The New IRS, ID Theft and Advanced Tax Controversy · executive briefing series #DHGexecutivebriefingseries The New IRS, ID Theft and Advanced Tax Controversy Paul Tew

executive briefing series #DHGexecutivebriefingseries

The New IRS, ID Theft and Advanced Tax ControversyPaul Tew


About the Speaker

Paul Tew, Senior Manager

IRS Practice & Procedure ServicesPaul Tew is a member of Dixon Hughes Goodman’s IRS Practice and Procedures Group. Tew, a former IRS agent and team manager, brings 38+ years of Internal Revenue Service experience to the firm. He has extensive experience in the international tax area, including transfer practice.

While with the IRS, Tew spent the majority of his time as a revenue agent and team manager working in the international tax area, focusing on the examination of mid-size and large corporate entities with significant cross-border transactions. A significant career milestone was his identification and development of transfer pricing issues on a large multi-national company, representing the largest tax dispute resolved in the history of the Internal Revenue Service.


The New IRS


The IRS’s LB&I Divisionis Reorganizing . . . . AGAIN!!!

AND They are changing their

examination process.


Previously Organized by Industry

Now organized by Function (Practice Area)


LB&I Organizational Chart

DirectorWestern Compliance PA

Kimberly Edwards

DirectorPass Through Entities PA

Cheryl Claybough

DirectorEnterprise Activities

Kathy Robbins

DirectorCentral Compliance PA

Tina Meaux

DirectorCross Border Activities PA

John Hinding

DirectorEastern Compliance PA

Lavena Williams

LB&ICommissioner

Douglas O'Donnell

LB&IDeputy Commissioner

Rosemary Sereti

Director Withholding & International Individual Compliance PA

Pamela Drenthe

Director Program and Business

Solutions Susan Latham

Director of Field Operations East

Orrin Byrd

Director of Field Operations West Jolanta Sander

Director of Field

Operations International

Individual Compliance

Elise Gardner

Director of Field

Operations Southwest

Paul Curtis

Director of Field Operations West

Donald Sniezek (a)

Director of Field Operations North

CentralKatheryn Houston

Director of Field

Operations South Central Margie

Maxwell (a)

Assistant Deputy

Commissioner InternationalTheodore Setzer

Assistant Deputy Commissioner Compliance

Integration David Horton

Director of Field

Operations Transfer Pricing

Practice Cheryl Teifer

Director Advance

Pricing and Mutual Agreement

Hareesh Dhawale

Director Compliance Planning and

AnalyticsChristopher Larsen

Director Data Mgt.

William Holmes

Director Financial Institutions and

Products Gloria Sullivan

Director Corporate/

Credit Holly Paz

Director Resource Solutions

Keith Walker

Director Technology

and Program Solutions

Kathryn Greene (a)

DirectorTreaty & Transfer Pricing

Operations PASharon Porter

Director Treaty Administration

Deborah Palacheck

Director of Field

Operations Foreign Payments

PracticeJohanna

McGeady-Murphy

Director of Field

Operations North Atlantic

Catherine Jones

Director of Field Operations Mid-

AtlanticDennis Figg

DirectorNortheastern Compliance PA

Barbara Harris

Deputy Director Pass Through

Entities Clifford

Scherwinski

Director of Field Operations

Great LakesStephen

Whiteaker

Director of Field

Operations Southeast

John Hinman (a)

Senior Advisor Elizabeth Wagner

Large Business & InternationalExecutive Organizational Chart

Presenter

Presentation Notes

Steve, at this point I would suggest that you ask the question of how this organizational changes affects the International Enforcement side of the IRS’s house. That will lead me into a nice detailed walk through the next two slides.


Cross Border ActivitiesDirector

Cross Border Activities PAJohn Hinding

DFO East Orrin Byrd

DFO West Jolanta Sander

Territory 3

Stephen Kraemer

Territory 4

Darlene Scifert

Territory 2

Anna Petinova

Program Manager

Violette Walter

Territory 1

Bharati Shenoi

Territory 5

Donald Murray

Territory 7

Roger Benesch

Territory 8

Jackie Topping

Territory 6

Ismael Carreno

Territory 9

Donald Focht

Team 1330Michael Reidy

Team 1506 Brian McDonald

Team 1371Brenda Sarini

Team 1571Michael Connelly

Team 1572Phillip DeLeo

Team 1659Norman Gaudet

Team 1152Krishanand

Naraine

Team 1153 Thomas Wan

Team 1503John Marino

Team 1154 Jesus Melon

Team 1372 Mark Skepner

Team 1374 Fred Perla

Team 1505Neil Smuckler

Team 1687 Julie Levin

Team 1660Edward Horvath

Team 1682Pegene

McPhadden

Team 1686John Carrig

Team 1570Shimshon Mizrachi

Team 1136Marina Milton

Team 1573Kathryn

Misegades

Team 1733Carla McBride

Team 1736Richard Cosler

Team 1738Patricia Carlo

International Practice Network (IPN) Team

1149Inbound

Richard Blumenthal

IPN Team 1150Crossover

Frank Santoro

Team 1376Maria Hardrick

Team 1520 Carol Freshour

Team 1688 John Kogler

Team 1732Dan Orsini

Team 1735 Kathy Lindamood

Team 1737Valerie Hartwick

IPN Team 1147Outbound Cindy Kim

Team 1358 TBD

Team 1373 Geoffrey Miller

Team 1375 Fred Savaglio

Team 1377Mustafa Tayebali

Team 1379 Theresa Newton

Team 1380Karen Willingham

Team 1631Ronald Webster

Team 1635Keith Reed

Team 1443 Maureen McMahan

Team 1444Manju Banthiya

Team 1445Marcia

Vanderpool

Team 1446Joseph Reneau

Team 1447 Donna Wilkerson

Team 1449 Ronald Taylor

Team 1213 Patrick Roecker

Team 1215 Young Kang

Team 1216 TBD

Team 1218 Lynn Warner

Team 1636Scott Watson

Team 1275 Gloria Ramirez

Team 1313 Sylvia Sanders

Team 1634 Arcadio

Castellanoz

Team 1637Mark Giarratano

Team 1638 David Couch

Executive Assistant

Paul Kruse


Treaty & Transfer Pricing Operations

DFO Transfer Pricing Practice

(TPP)Cheryl Teifer

Territory East Matthew Hartman

Director APMAHareesh Dhawale

DirectorTreaty & Transfer Pricing

Operations PASharon Porter

Director Treaty Administration

Deborah Palacheck

EconomistRahm Mohan

Territory SouthDeborah Dickson

IPNJohn Kaffenberg

Territory NorthShah Mobed

Territory West Nancy Bronson

Exchange Of Information (EOI)

Tina Masuda

Automatic EOIAziz Benbrahim

Treaty Assistance and Interpretation

Team (TAIT)U.S. TerritoriesJennifer Best

Joint International

Tax Shelter Information Centre

(JITSIC)Nanette Hamilton

Team 1424Darline Farr

Team 1425Martha Regan

Team 1427Walter Choi

Team 1428 William Bosworth

Team 1457 William Karl

Team 1467 Steven Berthene

Team 1468 Elisabeth Alexander

Team 1469Robert Maxon

Team 1458Bradley Moore

Team 1459Natalie Blum

Team 1460Peter Carey

Team 1461 Matthew Herring

Team 1408Loraine Dearth

Team 1409 Mary Lindert

Team 1414Kim Murtaugh

Team 1415TBD

Team 1477Sohelia Crane

Team 1478Jeffery Riter

Team 1884Paul Isherwood

Team 1885 Roderick Weissler

Team 1886 Charles Adelberg

Team 1889 Joseph DiPaolo

Team 1138Economist

TBD

Team 1139Income ShiftingTraci DeBoer

Team 1 TBD

Team 5Burton Mader

Team 9 Patricia Fouts

Team 2Russell Kwiat

Team 3 Judith Cohen

Team 4 TBD

Team 6 TBD

Team 7 TBD

Team 8 TBD

Team 10 Dennis Bracken

Team 11Charles Larson

Team 12 Ho Jin Lee

Team 1 Anthony Ferrise

Team 2 Indu Subbiah

Treaty/EOI IPNNicole Welch

Team 1 Laurence Jeffery

Team 2Floyd Penn

Team 3 Kalpesh Gandhi

Team 4 Ivy Chamblin

Team 1 Tefera Beyene

Team 2 Michael Hayden

Team 3TBD

Team 4TBD

Executive Assistant Carla Langland

Assistant to the Director

J.D. Carroll

APMA Teams Report to Director

Program ManagerDonna

McComber

Program Manager

Peter Rock

Report to DirectorOf APMA

Program ManagerNancy

Wiltshire


Geographic Practice Area

CA RI

GA

NJ

MA

NH

MD

VT ME

NY

PA

OH WV

KY

IN

TN

MS

AR

MO

IA

IL

MI

MNND

SD

NE

KS

WY

CO

NMAZ

UT

ID

NV

OR

WA

AK

MT

OK

TXLA

WI

AL

FL

8

DEHI VA

DCNC

SC

DFO-W DFO-SW DFO-SC DFO-NC DFO-GL DFO-SE DFO-NA DFO-MAWest Central Northeast East

Engineers

CAS

GHW

TCS

http://lmsb.irs.gov/industries/ctm/Who/Contact/CTMOrgChart.xls




http://lmsb.irs.gov/industries/nr/WhoWeAre/NRCManagersPersonnel.asp


















http://lmsb.irs.gov/industries/rfp/WhoWeAre/Organizational%20Chart%20%20DFO%20West%20-%20RFPH.xls




http://lmsb.irs.gov/industries/mct/WhoWeAre/OrgCharts/DFO-WESTchart(revOCTOBER2006).doc










http://lmsb.irs.gov/industries/rfp/WhoWeAre/Organizational%20Chart%20-%20DFO%20East-%20RFPH.xls








http://lmsb.irs.gov/industries/rfhttp:/lmsb.irs.gov/industries/rfp/WhoWeAre/Organizational%20Chart%20%20DFO%20West%20-%20RFPH.xlsp/WhoWeAre/Organizational%20Chart%20-%20DFO%20East-%20RFPH.xls

http://lmsb.irs.gov/industries/rfhttp:/lmsb.irs.gov/industries/rfp/WhoWeAre/Organizational%20Chart%20%20DFO%20West%20-%20RFPH.xlsp/WhoWeAre/Organizational%20Chart%20-%20DFO%20East-%20RFPH.xls











http://lmsb.irs.gov/industries/ctm/Who/Contact/CTMOrgChart.htm

http://lmsb.irs.gov/industries/ctm/Who/Contact/CTMOrgChart.htm

http://lmsb.irs.gov/industries/mct/WhoWeAre/OrgCharts/DFO-EASTchart(rev.OCTOBER2006).doc




http://lmsb.irs.gov/industries/fsh/org/Fin%20Svcs%20Directory%20-%204.28.06.xls




























Eastern ComplianceDirector

Eastern Compliance PALavena Williams

DFO

Great LakesStephen Whiteaker

DFO

SoutheastJohn Hinman (a)

Atlanta Territory 3

Joseph Banks

MaitlandTerritory 4

Mark Furtak

NashvilleTerritory 2

Brian Calhoun (a)

PlantationTerritory 5

Carlton Hill

CincinnatiTerritory 1

Pete Puzakulics

Downer’s GroveTerritory 8

Robert Budney

Farmington HillsTerritory 9

Donna Zeppiero

ChicagoTerritory 7

Renee Banks

IndependenceTerritory 10

Dan Callahan

MilwaukeeTerritory 6

Diane Flouro

Team 1522Columbus

Robert Piatka

Team 1708Columbus

Perry Tuttle

Team 1525Dayton

John Eercaw (a)

Team 1362Cincinnati

Deborah Munson

Team 1186Lexington

Emanuel Hampton

Team 1266Nashville

Cornell Radford

Team 1341Nashville

Sharon Pritchett

Team 1606Nashville

William Tillman

Team 1268Memphis

Billy Childress*

Team 1406Memphis

Michael Jordan

Team 1021Atlanta

Catherine Brooks

Team 1051Atlanta

Keith Garrison*

Team 1192Durham

Lisa Hedgepeth

Team 1201Charlotte

Teresa Parrish

Team 1204Atlanta

Charles Daniel

Team 1367Atlanta

Janet Walsh

Team 1208Jacksonville

Owen Taylor

Team 1366MaitlandKathleen Matthews

Team 1405Tampa

David Valerio

Team 1710Maitland

Karen Carreiro-Smithson

Team 1716St. Petersburg

Jacquelyn Rookwood

Team 1718Jacksonville

Adrian Hirmiz

Team 1364Plantation

Manmeet Gulati

Team 1713Plantation

Jeanette Reuter-Fromkin

Team 1717Miami

Ivan Ceballos

Team 1739Miami

Salvatore Sargiotto

Team 1173Appleton

Dawn Leigh

Team 1029ChicagoNancy Li

Team 1352Downer’s Grove

Pat Wozek

Team 1176Waukesha

Jean Klajbor

Team 1357Waukesha

Bertram Bennett

Team 1356Schiller Park

Chris Therman


TBD

Team 1483Green Bay

Tom Muhowsi (a)

Team 1725Waukesha

Linda Fanning

Team 1355Chicago

Liza Valdez

Team 1532Chicago

Anita Bowens

Team 1721ChicagoLen Clay

Team 1724Chicago

Michael Lynch

Team 1481Downer’s GroveJudith Kranjc

Team 1728Downer’s GroveJohn Stance*Kim Ahern (a)

Team 1612Springfield

Billie Langfelder

Team 1722Decatur

Judith Lawrence

Team 1526Clinton Township

Tom Reckling

Team 1484Flint

Grant Gellert

Team 1527Portage

Christopher Pelton

Team 1528Grand Rapids

Michelle Lauer

Team 1183Independence

TBD


Peggy Bender*

Team 1706Akron

Susan Kurzweil

Team 1705Toledo

Chuck VanBelle

Team 1690Troy

Ann Kulik

Team 1694Troy

David Combs

Team 1698Ann Arbor

Rochelle Hiebl

Team 1187Fort Wayne

Jeanine Goeglein

Team 1403Louisville

Jennifer Hamilton

Team 1485Indianapolis

Patrick Dimmitt

Team 1729Carmel

Stacy Gibbons

Team 1308Birmingham

James Pickett

Team 1536Grand Rapids

Hasson Klepser

Team 1529Farmington HillsDonald Suman

Team 1691Troy

Barry Levy


James Dressel


Louis Olivieri

Team 1531Schiller ParkAllen Mina*

Tax Comp. Specialists/JC ReviewersTerritory 11

James O’Hara

Team 1230 Seattle

TBD

Team 1332New York

Valary Arthur

Team 1431Glendale

Gwendolyn Hogans

Team 1521Cincinnati

Jon Dunn*

Team 1524Farmington Hills

Michael Zielinski

Team 1533Chicago

Daniel Mielcuch

Team 1544South Portland

Kathleen Burns


Maureen Lippert

Team 1762Farmer’s Branch

Glynwood Fisher

Executive AssistantBrenda Jackson

Program Manager

Examination Practice Network

Lou Liotine

Team 1401Charlotte

James Robson

Team 1667Greensboro

Charles Philipp

Team 1711Atlanta

Ralph Williams

Team 1954Joint Committee

ReviewCeleste Dinkins

Team 1184Cincinnati

Janet Phillips

Team 1719Fort Meyers

Maria Podell


Summary of changes to the LB&I examination

process


LB&I IDREnforcement Process

(Initiated in 2014)


Issue Draft IDR Agree on a Due Date

Issue Final IDRIf Reply is not Timely . . .


Issue Delinquency Notice (Letter 5077) within 10 Days

Allows as Much as 15 Additional Days to RespondIf Reply still not Tendered . .


Issue Pre-Summons Letter (Letter 5078)Within 14 Days of Default on Delinquency Notice

Allows as Much as 10 Additional Days to Respond


Replacement of Publication 4837(QEP Guide) with Publication

5125(Rev. 2-2016) Effective 5/1/2016

Revision of IRM 4.46(Rev. March 2016)

Sets Clear Expectations

Presenter

Presentation Notes

Steve, I would interject here a question as to how Publication 5125 and the revision of IRM 4.46 will affect International Enforcement audits.


Encourages Transparency & Collaboration

Issue and Campaign Driven Examination Process


New Claim for Refund Requirement

New Facts Acknowledgment Process

Modified Risk Assessment Process

Presenter

Presentation Notes

Steve, I would interject at this point that you had heard through the grapevine that the IRS is now training domestic agents to handle some international issues, and ask my take on how that will work out during IRS audits.


Identity Theft


So…If You Think Your

PII is Safeand Sound…



Strategies for Dealing with

ID Theft


Freeze Your Credit

www.Equifax.comwww.Experian.com

www.TransUnion.com


Complete and SubmitForm 14039

(Identity Theft Affidavit)



Take a Look At

• Publication 5027 (ID Theft Information for Taxpayers

• Publication 4524 (Security Awareness for Taxpayers

• Apply for an IP-PIN

Presenter

Presentation Notes

Steve, as a little comic relief I would at this point somewhat sarcastically ask why we need to talk about this at an international tax conference. Answer: Because if your individual identity has been stolen, you will be occupied and worried, thus blocking you from engaging in free-thinking international tax strategies to lower your company’s worldwide effective tax rate!!!


Most Importantly…RELAX!!!!!


Advanced Tax Controversy


#1 - If the IRS has placed a target on your back, let’s use their own tools as a defense.


Audit Technique

Guides


31


1.Go to irs.gov2.Search “Audit Technique Guides”


• Aerospace Industry• Air Transportation• Architects and Landscape Architects• Art Galleries• Attorneys • Business Consultants• Capitalization of Tangible Property• Capitalization v Repairs• Cash Intensive Businesses• Child Care Provider• Coal Excise Tax• Conservation Easement• Construction Industry• Continuation of Employee Healthcare

Coverage• Cost Segregation

• Credit for Increasing Research Activities

• Entertainment• Equity (Stock)• Excise Tax on Indoor Tanning

Services• Excise Tax on Obligation Not in

Registered Form• Excise Tax on Obligation Not in

Registered Form D• Executive Compensation –Fringe

Benefits• Factoring of Receivables• Farmers• Fishing• Foreign Insurance• Golden Parachute


• Hardwood Timber Industry• IC-DISC• Inland Waterways• IRC §42 Low-Income Housing Credit• IRC 162(m) Salary Deduction

Limitation• IRC §183 Activities Not Engaged in

for Profit• Lawsuits, Awards, Settlements• Low-Income Housing• Ministers• New Markets Tax Credit• New Vehicle Dealerships• Non-qualified Deferred

Compensation• Oil and Gas Industry• Ozone Depleting Chemicals

• Partnerships• Passive Activity Losses• Placer Mining• The Port Project• Real Estate Property Foreclosure and

Cancellation of Debt• Reforestation Industry• Rehabilitation Tax Credit• Research Credit Claims• Retail Industry• Sections 48A and 48B• Split Dollar Life Insurance• Structured Settlement Factoring• Timber Casualty Loss• Veterinary Medicine• Wine Industry


International Practice Units Job aides and training materials that are a means for collaborating and sharing knowledge among IRS employees.

Evolve and change as the compliance environment changes and new insights and experiences are contributed.

Presenter

Presentation Notes

Steve, I would suggest that you question here the real value of these practice units, i.e. do they really help in deflecting potential international issues from being successfully raised.


#2 - An easy solution to what can be an expensive problem.



First Time Abate

IRM 20.1.1.3.6.1


Applies to:

Failure to File (FTF)Failure to Pay (FTP)

Failure to Deposit (FTD)

Applies to:

Failure to File (FTF)Failure to Pay (FTP)

Failure to Deposit (FTD)


Applicable if:1.There were no penalty assertions in the prior three tax years on the same type of return

2. You are filed and paid up, i.e. have filed all currently due tax returns and owe the IRS no monies OR you have entered into an installment agreement(payment plan) with the IRS and are current with those payments.

Applicable if:1.There were no penalty assertions in the prior three tax years on the same type of return

2. You are filed and paid up, i.e. have filed all currently due tax returns and owe the IRS no monies OR you have entered into an installment agreement(payment plan) with the IRS and are current with those payments.

Available for most annual based filings:1040, 1041, 1120, 1120S, 1065, etc.


Not available for event based filings like Forms 5741/5742, says the IRS.

Not available for tax-exempt filings


Forms 5471IRM 21.8.2.1.1 (Campus Consolidation and

Program Centralization)IRM 20.1.9.3 (IRC 6038-Information

Reporting With Respect to Foreign Corporations and Partnerships

IRM 21.8.2.21(Form 5471-Information Return of U.S. Persons With Respect to

Certain Foreign Corporations)


Forms 5472IRM 21.8.2.1.1 (Campus Consolidation and

Program Centralization)IRM 20.1.9.5 (IRC 6038A(d)-Information

Reporting for Certain Foreign-Owned Corporations)

IRM 21.8.2.22(Form 5472-Information Return of a 25% Foreign-Owned U.S. Corporation of a Foreign Corporation Engaged in a U.S. Trade of Business)

Presenter

Presentation Notes

At this point you can interject your amazement at DHG’s ability to negotiate the dark reaches of the IRS’s Internal Revenue Manual and dig out information and solutions that might be helpful to client’s with a global presence.


#3 – Yes, I am consulting with IRS subject matter experts, but they’re mine. You can’t have them!!!



IPG – Issue Practice GroupsIPN – International Practice

NetworkTPP – Transfer Pricing

Practice

Presenter

Presentation Notes

Steve, I would interject here that you have heard that the relationship between the International Examiners assigned to large transfer pricing cases, and the Transfer Pricing Practice specialists that are supposed to help develop their transfer pricing issues, is contentious and has resulted in internal turf battles.


#4 – I’m sorry, but I can’t allow that business expense(when Revenue Agents make up their own rules).


IRM 4.10.7.4.2

If a taxpayer cannot precisely document amounts spent for expenses while away from home on business, examiners may establish that reasonable amounts were spent for such items if taxpayers can clearly establish the following:

Dates of departure and return for each trip away from home, and number of days away from home, destinations or locality of travel, for example, name of city or town, business reason for travel or nature of business benefit derived or expected to be derived, and proof that expenditures were incurred.


IRM 4.10.7.3.2 – Oral Testimony

The Internal Revenue Code requires all taxpayers to keep adequate records. There are times, due to unusual circumstances, when records do not exist. In such cases, oral testimony may be the only evidence available. Therefore, oral statements made by taxpayers to examiners represent direct evidence which must be thoroughly considered.


IRM 4.10.7.3.9 – Documentary Evidence

While documentary evidence has great value, it should not be relied on to the exclusion of other facts. Facts can also be established by oral testimony and there will be occasions when courts will give greater weight to oral testimony than to conflicting documentary evidence.


IRM 4.10.7.4.2 – Reasonable Determinations

Close approximations of items, not fully supported by documentary proof, can be frequently be established through reliable secondary sources and collateral evidence.

The practice of disallowing amounts claimed because there is no documentary evidence available, which will establish the precise amounts beyond any reasonable doubt (even though it is clear that the taxpayer did incur some expense) ignores commonly recognized business practice, as well as the fact that proof may be established by credible oral testimony.


#5 – I think that there is an adjustment to this item on your tax return, so I’m going to prepare a quick NOPA. Please sign off on the NOPA letting me know that you agree.(When Revenue Agents get in a hurry with your rights).


Playing To Your Fear


The Right to Challenge the IRS’s Position and Be Heard

Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.


IRM 4.10.7.2Researching Tax Law

Conclusions reached by examiners must reflect correct application of the law, regulations, court cases, revenue rulings, etc. Examiners must correctly determine the meaning of statutory provisions and not adopt strained interpretations.


IRM 4.10.7.5.3Field Examinations

. . . once the examination is completed, examiners will explain the basis of the proposed adjustments to taxpayer and/or his representative. The examiner should solicit agreement to the issues and attempt to secure agreement to the proposed tax liability. Examiners should be prepared to cite the law, regulations, rulings, and court decisions on which their conclusions are based and provide the taxpayer with copies of workpapers explaining the proposed adjustments.


Taxpayer Bill of Rights

The Right to Quality ServiceTaxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.


#6 – Your own personal device for mass intelligence gathering, and how and when to use it.


Freedom of Information Act (FOIA)

Passed in 1967

Provides the public the right to request access to records from any federal agency subject to certain disclosure exemptions.


Potential IRS FOIA Uses1. Secure copies of IRS notices you seem to

have overlooked.2. Secure copies of agent’s workpapers from

prior examinations.3. Secure data from prior examinations to

be used to limit the scope of a current examination.


However . . . . . . . . .

My Personal Favorite

Making a FOIA request to obtain the name and contact information of the person currently assigned to your account.


Helpful IRM Cites11.3.13.9


#7 - Form 1120S/1065Late Filing Strategies


IRC 6698/6699Provides the penalty regime for 1065/1120S late tax return filings.

$195/Partner or Shareholder per monthtimes the number of months late, up to 12 months.


1065 Penalty Abatement Strategies1. Revenue Procedure 84-352. Reasonable Cause3. First Time Abatement


Revenue Procedure 84-35A domestic partnership composed of 10 or fewer partners and coming within the exception outlined in section 6321(a)(1)(B) of the Code will be considered to have met the reasonable cause test and will not be subject to the penalty imposed by section 6698 for the failure to file a complete or timely partnership return


IRC 6231(a)(1)(B)(i) defines partnerships as follows:

(i) In general. The term "partnership" shall not include any partnership having 10 or fewer partners each of whom is an individual (other than a nonresident alien), a C corporation, or an estate of a deceased partner.


1120S Penalty Abatement Strategies1. Reasonable Cause2. First Time Abatement3. Revenue Procedure 84-35 for Forms

1120S(What???!!!???)


Substitute For Return(SFR)

If you don’t file a tax return, the IRS can file one for you.


IRC 6020(b)(1)&(2)(b) Execution of return by Secretary

(1) Authority of Secretary to execute returnIf any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

(2) Status of returns Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.


But, since Form 1065 and 1120S returns are not tax paying entities, the IRS has no reason to create a SFR to assess tax due.


IRC 6651(g)(1)(g) Treatment of returns prepared by Secretary under section 6020(b)In the case of any return made by the Secretary under section 6020(b)—

(1) Such return shall be disregarded for purposes of determining the amount of the addition under paragraph (1) of subsection (a)


IRM 20.1.2.2.10Substitute for Return-IRC 6651(g)

1. Pursuant to IRC 6020(b), a “substitute for return” (SFR) is prepared by the Service when it is determined that a taxpayer is liable for filing the tax return, but failed to do so even after notification from the Service.

2. IRC 6651(g)(1) provides that a return prepared under IRC 6020(b) does not constitute the taxpayer’s return for determining whether or when the taxpayer filed a return for the purpose of computing the penalty for filing late under IRC 6651(a)(1).


So, . . . . . . . If a taxpayer is delinquent in filing Form(s) 1120S, but their shareholders have either included the income accurately on their return, or will via amended return, please consider not filing the delinquent Forms 1120S. The IRS can then assert no failure to file penalties.

Presenter

Presentation Notes

Steve, I would suggest that you opine at this point that this generally really doesn’t apply to taxpayer’s with international transactions, does it. I will reply with a strategy that could save you having to face late filing penalties for the submission of Forms 5471/5472.


#8 - Accuracy-Related Penalty Strategies

(IRC 6662 And the IRS’s Automatic Penalty Regime)


IRC 6662Imposes a penalty of 20% of the tax deficiency attributed to:1. Negligence or disregard of rules and

regulations, if there is2. Any substantial understatement of

income tax(exceeds 10% of tax reported per return, or $5,000.


IRC 6751(b)(1)(b) Approval of assessment

(1) In generalNo penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.


IRC 6751(b)(2)(2) Exceptions Paragraph (1) shall not

apply to—(A) any addition to tax under section6651, 6654, or 6655; or(B) any other penalty automatically calculated through electronic means.


IRM 20.1.5, 1.6, §9Managerial Approval of Penalties

9. Any penalties automatically calculated through electronic means are excluded from IRC 6751(b)(1) requirement.


IRM 20.1.5, 1.6, §9.B.B. However, if a taxpayer responds either

to the initial letter proposing a penalty or to the notice of deficiency that the program automatically issues, an IRS employee will have to consider the taxpayer’s response. Therefore, the IRS employee will have to make an independent determination as to whether the response provides a basis upon which the taxpayer may avoid the penalty.


The employee’s independent determination of whether the penalty is appropriate means the penalty is not automatically calculated through electronic means. Accordingly, IRC 6751(b)(1) requires managerial written approval of an employee’s determination to assert the penalty.

Presenter

Presentation Notes

Steve, I would suggest that you at this point ask what is the best penalty strategy where it is clear that the IRS is going to make transfer pricing adjustments and trigger a substantial understatement or negligence penalty.


# 9 - Using Private Letter Rulings to Resolve Problems and Seize

Opportunities

9100 Relief


Reactive PLRs

• Inadvertent Termination of subchapter S trust (QSST) election

• Late 953(d) election

• Late subchapter S election

• Late dual consolidated loss election

• Late IT Reg. 1.48-4 election

• Late election under IRC 47(a)(2)

Presenter

Presentation Notes

(Main learning point – PLRs may be used to …) (P) PLR regarding inadvertent termination of a qualified subchapter S trust(QSST) election. Termination avoided through PLR.


Reactive PLRs

• Late election pursuant to IRC 754

• Late IRC 1022 election

• Late election not to deduction additional first year depreciation-IRC 168(k)

Presenter

Presentation Notes

(Main learning point – PLRs may be used to …) (P) PLR regarding inadvertent termination of a qualified subchapter S trust(QSST) election. Termination avoided through PLR.


Treasury Regulations § 301.9100-3

Granted if the taxpayer provides evidence which establishes that:

– The taxpayer acted reasonably and in good faith

– Relief will not prejudice the interests of the Government

PLR request (Rev. Proc. 2016-1) must be used to request relief

Presenter

Presentation Notes

NOTE: Pasted slides from Paul on 9100 relief here ---discuss with Paul we had discussed that 9100 relief might be mentioned but was a bit of a tangent from method and PLR topic, thought one slide there are several. We need to consider time anyway and probably need to pare down slides all the way through presentation now that we have closer rough draft)


Treas. Reg. § 301.9100-3(b) -- Reasonable Action and Good Faith

A taxpayer will be treated as acting reasonably and in good faith if:

– The taxpayer applies for relief before discovery by the IRS;

– Events beyond the taxpayer's control caused the failure to make the election;

– The taxpayer was unaware of the necessity for the election;

– The taxpayer relied on the written advice of the IRS; or the taxpayer reasonably relied on a competent and qualified tax professional who failed to advise the taxpayer to make the election

Presenter

Presentation Notes

Paul -9100


Treas. Reg. § 301.9100-3(b)(3) --Reasonable Action and Good Faith

A taxpayer is deemed to not have acted reasonably or in good faith if the taxpayer:

– Seeks to alter a return position for which an accuracy-related penalty could have been imposed;

– Was informed in all material respects of the required election, but chose not to file the election

– Uses hindsight in requesting relief

Presenter

Presentation Notes

Paul 9100


Treas. Reg. § 301.9100-3(c) -- Prejudice to the Interests of the Government

The government's interests are prejudiced if:

– Granting relief would result in a lower tax liability for the aggregate of all taxable years affected by the election;

– The statute of limitations under I.R.C. § 6501 has expired.

Presenter

Presentation Notes

Paul 9100


Treas. Reg. § 301.9100-3(c)

Please note that there are special rules for accounting method and period regulatory election relief requests.

See Treasury Reg. § 301.9100-3(c)(2) & (3).

Presenter

Presentation Notes

Paul 9100


Procedural Requirements

Must provide affidavit and declaration from taxpayer describing events that led to the failure and must provide significant detail if using a reliance on the tax advisor defense.

Must provide affidavit and declaration from other relevant parties.

Presenter

Presentation Notes

Paul 9100


Can 9100 Relief Be Used to Revoke an Election

For purposes of 9100 Relief, “election” is defined broadly to include:

– “An application for relief in respect of tax” (Treas. Reg. § 301.9100-1(b))

• PLR 201239012 – Extension of time to revoke IRC 501(h) election(lobbying expenses)

• PLR 9627019 – Extension of time to revoke IRC 453(d)(4) election(installment method)

Presenter

Presentation Notes

Paul 9100


# 10 - Tax Attributes and the Statute of Limitations

Surprises That Thrill and Chill!!!


Common Tax Attribute Carryovers• Net Operating Loss• General Business Credits• AMT Credits• Capital Losses• Charitable Contributions


??????Can the IRS adjust a tax attribute emanating from closed tax years that are being utilized in an open tax year?


Yes, They Can!!!Mennuto v. Commissioner

56 TC 910 (1971)Calumet Industries v. Commissioner

95 TC 257 (1990)Hill v. Commissioner

95 TC 437 (1990)


But…It’s a Two-Way StreetNotice Number 200913022

PLR 9504032Revenue Ruling 77-225


One CaveatChanges to the tax attribute must not meet the definition of a change in the accounting method under IRC 446 and 481.

Presenter

Presentation Notes

Steve, set me up here by saying that you just thought about a very bad potential fallout of this information, i.e. that what the IRS might do if they make transfer pricing adjustments in an audit year with NOL’s rolling in from prior years. I have some horror stories on that particular point.


Questions?


Contact Information

[email protected](336) 822-4385

Documents

The New IRS, ID Theft and Advanced Tax Controversy · executive briefing series #DHGexecutivebriefingseries The New IRS, ID Theft and Advanced Tax Controversy Paul Tew