Document summaries for the week of April 19, 2021

Tax document summaries for the week of April 19–23, 2021, covering international tax and IRS procedure.

EMPLOYMENT TAXES

Taxpayer acted willfully in failing to pay over withheld taxes

The Eleventh Circuit affirmed a district court’s decision to grant summary judgment to the government in its complaint to recover trust-fund penalties assessed against the taxpayer. The court affirmed that the taxpayer acted willfully in failing to pay over withheld taxes. Edwards, No. 20-13910 (11th Cir. 4/21/21).

 

INDIVIDUALS

Court affirms deficiency; couple cannot deduct attorneys’ fees for AMT purposes

The Tax Court held that a married couple were liable for $3,003 of alternative minimum tax (AMT) for their 2016 tax year. The AMT assessment was the result of certain attorneys’ fees, incurred in connection with litigation, not being deductible on Schedule A of Form 1040 for alternative minimum tax purposes. Colton, T.C. Memo. 2021-44 (4/21/21).

 

INTERNATIONAL

Court upholds $3 million FBAR penalty

The Court of Federal Claims upheld the IRS’s imposition of a more than $3 million penalty for failure to timely disclose a Swiss bank account on a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), finding that the account owner had a financial interest in the account and was not merely a trustee. Landa, No. 18-365 (Fed. Cl. 4/19/21).

Eleventh Circuit upholds finding of willfulness in failure to file FBAR

The Eleventh Circuit upheld a district court’s grant of summary judgment, enforcing an IRS penalty for willful violation of the requirement to file an FBAR. The appeals court found that the lower court applied the correct standard of willfulness by including reckless disregard of an obvious or known risk; correctly concluded that there were issues of material fact as to whether the taxpayer’s conduct rose to the required level of willfulness/recklessness; was correct in refusing to limit the amount of a willful violation penalty to $100,000; applied the correct standard of review to the amount of the penalty; was correct in not finding the IRS’s factfinding procedures to be arbitrary and capricious; and correctly rejected the taxpayer’s challenge to the interest and late fees charged. Rum, No. 19-14464 (11th Cir. 4/23/21).

 

IRS PROCEDURE

IRS extends e-signature authorization for 6 months

The IRS announced it was extending its authorization to electronically sign a large number of IRS forms until Dec. 31, 2021, and adding a number of new forms. NHQ-10-0421-0002 (4/20/21) (see related news story).

IRS provides safe harbor for taking deductions related to certain PPP loans

The IRS is providing a safe harbor for certain taxpayers that received a loan pursuant to the Paycheck Protection Program (PPP) and that, based on prior guidance, did not deduct certain otherwise deductible expenses paid or incurred during the taxpayer’s tax year(s) ending after March 26, 2020, and on or before Dec. 31, 2020 (2020 tax year) that resulted in, or were expected to result in, forgiveness of the loan. Under the safe harbor, taxpayers who filed a tax year 2020 return on or before Dec. 27, 2020, may elect to deduct these expenses on the taxpayer’s timely filed original federal income tax return or information return, as applicable, for the taxpayer’s first tax year following the taxpayer’s 2020 tax year rather than filing an amended return or administrative adjustment request for the taxpayer’s 2020 tax year. Rev. Proc. 2021-20 (4/22/21) (see related news story).

 

TAX ACCOUNTING

Appeals court affirms disallowance of medical marijuana dispensary’s deductions

The Ninth Circuit affirmed a Tax Court decision that disallowed a deduction for many of a medical marijuana dispensary’s expenses under Sec. 280E. The court declined to consider the taxpayer’s argument, not raised before the Tax Court, that Sec. 280E violates the Sixteenth Amendment as a direct tax. Patients Mutual Assistance Collective Corp., No. 19-73078 (9th Cir. 4/22/21).

Tax Insider Articles

TECHNOLOGY

2020 tax software survey

COVID-19 upended tax season. Did CPAs’ tax software help them cope? Read the results of our annual tax software survey

TAX RELIEF

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.