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News and miscellaneous legal topics – 2016

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Various legal items emphasizing Missouri and federal taxes, archived from the RSS ("rich site summary") feed xlm logo

IRS Updates Allowable Living Expense Standards for 2017 new 3/17/17

Collection Financial Standards are used to help determine a taxpayer's ability to pay a delinquent tax liability. Allowable living expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s (and his or her family's) health and welfare and/or production of income.

The IRS has updated its policy covering Offer in Compromise‎ applications new 3/17/17

Beginning with Offer applications, the IRS will return any newly filed Offer in Compromise application received on or after March 27, 2017 if the applicant has not filed all required tax returns. Any application fee included with the OIC will also be returned. Any initial payment required with the returned application will be applied to reduce your balance due. This policy does not apply to current year tax returns if there is a valid extension on file.

Taxpayer Allowed Only One “Opportunity” To Challenge Penalty Assessment new 3/1/17

In Keller Tank Services II, Inc., CA-10, February 21, 2017, the Tenth Circuit held that the Tax Court properly decided that a taxpayer was not entitled to challenge a penalty in a collection due process (CDP) hearing assessed against it after previously challenging the penalty with IRS appeals. In so doing, the appeals court affirmed that it was reasonable to interpret the applicable statute as only offering one chance to challenge an assessment.

The Tax Court granted summary judgment in the IRS's favor after determining that the taxpayer was precluded from challenging the liability because it was provided with the prior opportunity to do so in its hearing before the appeals office. The Tax Court found that the IRS had reasonably interpreted Reg. §301.6320-1(e)(3) as allowing a taxpayer only one opportunity, whether in court or before the appeals office, to challenge a tax liability.

The Tenth Circuit affirmed the Tax Court’s decision. The Tenth Circuit found that Reg. §301.6330-1does not impermissibly limits the jurisdiction of the Tax Court, and does not address the Tax Court, but merely limits the scope of what may be heard at the agency’s administrative CDP proceedings. Additionally, the regulation has no impact on the taxpayer’s ability to file a refund suit in federal district court. As the taxpayer failed to establish that the regulation was arbitrary, capricious or manifestly contrary to the statute, the regulation was entitled to Chevron deference.

One commenter noted that an IRS Appeals Conference on the substantive issue of whether a taxpayer is subject to liability is not an administrative hearing in the customary sense, and is not a formal adjudication. There is no administrative law judge or finder of fact; no transcript of the proceedings; no witnesses so no opportunity to examine or cross-examine; neither discovery nor evidentiary rules; statements made during the process are generally inadmissible under the Federal Rules of Evidence; and there are there is no final decision on the merits. There is no potential argument that the IRS Appeals Officer abused his or her discretion in arriving at the settlement offer as it is merely a nonbinding, relatively informal, conciliation conference with an employee of the adversary, in this case an IRS employee, whose job is to attempt to, but is not required to settle the case.

It was noted that the Trump administration and GOP are attempting to limit the scope of the"Chevron" doctrine in an attempt to stop judges from deferring to agency interpretation in legal challenges. The premise is that the code and regulations should be written with clarity to avoid discrepancies in interpretations across different cases.

IRS Guide to Community-Based Free Tax Preparation new 2/9/17

The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs help people every year. Through these IRS-sponsored programs, millions of lower-to-moderate income individuals and families get their taxes done free.

The IRS works with local community groups to train and certify VITA and TCE volunteers to offer this service. Eligible taxpayers, including those with disabilities or limited English, should take advantage of these free programs.

Here are several important details about VITA and TCE:

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

IRS YouTube Videos: Free Help Preparing Your Tax Return – English | Spanish | ASL

IRS Refundable Credit Resources new 1/27/17

IRS "Other Refundable Credits Toolkit"

The toolkit brings you tools and resources for other refundable credits along with the Additional Child Tax Credit refundable portions. But, we also provide resources for Lifetime Learning Credit and the Child Tax Credit.

information on Understanding Who is a Qualifying Child

To be a qualifying child for any of the child related tax benefits:

The child must meet the basic tests under the Uniform Definition of a Qualifying Child and then each credit has additional rules the child and the person claiming the child must meet. Uniform Definition of a Qualifying Child The Working Families Tax Relief Act of 2004 amended in 2008 to add the joint return test set a standard definition of a qualifying child for these five child related tax benefits. In general, to be your client's qualifying child, a person must satisfy these tests:

The law also defined exceptions and special rules for dependents with a disability, divorced parents, adopted children and missing or kidnapped children. The exceptions and special rules for dependents with a disability and divorced parents are different for each of the child-related benefits; see the Child-related Tax Benefits Comparison chart for more information.

Adopted Child: An adopted child is always treated as your own child and includes a child lawfully placed with you for legal adoption.

Missing or Kidnapped Children: You may be able to claim a child who was kidnapped by a non-family member. IRS treats a kidnapped child as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping.

What You Need to Know about CTC and ACTC

Here's what you need to know about the CTC, Child Tax Credit, and the refundable portion, the ACTC, Additional Child Tax Credit.

Child-Related Tax Benefits Comparison (download a pdf version of the chart)

A handy chart shows some of the basic eligibility requirements for tax benefits available to those with a qualifying child. This chart compares the Earned Income Tax Credit (EITC), the Dependency Exemption, the Child Tax Credit and the refundable part of the CTC, the Additional Child Tax Credit (CTC/ACTC), the Head of Household filing status and the Child and Dependent Care Credit.

The chart is for quick comparison only. Each listed benefit has other requirements. This at-a-glance guide also directs you to more information to make sure the child is a qualifying child for the tax benefit.

Claim the Earned Income Tax Credit new 1/27/17

The Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break for 40 plus years. Yet, 1 out of every 5 eligible workers fails to claim it. Here are some things taxpayers should know about the EITC:

Taxpayers can also get free help preparing and e-filing their return to claim the EITC. The IRS Volunteer Income Tax Assistance, or VITA program, offers free help at thousands of sites around the country. Get help with health care law tax provisions with Free File or VITA. Refunds Held Until Feb 15. Beginning in 2017, if taxpayers claim the Earned Income Tax Credit or Additional Child Tax Credit on their tax return, the IRS must hold their refund until at least February 15. This applies to the entire refund, even the portion not associated with these credits. However, the IRS will begin accepting and processing tax returns once the filing season begins. Taxpayers should file as usual. There is no need to wait until February 15. For more on EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on

For more on EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on

The IRS is sending Letter 5025-H to tax preparers who completed returns claiming the Earned Income Tax Credit new 1/27/17

The IRS is sending Letter 5025-H to tax preparers who completed returns claiming the Earned Income Tax Credit for taxpayers reporting income they received as household employees but without a Form W-2 to substantiate the income. These preparers may not have met their EITC due diligence requirements. Learn more about this letter and other due diligence information by visiting the EITC Central page on

Work as a household employee is done in the home of an individual or family. The homeowner provides the necessary supplies, determines the type of work done, and how to complete it. Examples of household employees are babysitters, caretakers, house cleaning workers, domestic workers, drivers, health aides, housekeepers, maids, nannies, private nurses, and yard workers.

An employer is required to report income paid to a household employee on Form W-2 or Form 1099 if that employee earned $2,000 or more in 2016. If a household employee earned less than $2,000 from each individual household in 2016, the household employee will not receive any Forms W-2 or 1099. However, household employees may be considered self-employed, and may be required to file a Schedule C, Profit or Loss from Business (Sole Proprietorship). All household employees must keep records of who they worked for, how often, how much they were paid, and when. The records must show the employers’ names, telephone numbers, addresses where they worked, and payment receipts. Your clients will need to provide this information in case of an audit.

A paid preparer must take extra steps to ensure returns they prepare claiming the EITC are complete and correct.

IRS warns of the return of the W2 Scam aimed at tax and payroll professionals new 1/26/17

Cybercriminals tricked payroll and human resource officials into disclosing employee names, SSNs and income information. The thieves then attempted to file fraudulent tax returns for tax refunds.

This phishing variation is known as a “spoofing” e-mail. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office or human resource employee and requests a list of employees and information including SSNs. The following are some of the details that may be contained in the emails:

IRS web page lets you find out how much you owe new 1/9/17

If you're an individual taxpayer, you can use this tool to find out:

  1. Your payoff amount, updated for the current calendar day, and
  2. the balance for each tax year for which you owe. Your balance will update no more than once every 24 hours, usually overnight.

Once you view your balance, you can immediately choose a payment option. The IRS recommends that you make a note of the amount before doing so.

To register for this service, you need:

  1. Your Social Security Number;
  2. date of birth;
  3. filing status;
  4. mailing address from latest tax return;
  5. access to your email account;
  6. your personal account number from a credit card, mortgage, home equity loan, home equity line of credit or car loan; and
  7. a mobile phone with your name on the account.

Use Publication 2043 to Set Refund Expectations for 2017 new 1/6/17

IRS Publication 2043, IRS Refund Information Guidelines for the Tax Preparation Community, was updated for 2017. The publication provides the latest refund information and guidelines to advise clients who are expecting refunds. This year's update includes information about a new law that requires the IRS to hold refunds claiming the Earned Income Tax Credit and the Additional Child Tax Credit. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, these refunds likely will not reach taxpayers until the week of Feb. 27.

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