News and miscellaneous legal topics

IRS Business and other standard mileage rates decrease for 2016 12/18/15

The standard mileage rate is $.54 per mile for business use (business standard mileage rate), $.14 per mile for unreimbursed services to a charitable organization under §170, and $.19 per mile for: (1) for medical care described in §213, or (2) deductible moving expenses under §217. Notice 2016-1, 2016-2 IRB, 12/17/2015.

IRS Early Interaction Initiative to more quickly identify employers falling behind on their employment taxes 12/10/15

The IRS has launched a new “Early Interaction Initiative” designed to more quickly identify employers who are falling behind on their payroll or employment taxes and then help them get caught up on their payment and reporting responsibilities. The new IRS initiative will monitor deposit patterns and identify employers whose payments decline or are late. Employers identified under this initiative may receive a letter reminding them of their payroll tax responsibilities and asking that they contact the IRS to discuss the situation. In addition, some employers may receive automated phone messages from the IRS providing information and assistance. Where appropriate, an IRS revenue officer will also contact some of these employers at their place of business. IR-2015-136, Dec. 8, 2015.

IRS Chief Counsel Advice 201549024, Capitalization of Software Development Costs (Oct. 23, 2015) 12/9/15

In PLR 200236028 (June 4, 2002), the IRS addressed the income tax consequences on the purchase, development, and implementation of Enterprise Resource Planning (ERP) software and computer hardware acquired by a taxpayer from a third party. On January 5, 2004, the IRS issued final regulations that explained how §263(a) applies to amounts paid to acquire, create, or enhance intangible assets (the “final intangible regulations”). T.D. 9107, 69 Fed. Reg. 436. The final intangible regulations also did not specifically address the treatment of ERP implementation costs. In response to Some taxpayers’ position that the conclusions set forth in PLR 200236028 no longer apply following the promulgation of §1.263(a)-4, IRS Chief Counsel confirmed the principles and conclusions contained in PLR 200236028 continue to apply.

(1) The cost of the purchased ERP software (including the sales tax) is to be capitalized under §263(a) of the Internal Revenue Code and amortized under §167(f) ratably over 36 months, beginning with the month the software is placed in service by the taxpayer;

(2) The employee training and related costs (maintenance, troubleshooting, and running reports during the training; such costs did not include any reorganizational expenditures) are deductible as current expenses under §162. However, the pre-paid training expenses are deductible as a current expense in the year in which incurred under the requirements of §461;

(3) The separately stated computer hardware cost is to be capitalized under ? 263(a) and depreciated under §168 over a 5-year recovery period;

(4) If the taxpayer is solely responsible for the creation and performance of the software project covered by the consulting contracts, the costs of writing machine readable code software (and its allocable portion of the costs of modeling and design of additional software) under the taxpayer’s consulting contracts are self-developed computer software and are allowed to be deductible as current expenses pursuant to section 5.01(1) of Rev. Proc. 2000-50, 2000-2 C.B. 601; and

(5) The costs of option selection and implementation of templates (and its allocable portion of the costs of modeling and design of additional software) under the taxpayer’s consulting contracts are installation/modification costs that are to be capitalized and amortized as part of the purchased ERP software ratably over 36 months, beginning with the later of the month the purchased software is placed in service by the taxpayer or the month the template work is available for use by the taxpayer. The undefined miscellaneous costs under the taxpayer’s consulting contracts are also capitalized as a part of the underlying purchased ERP software and amortized over the same 36 month period described in the preceding sentence.

The IRS may count nontaxable, non-leviable income when making installment payment offer 12/8/15

In Matthews, TC Memo 2012-225, the Court held that IRS did not abuse its discretion when it considered Matthews’s VA disability income in determining its installment agreement offer. The Court said that Matthews “completely ignore[d]” the fact that installment agreements must reflect taxpayers’ ability to pay on a monthly basis throughout the duration of agreements and that his VA disability benefits increased his “ability to pay on a monthly basis.” In rejecting Matthews’s Code Sec. 6334(a)(10) argument, the Court cited Ligman, TC Memo 2015-79, which held that there was no abuse of discretion where an IRS settlement officer included certain Railroad Retirement Board benefits, even though those benefits were in part not subject to levy under Code §6334(a)(6) and Code §6331(h).

Certain student loans resolved under formal discharge process are not gross income 12/8/15

In Revenue Procedure 2015-57, 2015-51, the IRS has provided that taxpayers who took out Federal student loans to finance attendance at certain schools, and whose loans taken out to finance attendance at schools owned by Corinthian Colleges, Inc. were discharged under the Department of Education’s Defense to Repayment or Closed School discharge processes, will not have to recognize gross income as a result of the discharge. IRS further stated that these taxpayers won’t be required to increase their taxes or income to account for education credits under Code §25A, interest deductions under Code §221, or higher education expense deductions under Code §222 claimed in respect to payments made with proceeds of these discharged loans.

Transfer of Intangible Property Agreements Satisfies Section 1031 12/8/15

in Ltr. Rul. 201532021, the IRS ruled that the exchange of agreements representing intangible property constituted an exchange of like-kind property for purposes of §1031, and that no gain or loss would be recognized on the exchange.

Tax Court refuses to impose transferee liability on company shareholders 12/8/15

In John M. Alterman trust U/A/D May 9, 2000, et al, TC Memo 2015-231, the Court refused to impose transferee iability on shareholders.

Code §6901(a) provides that IRS may proceed against a transferee of property to assess and collect Federal income tax, penalties, and interest owed by the transferor. Code Sec. 6901 does not impose liability on the transferee but merely gives IRS a procedure to collect the transferor’s existing liability. The IRS may collect the transferor’s unpaid tax from the transferee if an independent basis exists under applicable State law or State equity principles for holding the transferee liable for the transferor’s debts. Three conditions under Code Sec. 6901 must be met to allow IRS to collect a taxpayers’s unpaid tax from another person: (1) the taxpayer must be liable for the unpaid tax; (2) the other person must be a “transferee” within the meaning of Code §6901; and (3) an independent basis must exist under applicable State law or State equity principles for holding the other person liable for the taxpayer’s unpaid tax. (Diebold Foundation, Inc. v. Comm., (CA 2 11/14/2013) 112 AFTR 2d 2013-6901).

The Court found that the shareholders took reasonable steps to ensure that the buyer’s acquisition vehicles would honor their promises to pay the putative tax by placing significant covenants, representations, and warranties in the share purchase agreement.

Unbeknownst to the sellers or their advisers, the buyer and its lender had an agreement for the lender to immediately purchase the shares from the buyer . Neither sellers nor their advisers knew about the buyer’s immediate sale of the stock to the until the IRS subpoenaed them years later in 2006. They also discovered that buyer had not caused the corporation to pay its 2003 tax liability.

The IRS’s expert admitted at trial that requesting representations and warranties from the buyer was a key part of seller-side due diligence in his opinion and that the representations here went above and beyond what he had customarily seen. The Court also determined that it was not unreasonable for the sellers’ advisers to believe that the buyer had a viable, legitimate tax deferral plan.

The Court found that the separate steps of the transaction showed that there was not a circular flow of funds: the purchase of the shares was funded by a loan from buyer’s lender to the buyer’s acquisition vehicles and not with the corporation’s funds, and the corporation’s funds were left untouched. Because the Court concluded that the former shareholders did not have constructive knowledge of buyer’s plan to sell its stock to buyer’s lender, the Court refused to collapse the steps.

The Court also concluded that IRS had not shown a fraudulent transfer from the corporation to the shareholders under FUFTA 726.106(1).94. The IRS would have had to prove that corporation made transfers to the shareholders without receiving reasonably equivalent value in exchange and that the corporation was either insolvent at the time of these alleged transfers to the shareholders or rendered insolvent by the transfers. However, the Court found that the corporation did not make any transfers to the taxpayers in the stock sale to the buyer’s acquisition vehicles.

See also a recent Journal or Taxation article – “… The courts, however, are divided … . The scope of transferee liability has been the subject of numerous court battles between taxpayers and the IRS for several decades. After victories for the taxpayers in Julia R. Swords Trust, 142 TC 317 and Andrew, 115 AFTR 2d 2015-808 2015-1 USTC Par. 50193 91 F Supp 3d 739 (DC N.C., 2015), the Tax Court more recently found for the IRS in Stuart, 144 TC No. 12 …. Although the courts continually disregard the IRS’s contention that this issue of transferee liability should be looked at as step-transactions using federal common law doctrines … . … Section 6901 contains two conditions … Transferee prong. The person must be a “transferee” within the meaning of Section 6901 (the definition being very inclusive). Liability prong. There must be an independent basis under state law or state equity principles for holding the transferee liable for the transferor taxpayer’s unpaid tax. Both prongs must be met in order for the Service to collect unpaid taxes from a transferee. …”

Alternate donee reporting of $250-or-more charitable gifts 12/8/15

IRS sends email assuring charitable organizations that proposed regs issued in September wouldn’t make mandatory changes to the way donees currently acknowledge charitable gifts of $250 or more. The proposed regs would merely implement an optional donee reporting procedure, authorized by Code Sec. 170(f)(8)(D), for substantiating such charitable contributions. The alternative will not be available until final regulations, which are prospective, are issued.

Under Code §170(f)(8)(A), taxpayers must substantiate charitable contribution deductions over $250 with a contemporaneous written acknowledgment (CWA) by the donee organization stating: (1) the amount of cash and a description (but not the value) of any property other than cash contributed; (2) whether the donee provided any goods or services in consideration for the contribution, and if it did, a description and good-faith estimate of their value; and (3) if the goods or services consist entirely of intangible religious benefits (e.g., admission to a religious ceremony, but not religious school tuition or fees), a statement to that effect. A written acknowledgment is contemporaneous if it’s obtained by the taxpayer on or before the earlier of: (a) the date he files the original return for the tax year of the contribution; or (b) the due date (including extensions) for filing the original return for the year.

Under the September 2015 proposed regs donee organizations could elect to provide donee reporting under Code Sec. 170(f)(8)(B) by completing a to-be-designated form, including the information described in Code §170(f)(8)(B), as well as the donor’s name, address, and taxpayer identification number (TIN). (Prop Reg §1.170A-13(f)(18)(ii)). The IRS said the donor’s TIN was necessary in order to properly associate the donation information with the correct donor.

Canceled checks do not qualify as contemporaneous written acknowledgments for contributions over $250 11/24/15

Charitable deduction was disallowed because canceled checks do not qualify as contemporaneous written acknowledgments because they do not state whether petitioner received any goods or services in exchange for contributions over $250. Marie Beaubrun v. Commissioner, TC Memo 2015-217 (11/16/2015). See also Linzy v. Commissioner, T.C. Memo. 2011-264,2011 RIA TC Memo Par. 2011-264, finding that receipt from charitable organization did not constitute contemporaneous written acknowledgment because it did not state whether taxpayer received any goods or services in exchange for her contribution.

Alabama Rule Requires Certain Out-of-State Sellers Making Significant Sales Into Alabama to Collect sales Tax

The Alabama Department of Revenue enacted Rule 810-6-2-.90.03 requiring out-of-state sellers lacking a physical presence in Alabama, but who are making $250,000 or more in retail sales of tangible personal property into Alabama in the previous year retail sales (“substantial economic presence”), collect and remit Alabama tax on its sales into the state, effective for transactions occurring on or after January 1, 2016.

Out-of-state sellers may satisfy the rule?s requirements by collecting, reporting and remitting tax on sales made into Alabama pursuant to the provisions of Article 2, Chapter 23 of Title 40, Code of Alabama, or by participating in the Simplified Sellers Use Tax Remittance Program, a program which offers simplified collection, reporting and remitting to eligible out-of-state sellers. Eligible out-of-state sellers choosing to participate in the Simplified Sellers Use Tax Remittance Program collect one rate of tax, file one return reporting the tax, and keep a percentage of collections as compensation for compliance.

Missouri Tax Amnesty deadline is November 30, 2015 11/3/15

The deadline to participate in the Missouri Tax Amnesty program is November 30, 2015. The tax amnesty provides individuals and businesses with a one-time opportunity to pay their delinquent state taxes without penalties and interest. Learn more and download an amnesty application from the Department of Revenue’s website.

Missouri Corporate Franchise Tax is no longer required after January 1. 2016 11/3/15

Senate Bill 19, passed by the 2011 legislature, phased out corporation franchise tax after 2010. The franchise tax rate for franchise years beginning on or after January 1, 2016, is zero percent and corporations will no longer be required to file the report outlined in Sections 147.020 and 147.050, RSMo. The reporting requirement remains for tax years beginning prior to January 1, 2016.

EU’s new VAT rules forcing thousands out of business 8/26/15

New VAT rules coming into force on 1 January 2015 designed to put a stop to billions of euros of the consumer tax being lost due to a loophole have left some businesses overwhelmed and “confused”, require businesses to charge the VAT for the purchaser’s location (compare to the US Streamlined Sales Tax). The rules affect a range of sellers from games producers to app makers, e-publishers and even those selling knitting patterns or instructions on how to make jeweler. Most microbusinesses can?t access the data required to prove the place of supply, never mind compare them automatically during the sales transaction. Then they have to work out which of more than 80 VAT rates to apply and issue a compliant VAT invoice in the correct language, currency, and layout. Nearly every member state is interpreting the rules slightly differently; meaning something outside the rules in one country may fall under the rules in another. Companies can sign up to a national one-stop shop for VAT registration – this saves them from having to file VAT returns for each of the member states where they have customers. But the information requirements are onerous. To find out where a consumer is based – sometimes it is not obvious as the person may be paying by PayPal – a company needs two pieces of consistent evidence such as credit card number and an address.

The Missouri Department of Revenue posted a FAQ page about the new amnesty program 7/2/15

See the FAQ page at http://dor.mo.gov/faq/amnesty.php, and part of the information follows:

Tax amnesty is an opportunity for individuals and businesses to pay unpaid taxes that were due on or before December 31, 2014, without paying any interest or penalties. Tax amnesty will begin on Tuesday, September 1, 2015, and will end Monday, November 30, 2015. The signed notice or application and all tax amnesty payments must be postmarked by Monday, November 30, 2015.

The Missouri Department of Revenue will mail an Amnesty Eligibility Notice beginning the last week of August 2015 to known individuals and businesses that qualified for tax amnesty. You can return your Amnesty Eligibility Notice with full payment after September 1, 2015.

How does tax amnesty affect my payment agreement with the Department of Revenue? If you are currently in a payment agreement with the Department of Revenue, the remaining additions to tax, interest, and penalties will be waived if you complete the amnesty application or eligibility notice and pay your outstanding tax balance before the end of the tax amnesty period. If your current payment agreement includes payments drafted via Electronic Funds Transfer (EFT), contact DOR at (573) 751-7200 to discuss participation in the amnesty program. You are still required to submit a Missouri Tax Amnesty Application or Amnesty Eligibility Notice.

The Missouri Department of Revenue released Letter Ruling 7561 finding that a company’s sale of a text messaging service using a cloud-based network is subject to sales tax. 5/30/15

Taxpayer runs on a cloud-based computer network that it’s customers access through the public telecommunication lines and through the customers’ internal internet networks, and customer’s can also send and receive messages through an optional printer unit connected to the text messaging service and rented from taxpayer. Customers sign up for the service and pay a nominal startup fee and monthly service fee. Taxpayer’s customers’ patrons are not charged any fee for using taxpayer’s service other than standard text messaging charges the customers pay separately (if applicable) to their cell phone service provider. Applicant currently does not have any server located in Missouri. Applicant plans to enter and do business in Missouri in the near future. Section 144.020.1(4), RSMo provides: “A tax equivalent to four percent on the basic rate paid or charged on all sales of local and long distance telecommunications service to telecommunications subscribers and to others through equipment of telecommunications subscribers for the transmission of messages and conversations and upon the sale, rental or leasing of all equipment or services pertaining or incidental thereto[.]”

The Missouri Department of Revenue released Letter Ruling 7580 finding that a not-for-profit corporation’s sales of plastic Easter eggs that are stuffed with toys or candy are subject to sales tax. 5/30/15

Applicant is a Missouri private, not-for-profit corporation operating a manufacturing and light assembly facility that offers meaningful employment for people with developmental disabilities. Some of the services offered at Applicant’s facility are packaging, assembly, lawn and cleaning services. Applicant’s employees assemble plastic Easter eggs that are stuffed with toys or candy, and are then sold over the internet. The Easter eggs are sold to customers outside of Missouri and to Missouri residents. Applicant assembles and sells other items, but those items are for other companies who will sell them at retail. Applicant has a limited exemption from Missouri sales taxes as a charitable organization on its sales for its charitable and educational functions and activities. Applicant’s sales of Easter eggs are not for a charitable purpose as these sales to the general public compete with for profit businesses. Therefore, Applicant’s sales of Easter eggs to Missouri residents are subject to sales tax.

IRS Reminds Tax-Exempt Organizations Of Filing Deadline, Automatic Revocation For Failure To File 5/12/15

The Internal Revenue Service today reminds tax-exempt organizations that many have a filing deadline for Form 990-series information returns in mid-May.

By law, organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third required filing (The Pension Protection Act of 2006).

Small tax-exempt organizations with average annual receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard), which asks organizations for a few basic pieces of information. Tax-exempt organizations with average annual receipts above $50,000 must file a Form 990 or 990-EZ depending on their receipts and assets. Private foundations file a Form 990-PF.

Organizations that need additional time to file a Form 990, 990-EZ or 990-PF may obtain an extension. Note that no extension is available for filing the Form 990-N (e-Postcard).

Missouri Governor Signs Legislation Authorizing Tax Amnesty 4/30/15

Missouri Governor Jay Nixon signed legislation on April 27, 2015 authorizing amnesty from the assessment or payment of penalties, additions to tax, and interest on unpaid taxes due on or before December 31, 2014, reported and paid in full from September 1, 2015 to November 30, 2015, regardless of whether previously assessed (no refunds of paid amounts). Amnesty does not extend to taxpayers subject to criminal investigation or if civil or criminal litigation is pending in any US or Missouri court for nonpayment, delinquency, or fraud in relation to any Missouri state tax imposed by. (L. 2015, H384, effective 04/27/2015.)

Missouri General Assembly passes tax amnesty bill H384 4/15/15

The Missouri General Assembly passed H384 On April 9, 2015, authorizing an amnesty from assessment or payment of all penalties, additions, and interest on delinquencies of unpaid taxes administered by the Department of Revenue that occurred on or prior to December 31, 2014.

The amnesty period would occur from September 1, 2015 to November 30, 2015, and a taxpayer must apply for amnesty, file tax returns for each taxable period for which amnesty is requested, and pay the entire balance owed by November 30, 2015, and agree to comply with state tax laws for the next 8 years from the date of the amnesty agreement. Taxpayers granted amnesty will not be eligible to participate in any future amnesty for the same type of tax. The bill was sent to the Governor on April 14, and is awaiting the Governor’s approval.

Taxpayers Receiving Identity Verification Letter Should Use IDVerify.irs.gov 3/26/15

The Internal Revenue Service today reminded taxpayers who receive requests from the IRS to verify their identities that the Identity Verification Service website, idverify.irs.gov, offers the fastest, easiest way to complete the task.

Taxpayers may receive a letter when the IRS stops suspicious tax returns that have indications of being identity theft but contains a real taxpayer’s name and/or Social Security number. Only those taxpayers receiving Letter 5071C should access idverify.irs.gov.

Letter 5071C is mailed through the U.S. Postal Service to the address on the return. It asks taxpayers to verify their identities in order for the IRS to complete processing of the returns if the taxpayers did file it or reject the returns if the taxpayers did not file it. The IRS does not request such information via email, nor will the IRS call a taxpayer directly to ask this information without you receiving a letter first. The letter number can be found in the upper corner of the page.

Protection Against Income Tax Fraud 3/26/15

If you, or someone you know, feel that you have been a victim of income tax fraud:

Immediately contact the IRS. The IRS website gives detailed instructions on how you need to proceed in getting the situation taken care of. http://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft
Place a fraud alert with one of the three major credit bureaus.
Equifax – 1-800-525-6285 www.Equifax.com
Experian – 1-888-397-3742 www.experian.com
TransUnion – 1-800-680-7289 www.TransUnion.co
File a police report with your local department.
Place a password on your checking/savings accounts as another way of protecting your account information.
Monitor your account(s) and contact us immediately if you see anything suspicious.

Pallets drop shipped to Missouri by out of state sell direct from manufacturer subject to Missouri sales tax 3/18/15

Sales made by an out-of-state seller (taxpayer) of pallets manufactured out of state and drop shipped to Missouri customers are subject to Missouri sales tax, rather than use tax, when the orders are approved outside Missouri, sent to an out-of-state manufacturer, and then delivered by drop shipments from the manufacturer located outside of Missouri using the manufacturer?s trucks or a common carrier contracted by the manufacturer.

Seller has nexus with Missouri because of its sales representatives in Missouri. Seller directs its out-of-state manufacturer to drop ship products Seller purchases to the Seller?s customers in Missouri. When Seller’s products are drop shipped from outside of Missouri, title first passes in Missouri from the supplier to Seller and then from the taxpayer to its customers in Missouri. Therefore, Seller?s sales to Missouri customers are subject to sales tax.

Likewise, Seller?s sales to Missouri customers are subject to sales tax rather than use tax when the customers’ orders are approved outside of Missouri, sent to an in-state manufacturer, and delivered by drop shipments from the manufacturer located inside of Missouri. When Seller’s products are drop shipped from inside Missouri, title first passes in Missouri from supplier to Seller and then from Seller to its customers in Missouri. Therefore, Seller?s sales to Missouri customers are subject to sales tax.

However, Seller’s sales to Missouri customers are subject to use tax rather than sales tax when the customers’ orders are actually approved outside of Missouri, sent to a manufacturer located outside Missouri, and delivered by Seller’s contract or common carrier from the manufacturer’s facility located outside Missouri. When Seller uses its contract or common carriers to deliver products to Missouri customers from manufacturers located outside Missouri, Seller takes title to the products outside of Missouri. The transaction is in commerce because the order was approved by Seller outside of Missouri and delivered into Missouri using Seller’s third-party carriers. Therefore, Seller?s sales to Missouri customers are subject to use tax because the sales are for use and consumption in Missouri.

Letter Ruling No. LR 7500, Missouri Department of Revenue, February 20, 2015

Payments Made to non-corporation LLC Are Subject to Information Reporting (Form 1099) 3/18/15

The IRS concluded that any payment made to a limited liability company (LLC) that has not elected to be classified as a corporation for federal tax purposes, is subject to the information reporting requirements under Section 6041. ILM 201447025.

Proposed Missouri Amnesty Program 3/11/15

On March 5, 2015, the Missouri House of Representatives approved and advanced H.B. 384 to the Senate. The bill authorizes an amnesty from the assessment or payment of all penalties, additions to tax, and interest on delinquencies of unpaid taxes administered by the Missouri Department of Revenue which occurred on or prior to December 31, 2014.

Amnesty is NOT available to taxpayers who at the time of payment is a party to any civil or criminal litigation that is pending for nonpayment, delinquency, or fraud regarding any tax imposed by Missouri.

Taxpayers must apply for amnesty, pay the unpaid taxes in full from July 1, 2015 to September 30, 2015, and comply with Missouri tax laws for the next 8 years from the date of the agreement, or the penalties, additions, and interest waived under amnesty become due and owing immediately.

A taxpayer who is granted amnesty will not be eligible to participate in any future amnesty for the same type of tax.

The provisions of the bill will expire on December 31, 2023.

Does the Net Investment Income Tax Apply 2/26/15

The 3.8% Net Investment Income Tax applies to the lesser of:

your net investment income, or
the amount your modified adjusted gross income exceeds a threshold amount based on your filing status

Filing Status	Threshold Amount
Single / head of household	$200,000
Married joint	$250,000
Married separate	$125,000
Qualifying widow(er) with a child	$250,000

Net investment income generally includes income such as (list is not all-inclusive):

Interest
Dividends
Capital gains
Rental and royalty income, and
Non-qualified annuities.

Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony, or any gain from the sale of your main home that you exclude from your income.

See IRS Form 8960, or IRS questions and answers.

IRS Urges Caution when Outsourcing Payroll Payments 2/25/15

While outsourcing of payroll and related tax duties to payroll service providers can streamline business operations, facilitate meeting filing deadlines and deposit requirements, and allow businesses to concentrate on the “core” business function, it can be disasterous because employers who outsource their payroll responsibilities remain liable for all taxes, penalties and interest due.

in Boyle, (S Ct 1985) 469 US 241, 55 AFTR 2d 85-1535, the Supreme Court held that reliance on an agent is not a reasonable cause and does not excuse a taxpayer’s failure to timely file a tax return. Applying this principle in a payroll tax context, the Third Circuit, affirming the district court, has held that where the payroll firm an employer hired to fulfill its employment tax obligations embezzled the money, the employer remained liable for payroll taxes and interest. The employer’s reliance on the payroll firm and the payroll firm’s failure to perform its task properly did not amount to reasonable cause for failure to pay the taxes. (Pediatric Affiliates P.A., (CA 3 4/16/2007) 99 AFTR 2d ?2007-845.

IRS tips for outsourcing.

Stay Vigilant Against Bogus IRS Phone Calls and Emails 2/17/15

Tax scams take many different forms. Recently, the most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too. Here are several tips from the IRS to help you avoid being a victim of these tax scams:

The real IRS will NOT:

Initiate contact with you by phone, email, text or social media to ask for your personal or financial information.
Call you and demand immediate payment. The IRS will not call about taxes you owe without first mailing you a bill.
Require that you pay your taxes a certain way. For example, telling you to pay with a prepaid debit card.

Be wary if you get a phone call from someone who claims to be from the IRS and demands that you pay immediately. Here are some steps you can take to avoid and stop these scams.

If you don?t owe taxes or have no reason to think that you do:

Contact the Treasury Inspector General for Tax Administration. Use TIGTA?s ?IRS Impersonation Scam Reporting? web page to report the incident.
You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report. If you think you may owe taxes:
Ask for a call back number and an employee badge number.
Call the IRS at 800-829-1040. IRS employees can help you. In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS.

They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real. The scammers? goal is to lure victims to give up their personal and financial information. If they get what they?re after, they use it to steal a victim?s money and their identity.

If you get a ?phishing? email, the IRS offers this advice:

Don?t reply to the message.
Don?t give out your personal or financial information.
Forward the email to phishing@irs.gov. Then delete it.
Don?t open any attachments or click on any links.

They may have malicious code that will infect your computer. Stay alert to scams that use the IRS as a lure. More information on how to report phishing or phone scams is available on IRS.gov.

Affordable Care Act News 1/27/15

The Interactive Tax Assistant for 2015 has been deployed to IRS.gov. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions. There are two ACA topics on the Interactive Tax Assistant:

Information is at Affordable Care Act Legal Guidance and Other Resources

See the latest Health Care Tax Tips

Affordable Care Act News for Individuals

Forms and Instructions are now final.

Practitioners see page 7 of the instructions for Form 8965: Column c?Exemption Certificate Number (ECN). Enter the ECN that you received from the Marketplace for the individual listed in column a. If you were granted a coverage exemption from the Marketplace, but did not receive an ECN, or do not know your ECN, contact the Marketplace to obtain your ECN. If the Marketplace has not processed your application before you file, enter ?pending.?

ACA News for Businesses

IRS.gov page was recently updated on S Corporation Compensation and Medical Insurance Issues

IRS.gov has resources that can help tax professionals manage estate and bankruptcy issues 1/27/15

IRS Post-Appeals mediation is available after unsuccessful Offers in Compromise and Trust Fund Recovery Penalties 1/27/15

The Internal Revenue Service released Rev. Proc. 2014-63 providing rules for the nationwide rollout of post-Appeals mediation for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (TFRP) cases. Post-Appeals mediation is available to help resolve disputes after unsuccessful negotiations with the IRS Office of Appeals.

The Identity Protection: Prevention, Detection and Victim Assistance page on IRS.gov was updated on January 8, 2015 1/27/15

Scam Phone Calls Continue; IRS Unveils New Video to Warn Taxpayers 1/27/15

As incidents of an aggressive telephone scam continue across the country, the Internal Revenue Service unveiled a new YouTube video with a renewed warning to taxpayers not to be fooled by imposters posing as tax agency representatives.

The IRS does not use email, text messages or any social media to discuss your personal tax issue.

The new IRS Tax Scams video describes some basic tips to help protect taxpayers from tax scams.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don?t answer, they often leave an ?urgent? callback request.