Tax Procedure: The Tax Court Holds that a Partner-Level Defense to an Accuracy-Related Penalty Can Be Considered in a Collection Due Process Hearing

TEFRA, CollectionTaxpayers who are the subject of collection action by the IRS have the option of requesting a collection due process hearing before the IRS either files a tax lien or pursues a levy against the taxpayer’s property. I.R.C. §§ 6320; 6330. The Tax Court then has jurisdiction to review the administrative disposition. I.R.C. § 6330(d). Typically, these hearings (and the court’s subsequent review) focus on issues concerning the propriety of the proposed collection action, as well as potential collection alternatives.

The underlying merits of the tax assessment are usually not at issue because, in most cases, the taxpayer will have had a prior opportunity to seek Tax Court review of the assessment.… Read More

And Now for Something Completely Different: New Rules for Partnership Audits

Partnership TaxationSuddenly, TEFRA died.

It remains to be seen if it will be missed. On November 2, 2015, the President signed the Bipartisan Budget Act of 2015, Pub. L. 114-74. Title XI of the legislation brings radical change to the world of partnership taxation.

Starting with the 2018 tax year, when a partnership audit results in adjustments, the default rule will be that the partnership pays the tax, not the partners. Consequently, someone entering a partnership may be subject to taxes that historically would have been someone else’s headache. There are two ways out of that predicament, but first a bit of history is in order.… Read More