Document summaries for the week of March 16, 2020
Tax document summaries for the week of March 16–20, 2020, covering individuals, IRS procedure, and more.
IRS does not acquiesce to Paychex decision
The IRS announced its nonacquiescence to a federal district court’s decision in Paychex Business Solutions, LLC, No. 8:15-cv-01455 (M.D. Fla. 6/22/17), a FICA tax refund suit involving payroll companies. The IRS’s position is that an entity is not in control of the payment of wages within the meaning of Sec. 3401(d)(1) if the payment of wages is contingent upon, or proximately related to, the entity having first received funds from the common law employer. Action on Decision 2020-1 (3/16/20)
Families First Coronavirus Response Act provides payroll tax credits
Employers who provide paid sick leave or family or medical leave for their employees who miss work for various coronavirus-related reasons will receive payroll tax credits under legislation enacted March 18. Families First Coronavirus Response Act, P.L. 116-127 (3/18/20) (see related news story).
Noncompliance with current estimated tax obligations precludes installment agreement with IRS
The Tax Court sustained an IRS collection action against a taxpayer who failed to pay her tax liability for 2013 and 2014, concluding that the IRS settlement officer did not abuse her discretion in upholding a proposed levy and rejecting a proposed installment agreement. The court noted that the taxpayer failed to comply with her current estimated tax obligations or to supply sufficient documentation to establish that she was unable to comply with her obligations. Bishop, T.C. Memo. 2020-36 (3/17/20).
Final administrative determination is not an absolute prerequisite to assessing return preparer penalties
The Tax Court held that a taxpayer was liable for 17 separate tax return preparer penalties of $1,000 each that were assessed by the IRS under Sec. 6694(a) for 2009. After rejecting the taxpayer’s assertion that a final administrative determination is an absolute prerequisite to an assessment of return preparer penalties, the court determined that the IRS settlement officer did not abuse her discretion in sustaining a proposed levy with respect to the taxpayer’s individual income tax liabilities as well as the 17 tax return preparer penalties. McNamee, T.C. Memo. 2020-37 (3/18/20).
Final covered asset acquisition rules issued under Sec. 901(m)
The IRS finalized temporary and proposed regulations that are designed to prevent taxpayers from misapplying the Sec. 901(m) statutory disposition rule in certain dispositions of relevant foreign assets (RFAs), including where the gain or loss from the disposition of an RFA is recognized for U.S. income tax purposes but not for foreign income tax purposes, and cases in which no gain or loss is recognized for purposes of U.S. or foreign income tax from the disposition of an RFA. T.D. 9895 (3/20/20) (see related news story).
Accountant’s whistleblower claims unsuccessful
The Tax Court held that the IRS Whistleblower Office (WBO) did not abuse its discretion when it denied an accountant’s first claim for a whistleblower award and rejected his second claim. With respect to the first claim, the Tax Court noted that the information provided did not result in the collection of any proceeds and, with respect to the second claim, the court found that the WBO’s conclusion that the claim was speculative did not appear to lack a sound basis in fact and law. Cline, T.C. Memo. 2020-35 (3/16/20).
IRS issues April 2020 applicable federal rates
The IRS issued a ruling that prescribes the applicable federal rates for April 2020. The ruling provides various prescribed rates under Sec. 1274 for federal income tax purposes, including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. Rev. Rul. 2020-9 (3/17/20).
April 15 federal tax payments and returns are not due until July 15, 2020
As a result of President Donald Trump’s emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, in response to the ongoing COVID-19 pandemic, the IRS announced that any “individual, a trust, estate, partnership, association, company, or corporation” with a federal income tax return or income tax payment due April 15, 2020, is granted an automatic postponement of that deadline until July 15. The notice applies only to federal income tax returns and payments (including self-employment tax payments) due April 15, 2020, for 2019 tax years, and to estimated income tax payments due April 15, 2020, for 2020 tax years. The notice does not apply to any other type of federal tax or to any federal information returns. Notice 2020-18, superseding Notice 2020-17 (3/20/20) (see related news story).
Tax Court closes building
The Tax Court announced that it has closed its building, which had previously been closed to visitors. Taxpayers can comply with filing deadlines by mailing petitions or notices of appeal to the court, but mail will be held until the court reopens. U.S. Tax Court Press Release (3/18/20).
Business meal deductions after the TCJA
This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.
Quirks spurred by COVID-19 tax relief
This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.