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

Trust Fund Taxes: Trust Fund Tax Payments Are Not Preferences Under the Bankruptcy Code.

When a company files a bankruptcy petition, a variety of potential claims against its creditors arise under the Bankruptcy Code. Preferential transfers are an example; under the Bankruptcy Code, transfers made within ninety days of the bankruptcy filing can be recovered if a creditor received an interest in a debtor’s property on account of a pre-existing debt while the debtor was insolvent, and the transfer of property puts the creditor in a better position than it would have had in a Chapter 7 liquidation. 11 U.S.C. § 547(b). There are some additional nuances, including a longer preference period for insiders and a variety of potential defenses.… Read More

Trust Fund Taxes: A Sensible Application of Flora.

Jurisdiction over a refund action requires full payment of the tax. Flora v. United States, 362 U.S. 145, 150 (1960). For someone who is challenging the imposition of the trust fund recovery penalty, this rule is relaxed: jurisdiction is established if the plaintiff has paid the withheld tax for one employee for one quarter is paid. Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir. 1971).

A recent Court of Federal Claims case addressed an interesting issue: what if the plaintiff lacks sufficient access to records to determine what is the correct amount; will an estimate suffice? Kaplan v. United States, 2014 U.S.Read More

Nice Work: Taxpayer Wins a Fee Award in a Payroll Tax Dispute.

To help taxpayers vindicate their rights in a dispute with the IRS, Section 7430 of the Internal Revenue Code authorizes an award of attorneys’ fees and costs (such as fees paid to experts) if the taxpayer is a prevailing party. I.R.C. § 7430(a). To qualify, the taxpayer must exhaust his administrative remedies. I.R.C. § 7430(b). There are also limitations on the amount recoverable and the availability of an award for those whose net worth exceeds statutory limits.

Fees are not available, however, if “the position of the United States” in the dispute is “substantially justified.” I.R.C. 7430(c)(4)(B). Since the taxpayer must exhaust administrative remedies by pursuing an administrative appeal to obtain a fee award, you would expect that process to weed out most cases where the government’s position is shaky.Read More

Payroll taxes: An “amnesty” program for employers

Employers that have misclassified workers as independent contractors can benefit under a new IRS initiative announced on September 21st. The program, known as the Voluntary Classification Settlement Program or VCSP, provides an employer with the opportunity to correct worker classification problems with only limited liability for past employment taxes.

Under the program, a qualified employer can reclassify independent contractors for future tax periods; the program has the following benefits:

  • participating employers will only pay ten percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, which will be determined under the reduced rates of section 3509 of the Internal Revenue Code;
  • participating employers will not be liable for any interest and penalties on the liability; and
  • participating employers will not be subject to an employment tax audit with respect to the worker classification of the workers for prior years.
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