IRS Routinely Violates the Collection Statute of Limitations
Press Release
FOR IMMEDIATE RELEASE
TIGTA Report Number: 2022-10-043
Newport Beach, California
A recent August 19, 2022 Treasury Inspector General For Tax Administration ("TIGTA") report held the inspector continued to identify errors related to the suspension of the collection Statute Expiration Date ("CSED") on taxpayer accounts. TIGTA found that 18 (20 percent) of the 91 cases reviewed had an incorrect CSED. In TIGTA's prior year review, it identified 19 percent of cases had CSED errors (15 taxpayer accounts from a sample of 81). The CSED is the expiration of the time period established by law to collect taxes. The CSED is normally 10 years from the date of the tax assessment. Once a liability is assessed, the statute of limitations for collection begins to run. The expiration of the collection statute ends the Federal Government’s right to pursue collection of a liability. When a request for a CDP hearing is timely received, the IRS suspends the CSED from the receipt date of the CDP hearing request until the date the Appeals determination is made final or the date the IRS receives the taxpayer’s withdrawal request. For this review, TIGTA identified:
• 10 CDP cases had the CSED incorrectly extended. As a result, the IRS has more time to collect delinquent taxes than it was authorized. Additional collection activity creates an unnecessary burden on the taxpayer. Based on our sample results, TIGRA estimates that the IRS may have improperly extended the CSED for 3,233 of 28,667 CDP cases closed in FY 2021;
• 8 CDP cases had the CSED incorrectly shortened. As a result, the IRS has less time to collect any outstanding balance due from the taxpayer than it was authorized. Based on TIGTA's sample results, it estimates that the IRS may have inadvertently shortened the CSED for 2,586 of 28,667 CDP cases closed in FY 2021.
Calling this almost a wash would be inappropriate considering this means the IRS violated the collection the statute in an estimated 5,819 cases. Appeals management agreed with all of the errors TIGTA identified and stated that the CSED errors were a result of human error. Hopefully the IRS improves training on this to allow the statute to be correctly applied. It also means anytime a taxpayer owes taxes it is extremely important that the collection statute expiration date be examined. If the statute has expired it is legally impermissible for the IRS to collect the debt owed and it should release the tax liens.
Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.
Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292
Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430https://wilsontaxlaw.com
Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292
IRS Announces Late Filing Penalty Relief For 2019 and 2020 Tax Returns Filed Before September 30
Press Release - (IR-2022-163)
In recent news the IRS has announced that, individual taxpayers and businesses, impacted by the pandemic may qualify for a late filing penalty relief, provided their tax returns for the years 2019 and 2020 are filed on or before the filing deadline on September 30, 2022. This relief applies to Form 1040, US Individual Income Tax Return and Form 1120, US Corporation Income Tax Return series, as well as others listed in the Notice 2022-36, issued by the IRS. Further, taxpayers who file during the first few months after the filing deadline, would qualify for partial penalty relief, because the penalty for eligible returns would start accruing from October. 1, 2022, instead of the return’s original due date. However, the failure to pay penalty and interest stands applicable to unpaid taxes, based on the return’s original due date.
The IRS has also qualified that, the penalty relief is not available under the following circumstances:
- for applicable international information returns when the penalty is part of an examination;
- for filing of returns for the year 2021; and
in situations where, a fraudulent return was filed, or where the penalties were part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. This make sense given the nature of these specific situations.
However, for ineligible penalties, such as the failure-to-pay penalty, taxpayers could use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program. The IRS has also announced that, eligible taxpayers who have already filed their return do not need to apply for it, and those filing presently, do not need to attach a statement or other documents to their return. Further, those who have already paid the penalty are eligible for refunds, which will be processed by end of September, 2022.
Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.
Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292
Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430
Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292
IRS Announces More Options to Amend Returns Electronically
The IRS has announced that more forms can now be amended electronically. These include people filing corrections to the Form 1040-NR, U.S. Nonresident Alien Income Tax Return, Forms 1040-SS, U.S. Self-Employment Tax Return and Forms 1040-PR, Self-Employment Tax Return – Puerto Rico. Additionally, an electronic checkbox has been added for Forms 1040, 1040-SR, 1040-NR, 1040-SS and 1040-PR to indicate that a superseding return is being filed electronically. Taxpayers can also amend their return…
Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC.
Newport Beach and Yorba Linda, California.
Tel: (949) 397-2292 (Newport Beach Office)
Tel: (714) 463-4430 (Yorba Linda Office)
California Ends Cannabis Cultivation Tax
Beginning July 1, 2022, the California cannabis cultivation tax no longer applies to cannabis or cannabis products entering the commercial market. Cannabis enters the commercial market when the cannabis or cannabis products pass the required testing and quality assurance review.
Changes to Cultivation Tax Requirements
The following cannabis cultivation tax changes apply beginning July 1, 2022:
- distributors and manufacturers, including microbusinesses authorized to distribute or manufacture cannabis, are no longer required to collect the cultivation tax from cultivators;
- cultivators, including microbusinesses authorized to cultivate, are no longer responsible for paying the cultivation tax to manufacturers or distributors when cultivators sell or transfer cannabis to another licensee;
- the cultivation tax is not due on cannabis or cannabis products entering the commercial market on or after July 1, 2022, even if cannabis was received from a cultivator prior to July 1, 2022; and
- any cultivation tax collected on cannabis that enters the commercial market on or after July 1, 2022, must be returned to the cultivator that originally paid the cultivation tax.
Cultivation tax that cannot be returned to the cultivator who paid it is considered excess cultivation tax collected. In such an instance, manufacturers or cultivators must:
- a manufacturer that has collected the cultivation tax and is not able to return it to the cultivator who paid it, must transfer the excess cultivation tax collected to a distributor to remit to the California Department of Tax and Fee Administration (CDTFA);
- a distributor that has collected the cultivation tax and is not able to return it to the cultivator who paid it, must remit the excess cultivation tax collected to the CDTFA; and
- a distributor should report and pay any excess cultivation tax collected on their next cannabis tax return.
Each licensee in a transaction should keep clear records to document when the cultivation tax was collected or not collected, returned to a cultivator, transferred to a distributor, or when excess cultivation tax was paid to the CDTFA. Please be advised this should not be construed as legal advice. You should consult a tax professional or the State of California if you have any questions or concerns regarding the end of the cannabis cultivation tax in the State of California.
Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC.
Newport Beach and Yorba Linda, California.
Tel: (949) 397-2292 (Newport Beach Office)
Tel: (714) 463-4430 (Yorba Linda Office)
IRS Audits on the Rise & Tax Credits
Press Release
FOR IMMEDIATE RELEASE
President Biden Signs Inflation Reduction Act Into Law
WASHINGTON D.C.- President Biden, on August 16, 2022, signed the Inflation Reduction Act into law following its passage along party lines in both chambers of Congress.
The law (H.R. 5376) is a slimmed down version of the Build Back Better Act that passed the House in 2021 but failed to even come up for a vote in the Senate due to opposition primarily from Sen. Joe Manchin (D-W.V.). The Inflation Reduction Act did manage to keep some of the failed Build Back Better Act’s provisions in terms of generating revenues from corporations and wealthy taxpayers, as well as meeting some of the White House’s goals in the energy and health care sectors.
The law includes a one percent excise tax on stock repurchases, which goes into effect beginning in 2023, as well as a new corporate alternative minimum tax, although that does not apply to companies owned by private equity funds or certain manufacturing.
On the individual side, the IRS received a boost in funding of $80 billion across 10 years, part of which will be used to hire new agents who will help to the agency close the tax gap and get the wealthiest individuals to pay their fair share of taxes. Department of the Treasury Secretary Janet Yellen has directed the Internal Revenue Service to not use any of the new funding to increase the share of small businesses or households making $400,000 or less that are exposed to audit.
To help meet the Biden Administration’s environmental goals, the law includes tax credits for electric vehicle purchases, as well as new tax credits and extensions on expiring tax credits to produce electricity from renewable sources; making homes more energy efficient; and other activities aimed at reducing the carbon output of the nation.
Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.
Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292
Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430https://wilsontaxlaw.com
Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292
AICPA Requests More Penalty Relief
The American Institute of CPAs is seeking additional taxpayer relief following the announcement that the Internal Revenue Service would provide late filing penalty relief for certain taxpayers affected by the COVID-19 pandemic for tax years 2019 and 2020.
In a September 8, 2022, a letter to the agency and the Department of the Treasury, AIPCA asked the IRS for a number of additional relief measures, including expanding the scope of relief to include non-automatically assessed penalties, amended returns, and all international information returns; and include failure to pay penalties and have the relief cover additional forms; provide relief to more tax years.
The IRS, in August 2022, announced that it would be providing, announcing that certain taxpayers would be eligible for relief from failure to file penalties for tax years 2019 and 2020, assuming those tax forms are filed no later than September 30, 2022, with refunds automatically refunded or applied to outstanding debt. The relief has been offered as a result of the processing delays due to the ongoing pandemic.
"The AICPS appreciate the IRS providing relief from failure to file for years 2019 and 2020; however, as previously stated, the IRS is urged to expand the relief to also cover failure to pay penalty," AICPA states in the letter. "We think there are many taxpayers who sent payments to IRS but due to the IRS backlog or post office delays or other delays with banks, etc., IRS didn’t receive or record the payment timely (or the IRS said it was not received timely)."
The organization argues that there are "many checks that are still sitting in unopened envelopes, and there is concern that the IRS employees may make mistakes and process payments not with the dates the envelopes were mailed, but with the dates the envelopes were received or opened."
AICPA adds that relief should be provided to those suffering COVID hardship and paid late.
"We suggest that relief be provided for failure to pay if payment was received by IRS by a certain date after the due date," the letter states.
Given the ongoing nature of the pandemic and the new variants that are being discovered, AICPA also asked that the penalty relief be extended to cover tax year 2021. It noted that the federal government does acknowledge that the pandemic is ongoing and there were high incidents of outbreaks in the winter of 2021-2022.
AICPA also asked for further clarification that the relief does not affect applications for first-time abatement of penalties.
Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC
Newport Beach and Yorba Linda, California
Tel: (949) 397-2292 (Newport Beach Office)
Tel: (714) 463-4430 (Yorba Linda Office)