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On Behalf of | Sep 11, 2020 | IRS Updates |


According to the IRS, with the July 15 filing and tax returns possibly sitting in mail facilities for several days because of COVID-19, by following IRC §7502 Mailbox Rule, a return will be treated as filed on the date of the postmark. Best to keep a copy of the postmark/evidence of mailing as proof.

In an email addressed to the tax-exempt bond community, the IRS announced that it has resumed processing Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. 

IRC §6011, FBAR, Bank Secrecy Act—Penalties Per FORM: FBAR suit involving taxpayer/dual citizen who failed for a number of years to timely report his interests in multiple foreign accounts granted partial summary judgment that non-willful FBAR reporting penalties applied on per form, not per account. This interpretation was consistent with BSA’s plain language and avoided absurd outcomes that would result if penalty was based on specific financial accounts. U.S. v. Bittner, DC TX, 126 AFTR 2d ¶2020-5011

Reasonable Cause–Govt. granted partial summary judgment as to the taxpayer not having reasonable cause for his violations. TP claimed he didn’t know about FBARs and was educated outside the US, ignorance wasn’t in itself an excuse. And despite the steps he took to rectify once learning of the matter, the claim failed because he was a sophisticated business professional who, as a U.S. citizen generating tens of millions of dollars in income, couldn’t credibly claim he was so unaware he might have reporting obligations that he “did not even feel compelled to investigate” same. (U.S. v. Bittner, DC TX, 126 AFTR 2d ¶2020-5011)

Fraud penalty under IRC §6663 not upheld against pro se taxpayer for the year he pled guilty to tax evasion for substantial understatement of passthrough income. IRS failed to meet its burden on penalty’s applicability where it failed to demonstrate compliance with Code Sec. 6751(b)’s written supervisory approval requirement for initial penalty determination. TP had signed Form 4549 and he later withdrew after claiming he signed under duress, IRS failed to offer it into evidence, so Tax Court couldn’t determine whether that form or IRS’s 30-day letter constituted initial penalty determination for Code Sec. 6751(b) purposes. (John Thomas Minemyer v. Commissioner, (2020) TC Memo 2020-99, 2020 RIA TC Memo ¶2020-99)

Self-Employed Attorney in contempt for failing to make estimated tax payments, timely file returns and pay income taxes, and submit written compliance documentation to IRS; and while he claimed that he unaware of such order, such was undercut by IRS agent’s testimony along with his certification in his interim bankruptcy proceeding that instant action was “closed.” IRS agent left the order in a confidential envelope with a secretary at the taxpayer’s office, and while taxpayer clearly showed that he was in fact presently able to comply with order, he failed to meet any of his legal obligations under injunction. Magistrate further recommended that the taxpayer be referred to Chief District Judge for initiation of disciplinary proceedings, that his tax obligations be extended by 5 years, and that he be admonished that his continued noncompliance could result in loss of his right to practice law. (U.S. v. Lee, DC TN, 126 AFTR 2d ¶2020-5025)

Chap. 7 trustee’s objection to married taxpayers’ election of federal exemptions under 11 USCS 522(d), seeking to elect a variety of items that included federal and state tax refunds, was overruled. The trustee’s objection was based on a misreading of relevant statutes and counter to the well-established principle that exemptions were to be liberally construed in debtors’ favor. (Clinton Jacob Kauer, Bktcy Ct AZ, 126 AFTR 2d ¶2020-5014)

District of Columbia—Legislation provides that the following items are excluded from District gross income for purposes of the income and franchise tax: (1) small business loans awarded and subsequently forgiven under Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. No. 116-136); (2) public health emergency small business grants awarded under Section 2316 of the Small and Certified Business Enterprise Development and Assistance Act of 2005; and (3) public health emergency grants authorized under Section 16(m)(1) of the Advisory Neighborhood Commissions Act of 1975. Also, for tax years beginning after December 31, 2017, the legislation allows corporations, unincorporated businesses, and financial institutions an 80% deduction for apportioned District of Columbia net operating loss carryover to be deducted from net income after apportionment. The provisions of the temporary legislation are applicable as of June 09, 2020. (L. 2020, Act 23-334, effective for 225 days after a 30-day period of Congressional review and publication in the D.C. Register.)

Also, DC, Effective July 10, 2020, the District of Columbia Office of Tax and Revenue has adopted as final, emergency amendments previously made to 9 DCMR 313, Payment of Real Property Tax (see State & Local Tax Updates, 03/30/2020). The emergency amendments added new sub-section 313.6 to the rule, dealing with the real property tax due date extension allowed hotels and motels for the first half installment of the tax year 2020 under the “COVID-19 Response Emergency Amendment Act of 2020.” The rule defines the terms “hotel” and “motel” for purposes of the extended due date and sets forth the terms/conditions of the extension. The rule also provides that hotels and motels subject to the possessory interest tax will also benefit from the extended due date.