The IRS mailed its notice of determination to an incorrect address. On October 17, 2016, U.S. Tax Court held in favor of the taxpayer who claimed that he was deprived of the statutory notice. Section 6213(a) of the Internal Revenue code states a notice of deficiency should be duly mailed to the taxpayer’s last known address before a deficiency may be assessed. If the IRS hasn’t mailed a notice of deficiency, no collection of an assessment of the deficiency may proceed. Tax Court Memo 2016-191.
Under the threat of a tax levy, the taxpayer decided to liquidate her retirement account in order to pay her back taxes. However, instead of sending her check to her tax attorney, she decided to send her payment directly to the IRS revenue officer with an accompanying letter which read as follows: “Enclosed, please find our firm IOTA trust check account number 2512 in the amount of $61,669, to be applied to our delinquent taxes. If you have any questions, please let Wally Anderson or me know.” The memo section of the check read: “Back Taxes”.
The IRS revenue officer followed his own discretion as to how to apply the payment to various tax periods with liabilities.
Taxpayer was a personal injury lawyer whose income varied widely each year because it was dependent on uncertain contingency legal fees. He timely filed his 2009 and 2010 income tax returns but was not able to pay the entire tax debt and requested a payment plan. The IRS issued a Final Notice of Intent to Levy. Through his representative the taxpayer requested a collection due process hearing and on the day of the appointment went to the IRS’s office with his representative to meet with the settlement officer assigned to his case and explain his circumstances. The settlement officer didn’t meet with the taxpayer and his representative because she was absent from the office due to sickness.
Certain types of Virginia business taxes (for example sales and employment taxes but not corporate taxes) may be assessed against individual officers of a corporation or of a limited liability company organized in Virginia. Virginia courts use several factors in order to determine whether a particular business person should be held personally liable for business taxes. For example, if an individual was specifically designated as the tax matter partner within a business, prepared and signed tax returns and was aware of the tax delinquencies, there is a good chance that he would be held personally liable for delinquent business taxes.
In a significant ruling in the area of tax law, the United States Supreme Court has held that Maryland’s method of taxing its residents’ out-of-state income is not constitutional. (Comptroller of Treasury of Maryland v. Wynne, 575 U.S. ____, 2015) Maryland bifurcates the income tax collected from its residents by dividing it into ‘state income tax’ and ‘county income tax’. Maryland residents who pay income tax to another jurisdiction related to income generated in that other state, only get credit for the state portion (but not the county portion) of the tax paid to Maryland. The Court of Appeals of Maryland had previously held that the above taxing system violated the dormant Commerce Clause provision of the U.S.
In May 2015, a district court in California ruled that the IRS could not obtain a corporate taxpayer’s records related to tax advice prepared by the taxpayer’s in-house tax lawyers. United States v. Sanmina Corp., No. 5:15-cv-00092 (2015 U.S. Dist. LEXIS 66123). The court held that the records were protected by the attorney-client confidentiality rules and that the IRS had not shown that the taxpayer had waived the attorney-client privilege. The court stated “the memoranda constituted tax advice from lawyers to Sanmina—not merely preparation of tax returns or number crunching…Both memos contain legal analysis, were prepared by Sanmina’s tax department lawyers,