The Tax Court’s recent decision in Walquist v. Commissioner, 152 T.C. No. 3, further clarified the application of the supervisor approval requirement under section 6751(b)(1), which has been a key issue since Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017).  In Walquist, the Tax Court held that accuracy-related penalties determined by an IRS computer program without human review are “automatically calculated through electronic means” under section 6751(b)(2)(B).  As a result, those penalties are exempt from the written supervisor approval requirement under section 6751(b)(1).

The petitioners in Walquist failed to report compensation for 2014.  The IRS’ computer document matching recognized the underreporting, and the IRS processed the examination of the Walquist’s return through its Automated Correspondence Exam system using its Correspondence Examination Automated Support (CEAS) software program.  The Tax Court explained that this software is designed to process cases “with minimal to no tax examiner involvement until a taxpayer reply is received.”  The CEAS program eventually issued the petitioners a general 30-day letter, which systematically included an accuracy-related penalty.  The petitioners failed to respond to the 30-day letter, so the CEAS program issued them a notice of deficiency, which included the accuracy-related penalty from the 30-day letter.

The petitioners filed a purported petition with the Tax Court, which consisted of the notice of deficiency and appended various documents containing assertions commonly advanced by tax protesters.  Even in such cases, the IRS’ burden of production generally includes establishing compliance with section 6751(b), which requires that penalties be “personally approved (in writing) by the immediate supervisor of the individual making such determination.”  See Chai, 851 F.3d at 217.

Supervisor approval, however, is not required for “any other penalty automatically calculated through electronic means.”  IRC 6751(b)(2)(B).  The Tax Court held that an accuracy-related penalty determined by an IRS computer program is a “penalty automatically calculated through electronic means.”  The Tax Court pointed out that if the penalty at issue was not a “penalty automatically calculated through electronic means,” it would be difficult to conceive what type of penalty would qualify for the statutory exception to the supervisor approval requirement.

With the 2018 tax filing season in full swing, the Internal Revenue Service today kicked off its annual countdown of the twelve most prevalent tax scams facing taxpayers. Compiled annually by the IRS, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter any time of the year, but many of these schemes peak during filing season as individuals prepare their tax returns or seek help from tax professionals. As in prior years, the IRS will highlight each of these scams on twelve consecutive days in order to help protect taxpayers and raise awareness. In subsequent posts, we will report on each of the “Dirty Dozen” scams as they are unveiled by the IRS.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

I have written before about the battles being fought by cannabis businesses facing IRS examinations.  IRS audits raise many issues for state legal cannabis businesses operating in violation of the Controlled Substances Act. In some situations, taxpayers have struggled to resolve IRS examinations while addressing concerns that incriminating evidence provided to the IRS could fall into the hands of law enforcement. This week, the Tenth Circuit issued its ruling addressing these very concerns.

The Tax Court ruled in Feinberg v. Comm’r, T.C. Memo 2017-211, that the taxpayer failed to substantiate cost of goods sold when instead of submitting evidence of the amounts spend on inventory, it submitted an expert report in an effort to convince the court to make a determination of cost of goods sold based on industry averages.  However, the expert report was excluded and the court determined that without actual documents, the IRS determination of cost of goods sold would stand.  Further, because there was no substantiation of ordinary and necessary expenses claimed under Section 162, the Tax Court held that it did not need to address the application of Section 280E (the code section which disallows ordinary and necessary business deductions for businesses trafficking in controlled substances).  My discussion of the Tax Court opinion is available here.

At oral argument, the taxpayer is argued that it was backed into a corner when, after the IRS agreed that whether Section 162 deductions where substantiated was not an issue for trial, the Tax Court determined that Section 280E did not apply because of a lack of evidence that the taxpayer was trafficking in controlled substances, yet denied Section 162 deductions for lack of substantiation.   The Commissioner agreed that substantiation was not an issue for trial, but argued that the taxpayer did not in fact substantiate any expenses – because it asserted its Fifth Amendment privilege in response to discovery requests – and that there was enough evidence in the record to support a finding that the taxpayer was trafficking in controlled substances, allowing the court to agree that the IRS was correct in determining that Section 280E applied to the taxpayer.

The Tenth Circuit’s ruling is enlightening.  The panel agreed with the parties that the Tax Court erred in denying the business expense deductions for failure to substantiate them under Section 162 because substantiation was a new matter upon which the IRS carried the burden of proof.  However, the panel went on to conclude that based on the evidence in the record, it could affirm the Tax Court’s ruling on the alternative ground that the taxpayer did not meet their burden of proving that the IRS erred in denying the deductions under Section 280E.

The Tenth Circuit rejected the taxpayer’s argument that requiring them to prove that they were not trafficking in a controlled substance violated their Fifth Amendment privilege.  The taxpayer cited several Fifth Amendment cases where petitioners “were prosecuted for failing to comply with a statute compelling them to provide self-incriminating information.”  In those cases, the Fifth Amendment privilege provided a complete defense.  Those situations were distinguished from the instant case, involving the filing of a tax return, because the taxpayer failed “to explain how requiring them to bear the burden of proving the IRS erred in applying § 280E to calculate their civil tax liability is a form of compulsion equivalent to a statute that imposes criminal liability for failing to provide information subjecting the party to liability under another criminal statute.”  The court concluded that “the Taxpayers must choose between providing evidence that they are not engaged in the trafficking of a controlled substance or forgoing the tax deductions available by the grace of Congress.”  In other words, whether you get to take a deduction is a different matter altogether than facing criminal prosecution for failing to comply with a statute.  The court further noted that when asserting the privilege against self-incrimination, one must bear the consequences of the lack of evidence.  While normally the lack of evidence could benefit a party facing criminal prosecution, here the lack of evidence results in a particular application of the tax laws, not criminal liability.

The court next picked up where the Tax Court left off and considered whether the taxpayer had provided evidence refuting the IRS determination that the taxpayer was trafficking in a controlled substance.  Because the taxpayer did not identify any evidence showing the IRS had erred in this determination, the court concluded that they had not met their burden.  This was the court’s basis for affirming the Tax Court’s conclusion.

This ruling breaks new ground by directly addressing the issue of Fifth Amendment privilege in examinations where the IRS takes the position that Section 280E applies.  Because the court determined there is no violation of the taxpayer’s Fifth Amendment privilege, taxpayers in the Tenth Circuit should be cooperative during examinations to avoid denial of costs to which they are entitled.

 

Fox attorneys Ian M. Comisky and Matthew D. Lee will be speaking on criminal tax enforcement panels at the Federal Bar Association’s 2019 Tax Law Conference to be held on March 7-8, 2019, in Washington, D.C.

Ian will be leading a panel entitled “International Hot Topics in Tax Enforcement” which will seek to answer this question: Is charging tax fraud as a money laundering offense a reach too far? Traditionally, tax evasion has not been charged as mail fraud or wire fraud and therefore has not been charged as a predicate for a money laundering offense. However, one recent case in the Southern District of New York arising out of the Panama Papers has charged a tax offense as wire fraud and as a predicate for an international money laundering charge. This panel will review the existing law and guidance in this area and discuss when money laundering can be charged in connection with a tax crime.

Matt will be part of a panel entitled “Domestic Hot Topics in Tax Enforcement” that will address issues suggested by recent developments in domestic criminal tax matters, including: growth of I.R.S. Criminal Investigation (I.R.S.-CI) in 2019; new special agent classes; the Nationally Coordinated Investigations Unit (NCIU); efforts to deal with cryptocurrency; current investigation and prosecution priorities; impact of the federal government shutdown; charging decisions in light of Marinello, Yusuf, and recent cases; and practical issues in prosecuting and defending criminal tax cases.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

For most nonprofit organizations, the IRS Form 990/990-PF deadline is fast approaching. This Form 990/990-PF deadline should also prompt nonprofits to engage in a start-of-the-year review of its state filings, insurance coverage, donor letters, bylaws and corporate records to determine whether any changes should be made for the coming year.

Our colleagues Richard S. Caputo and Jacqueline Motyl have authored a two-part Alert addressing these critical issues for nonprofit organizations. Part I of this two-part Alert will review Form 990/Form 990-PF requirements, Solicitation of Funds registration requirements, and Change in Officer/Director notification requirements, and will discuss appropriate insurance coverage. Part II of the Alert will discuss written acknowledgements, quid pro quo disclosures, potential bylaw amendments and potential modifications to corporate records.

You can read Part I of their Alert here.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

 

With its special agent ranks significantly depleted after years of budget cuts, the Criminal Investigation Division of the Internal Revenue Service announced this week that it is hiring new special agents. IRS-CI is responsible for investigating potential criminal violations of the tax laws and related financial crimes, and it currently has barely 2,000 special agents to carry out this critically-important mission, not just in the U.S. but across the globe. The job posting for IRS special agents was unveiled on February 11, 2019, and it will remain open for only five business days.

IRS-CI has been particularly hard hit by the years of reduced Congressional appropriations for the agency as a whole, as well as by retirements of veteran agents. From an all-time high of 3,363 special agents in 1995, the total number of special agents decreased precipitously over the next two decades. The following graphic – reproduced from IRS-CI Annual Report for 2016 – tells the story:

In FY2017, the number of special agents dropped further, to 2,159, and in FY2018, the number dipped to 2,019.

The hiring of new classes of IRS special agents will not, however, result in an immediate increase in the number of criminal investigations and prosecutions for tax crimes. New special agents undergo an extensive six-month training program at the Federal Law Enforcement Training Center in Glynco, Georgia. And some experienced special agents will be pulled from the field in order to help train the new recruits. As a result, this new hiring initiative may in fact lead to a reduction in new criminal investigations, at least in the short term. Nevertheless, it is good news that IRS-CI has the funding to hire a new crop of special agents and this development should be welcomed by practitioners and law-abiding taxpayers alike. Tax evaders, on the other hand, should take heed.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

As part of its continuing guidance to taxpayers and practitioners about how its resumption of activities following the government shutdown is impacting pending matters, the Internal Revenue Service has published Frequently Asked Questions (entitled “Appeals Resumption FAQs“) regarding cases pending in IRS Appeals.  These FAQs provide information regarding the shutdown’s effect on Appeals hearings, Appeals correspondence, and communications with Appeals Officers.  The text of those FAQs follows:

1. How soon will Appeals hearings resume?

Once Appeals Officers have reviewed mail, voice messages, the status of their assigned inventory and completed administrative tasks to restart operations, they will begin to re-establish contact and schedule hearings. This process will take several business days to complete.

2. My Appeals hearing was cancelled prior to the shutdown. When will it be rescheduled?

After completing the assessment of their assigned inventory, your Appeals Officer will reach out to you to reschedule your hearing.  It will take several business days before your Appeals Officer is able to reach out to their assigned taxpayers.

3. My Appeals hearing was scheduled for one of the days when the government was shutdown.  I have not heard from my Appeals Officer.  What should I do?

Since your Appeals Officer was furloughed during the shutdown, they were prohibited from performing their duties. Once your Appeals Officer has completed a review of their inventory, they will reach out to you to reschedule your hearing. This process will take several business days to complete.

4. I left a message for my Appeals Officer but have not received a call back.

Since your Appeals Officer was furloughed during the shutdown, they were prohibited from performing their duties. Upon their return, your Appeals Officer will assess the status of their inventory.  Your Appeals Officer will retrieve their messages and return calls, but it may take several business days before he or she is able to reach out. If you have not heard after several days, place another call to the Appeals Officer.

5. When can I call my Appeals Officer to discuss my case?

Each Appeals Officer will reach out to their assigned taxpayers after they review and assess the status of their assigned inventory.  This may take several days.  In the meantime, you can reach out to your Appeals Officer during normal business hours.

6. I received a correspondence from my Appeals Officer giving me a deadline to respond.  I was unable to respond due to the shutdown. How should I proceed?

If you have additional information, you should send the information to your Appeals Officer immediately and call them to discuss options.  Your Appeals Officer will also be reaching out to you to re-establish contact before they take additional actions on your case.  At that time, they will discuss any information still needed.  It will take several days for your Appeals Officer to contact all of their assigned taxpayers.

7. I received a Statutory Notice of Deficiency during the shutdown.  What should I do?

On cases where Appeals issued a Statutory Notice of Deficiency, the notice sets forth the time parameters you have to petition the Tax Court if you want to protest the adjustments. Please review this carefully.  If you agree with the adjustments, you can sign and return it to the Appeals Officer. If you feel you received the Notice of Deficiency in error, you should contact the Appeals Officer immediately.

8. I requested an Appeals hearing but have not heard from Appeals.

If you submitted a request for Appeals consideration on your case, contact the IRS office that offered the Appeals request for an update on the status. If the IRS office states that your request was sent to the Office of Appeals and you have not received anything from Appeals after 60 days after the government has reopened, call Appeals Customer Service at 559-233-1267.

9. I filed a petition with the Tax Court during the government shutdown. What happens next?

We recognize it will take time for the Tax Court to work through its backlog of petitions needed to be served on the IRS. You should check with the Tax Court’s website for the latest updates and news from the court.

10. I received a Form 872, Consent to Extend the Time to Assess Tax, from my Appeals Officer. It was mailed prior to the shutdown, but I received it after the shutdown started.  What are my options?

The Form 872, Consent to Extend the Time to Assess Tax, was solicited to allow additional time for you and your Appeals Officer to address issues still open in the Appeals hearing. Included with Form 872 you also received Publication 1035.  Publication 1035 provides guidance and explains your options. If you have additional questions beyond those in the publication, you should contact your assigned Appeals Officer.  Your Appeals Officer will also be reaching out to you to discuss the process, but this may take several business days to accomplish.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

As part of its continuing guidance to taxpayers and practitioners about how its resumption of activities following the government shutdown is impacting pending matters, the Internal Revenue Service has published Frequently Asked Questions (entitled “IRS Update on Shutdown Impact on Tax Court Cases; Important Information for Taxpayers, Tax Professionals with Pending Cases“) regarding Tax Court activities.  These FAQs provide information regarding the shutdown’s effect on Tax Court proceedings, including mail being returned and issues with petitions not being processed.  The text of those FAQs follows:

What should I do if a document I mailed or sent to the Tax Court was returned to me?

The Tax Court website indicates that mail sent to the court through the U.S.  Postal Service or through designated private delivery services may have been returned undelivered.  If a document you sent to the Tax Court was returned to you, as the Tax Court website indicates, re-mail or re-send the document to the Court with a copy of the envelope or container (with the postmark or proof of mailing date) in which it was first mailed or sent. In addition, please retain the original.

My case was calendared for trial.  What does the Tax Court’s closure mean for my pending case?

The Tax Court canceled trial sessions for January 28, 2019 (El Paso, TX; Los Angeles, CA; New York, NY; Philadelphia, PA; San Diego, CA; and Lubbock, TX), February 4, 2019 (Hartford, CT; Houston, TX; San Francisco, CA; Seattle, WA; St. Paul, MN; Washington, DC; and Winston-Salem, NC) and February 11, 2019 (Detroit, MI; Los Angeles, CA; New York, NY; San Diego, CA; and Mobile, AL). The Tax Court will inform taxpayers who had cases on the canceled trial sessions of their new trial dates.

The Tax Court’s website indicates that it will make a decision about the February 25, 2019 trial sessions (Atlanta, GA; Chicago, IL; Dallas, TX; Kansas City, MO; and Philadelphia, PA) on or before February 7, 2019. Taxpayers with cases that are scheduled for trial sessions that have not been canceled or that have not yet been scheduled for trial should expect their cases to proceed in the normal course until further notice.

If my case was on a canceled trial session, when will I have an opportunity to resolve my case with Appeals or Chief Counsel after the government reopens?

After the IRS and Chief Counsel reopen, we will make our best efforts to expeditiously resolve cases.

Where can I get more information about my Tax Court case?

If someone is representing you in your case, you should contact your representative. In addition, the Tax Court’s website is the best place for updates.  The IRS Chief Counsel and Appeals personnel assigned to your case may be furloughed and will not be available to answer your questions until the government reopens.  In addition, The American Bar Association (ABA) is conducting a webinar on January 28, 2019, and you can get more information from the ABA Tax Section website. Taxpayers seeking assistance from Low Income Taxpayer Clinics (LITCs) can find a list of LITCs on the Tax Court’s website.

During the shutdown, does interest continue to accrue on the tax that I am disputing in my pending Tax Court case?

Yes. To avoid additional interest on the tax that you are disputing in your pending Tax Court case, you can stop the running of interest by making a payment to the IRS.  Go to www.irs.gov/payments for payment options available to you.  The IRS is continuing to process payments during the shutdown.

What should I do if I received a bill for the tax liability that is the subject of my Tax Court case?

If you receive a collection notice for the tax that is in dispute in your Tax Court case, it may be because the IRS has not received your petition and has made a premature assessment.  When the government reopens, the IRS attorney assigned to your case will determine if a premature assessment was made and request that the IRS abate the premature assessment.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

As part of its guidance to taxpayers and practitioners about how its resumption of activities this week following the government shutdown is impacting pending matters, the Internal Revenue Service has published Frequently Asked Questions (entitled “Collection Resumption FAQs“) regarding collection activities.  These FAQs provide information regarding the shutdown’s effect on liens, levies, notices of deficiency, penalties, passports, and private debt collection.  The text of those FAQs follows:

IRS employees returned to work on January 28, 2019 and resumed activities. Upon their return to the office, they will begin to review mail, voice messages, and their audit and collection files as well as completing administrative tasks to reopen operations.

1. I received a Statutory Notice of Deficiency during the shutdown.  What should I do?

On cases where the statute of limitations was nearing expiration, the IRS issued a Statutory Notice of Deficiency to protect the government’s interest.  If you received a Notice, you have 90 days to petition the Tax Court if you want to protest the adjustments.  If you agree with the adjustments in the report, you can sign and return the report.  If you feel you received the Notice in error, you should contact the person listed on the letter or your assigned auditor.

2. Will failure to pay and failure to file penalties be abated during the shutdown period?

The lapse in federal appropriations during the government shutdown did not affect the federal tax law. Individuals and businesses were required to keep filing their tax returns and making payments with the IRS. Failure to pay and failure to file penalties are charged on tax from the due date of the return until the date of payment. Taxpayers who make their deposits and payments in-person at an IRS Taxpayer Assistance Center and were unable to do so due to the shutdown can file a request that the penalty be abated for reasonable cause.

3. How does the shutdown period affect my repayment plan with my Revenue Officer (RO)? I was working with the RO towards an installment agreement.

Once your revenue officer has reviewed mail, voice messages, the status of their assigned inventory and completed administrative tasks to restart operations, they will begin to reestablish contact to work with you towards resolution of your tax account issue.  This process will take several business days to complete.

4. I missed an appointment with my Revenue Officer, am I going to be penalized?

Because your Revenue Officer was furloughed during the shutdown, they were prohibited from performing their duties. Once your Revenue Officer has completed a review of their inventory, they will reach out to you to reschedule your appointment. This process will take several business days to complete.

5. I needed to make a payment and provide information to my assigned Revenue Officer during the shutdown period, I was unable to do so, will this affect me?

No. Since your Revenue Officer was furloughed during the shutdown, they were prohibited from performing their duties. Your assigned Revenue Officer will work with you to secure the necessary information to move your case forward to resolution.  In the meantime, you can reach out to your Revenue Officer during normal business hours.

6. If a Notice of Levy has been issued/received, who should I contact?

Please use the telephone number provided on the notice.

7. I filed a request for a notice of discharge and I have an imminent closing.  Is there contact information available?

For additional information regarding a request for discharge, you can refer to Publication 4235 to find your local Collection Advisory Office for lien issues.

8. Where should questions regarding lien release/withdrawal issues be directed?

For additional information regarding a lien release or withdrawal issue, you can refer to Publication 4235 to find your local Collection Advisory Office.

9. My case is assigned to a Private Collection Agency (PCA) contracted by the IRS. How soon can I expect to be contacted?

The PCAs are currently working through correspondence and incoming voice messages received during the shutdown. We anticipate that the PCAs will begin to reestablish contact with taxpayers no later than Friday, February 1st, 2019.   If you have a prior-established payment arrangement with a PCA, you should continue to make your regular payments as previously agreed.

10. My passport application was denied because of delinquent tax debt. What should I do?

Contact the IRS at 1-855-519-4965 (International callers 1-267-941-1004) to make arrangements to resolve your tax debt, or to provide information and receive assistance if you have already resolved the debt. Visit irs.gov/passport for more information about passport denial due to Federal tax debt.

11. I submitted a request for a Collection Due Process (CDP) hearing but have not heard from anyone.  What should I do?

We will be processing CDP requests received.  Since work has resumed, you can expect to be contacted soon.  If you have any questions or concerns, you can contact the office where you submitted your hearing request.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

We wrote yesterday that the Internal Revenue Service has issued guidance to taxpayers and practitioners about how the agency’s resumption of activities this week following the government shutdown is impacting pending matters, such as audits, collection cases, and Tax Court cases.  With respect to pending audits, the IRS has published helpful Frequently Asked Questions (entitled “Exam Resumption FAQs“) about a variety of issues impacted by the shutdown.  The text of those FAQs follows:

IRS employees returned to work on January 28, 2019 and resumed activities. Upon their return to the office, they will begin to review mail, voice messages, and their audit and collection files as well as completing administrative tasks to reopen operations.

1. I sent documents to my auditor but have not heard back.  What should I do?

Your auditor will be reviewing mail they have received and will reach out to you to re-establish contact. It may take several business days before your auditor is able to make contact.

2. I planned on sending material to my auditor but did not do so since the government was shut down. What should I do now?

If you have assembled the material requested, you can immediately send the material to your auditor. You may call your auditor to discuss any items on your document request if you need clarification.  Your auditor will also be reaching out to you to re-establish contact in the next several business days.  During this contact, your auditor will be able to answer questions you have and will address the timeframe on when the requested information is due.

3. I sent my signed audit report and a check to my auditor during the shutdown. How do I know if they were received?

Once your auditor has completed their initial review of their inventory and associated mail received with each audit, the auditor will reach out to you to confirm that they received your agreement and check.

4. How soon will examinations resume?

Once auditors have reviewed mail, voice messages, the status of their assigned inventory and completed administrative tasks to restart operations, they will begin to re-establish contact. This process will take several business days to complete.

5. My audit appointment was cancelled prior to the shutdown. When will it be rescheduled?

After completing the assessment of their assigned inventory, your examiner will reach out to you to reschedule your appointment.  It will take several business days before your auditor is able to reach out to their assigned taxpayers.

6. My audit appointment was scheduled for one of the days when the government was shutdown.  I have not heard from my auditor.  What should I do?

Since your auditor was furloughed during the shutdown, they were prohibited from performing their duties. Once your auditor has completed a review of their inventory, they will reach out to you to reschedule your appointment. This process will take several business days to complete.

7. I left a message for my auditor but have not received a call back.

Since your auditor was furloughed during the shutdown, they were prohibited from performing their duties. Upon their return, your auditor will assess the status of their inventory.  Your auditor will retrieve their messages and return calls, but it may take several business days before he or she is able to reach out.

8. When can I call my auditor to discuss my audit?

Each auditor will reach out to their assigned taxpayers after they review and assess the status of their assigned inventory.  This may take several days.  In the meantime, you can reach out to your auditor during normal business hours.

9. I received an audit report from my auditor giving me 10 days to respond.  I was unable to respond due to the shutdown. How should I proceed?

If you have additional information, you should send the information to your auditor or call them to discuss options.  If you agree with the report, you can sign the report and return it to your auditor.  Your auditor will also be reaching out to you to re-establish contact before they take additional actions on your case.  At that time, they will discuss any information still needed.  It will take a number of days for your auditor to contact all of their assigned taxpayers.

10. I received a 30-day letter asking for my position on audit issues.  Will the time limit be extended due to the shutdown?

If you are unable to meet the original due date, you may contact your assigned auditor to discuss options. Your auditor will also be reaching out to you to re-establish contact before taking additional actions on your case.

11. I received a Statutory Notice of Deficiency during the shutdown.  What should I do?

On cases where the statute of limitations was nearing expiration, the IRS issued a Statutory Notice of Deficiency to protect the government’s interest.  If you received a Notice, you have 90 days to petition the Tax Court if you want to protest the adjustments.  If you agree with the adjustments in the report, you can sign and return the report.  If you feel you received the Notice in error, you should contact the person listed on the letter or your assigned auditor.

12. I filed a petition with the Tax Court during the government shutdown. What happens next?

We recognize it will take time for the Tax Court to work through its backlog of petitions needed to be served on the IRS.  The IRS will only make assessments when the legal assessment period (statute of limitation) is near expiration.  For cases in which the legal assessment period (statute of limitation) is not nearing its expiration, the IRS will delay defaulting those Notices and making assessments for the period in which the Tax Court needs to work through its backlog of petition.

13. I received a Form 872, Consent to Extend the Time to Assess Tax, from my auditor. It was mailed prior to the shutdown, but I received it after the shutdown started.  What are my options?

The Form 872, Consent to Extend the Time to Assess Tax, was solicited to allow additional time for you and your auditor to address issues still open on your exam. Included with Form 872 you also received Publication 1035.  Publication 1035 provides guidance and explains your options. If you have additional questions beyond those in the publication, you should contact your assigned auditor.  Your auditor will also be reaching out to you to discuss the process, but this may take several business days to accomplish.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.