum on February 25, 2016 here in our Philadelphia Office. The goal is to provide tax professionals – including accountants, return preparers, auditors and attorneys – with an overview of federal employment tax issues, including worker classification, and an update on related federal civil and criminal enforcement initiatives. Free CPE and CLE will also be offered.… Read More

Tax Enforcement Going Forward: Resources, Cheating, and Perceptions of Fairness

IRSAs we head into the New Year and look back on 2015, this blog reflects on one facet of the future of tax enforcement, at least in the near term. The trend in decreasing resources devoted to tax enforcement may erode widespread respect, and therefore compliance, with the tax code. One reason for this is because if people don’t believe that the tax code is fairly and uniformly enforced against tax cheats, they themselves will be more inclined to cheat.

Although this is presumably an obvious or intuitive point, the psychology behind it is perhaps more complex than simply observing that people are more inclined to cheat if they believe that they can get away with it.Read More

Listed Transactions: A Look at Basket Option Contracts, Part II

basket option contractThis post continues our coverage of basket option contracts, which were recently designated as listed transactions. See Notice 2015-73, 2015-46 I.R.B. 660 (Nov. 16, 2015). As discussed, the IRS designated these contracts as listed transactions because it is concerned that the basket option contract has been used by taxpayers to defer the recognition of income and to convert ordinary income and short-term capital gain or loss into long-term capital gain or loss. 2015-46 I.R.B. at 661.

A recent Chief Counsel Advice Memorandum offers further insight into the arguments that the IRS will likely offer in challenging the tax treatment of these transactions.… Read More

Listed Transactions: A Look at Basket Option Contracts

basket option contractThe IRS recently issued a notice formally designating basket option contracts as a listed transaction, which means that the IRS views these arrangements as tax avoidance transactions. See Notice 2015-73, 2015-46 I.R.B. 660 (Nov. 16, 2015). Notice 2015-73 supersedes Notice 2015-47, 2015-30 I.R.B. 76 (July 27, 2015).

The designation of a transaction as a listed transaction has a variety of adverse consequences. First, a taxpayer who has participated in a listed transaction has an obligation to make disclosures on her tax return. Treas. Reg. § 1.6011-4(a), (b)(2). Second, material advisors are required to report their involvement in the listed transaction, and must maintain lists of their clients and provide those lists to the IRS upon demand.… Read More

DOJ Tax Division and IRS Officials Describe Civil Tax Enforcement Priorities

CE1512CTF Print Brochure_1Speaking at the ABA’s Annual Criminal Tax Fraud and Tax Controversy Conference, senior officials from the Tax Division of the Department of Justice (DOJ) and the IRS Office of Chief Counsel described a variety of priorities for civil enforcement.

Consistent with prior indications that payroll taxes will be a significant area of focused criminal enforcement, Diana L. Erbsen, Deputy Assistant Attorney General for Appellate and Review, indicated that practitioners should anticipate civil actions for injunctive relief in payroll tax cases, followed by contempt proceedings to enforce those injunctions. Erbsen also indicated that the Financial Litigation Unit of the Office of Review, which focuses on collecting tax judgments, has received additional staff and is expected to be more active.… Read More

IRS Executives Discuss the Service’s Current Initiatives: Focus on Employment Tax Compliance and Digital Communications

IRS Rep ConferenceSpeaking on a panel this morning at the New England IRS Representation Conference, several Washington IRS executives discussed the Service’s current initiatives. We heard from Mary Beth Murphy, Deputy Commissioner, Small Business/Self-Employed Division; Rajive Mathur, Director of Online Services; Carole Madison, Acting Director of Examination, North Atlantic Region; and Darren Guillot, IRS Director of Field Collections. Below are some of the highlights from their discussion.

Employment Tax Compliance
As we have discussed before, one of the IRS’s stated enforcement priorities is employment tax compliance. According to Mr. Guillot, employer withholding of income and payroll taxes accounts for approximately 70 percent of the nation’s tax revenue.… Read More

Enforcing the Summons Against Microsoft

Today we are really pleased to welcome guest blogger Keith Fogg, who is a Professor of Law at Villanova Law School, and who currently is visiting at Harvard Law School this academic year to start and direct the tax clinic there. He is a co-founder of the blog, Procedurally Taxing, which seeks to comment on tax procedure issues. Before joining the Villanova Law School faculty, Keith worked for over 30 years with the Office of Chief Counsel, IRS. Keith previously has served as the Chair of the ABA Tax Section’s Pro Bono and Tax Clinic Committee, working to extend the representation of low income taxpayers before the Tax Court, and he currently is a member of the Tax Section Council.Read More

Employment Tax Enforcement: Temporary Staff and Long-Term Problems, Part II

employment taxesThis entry resumes yesterday’s discussion of problems that can arise for a business dealing with a temporary staffing service, or “TSS,” that is violating the law; the discussion continues to draw on the case of Mr. Victor Thach, described in yesterday’s post, who was convicted and sentenced for criminal tax violations associated with his labor leasing agency. This blog discussed civil tax issues yesterday; today it addresses criminal tax and immigration law issues, and how the legal problems of a TSS can become the problems of its clients. This is part of the broader discussion regarding employment tax crime that will occur during a panel at the White Collar Practice Seminar of the Pennsylvania Association of Criminal Defense Attorneys (PACDL) this Thursday, November 12, at the Union League in Philadelphia.… Read More