TIGTA Says That Improvements Are Needed in the IRS' Estate and Gift Tax Return Examination Process

The Internal Revenue Service (IRS) needs to make improvements in the classification, prioritization, and inventory assignment processes for the Estate and Gift Tax Return Examination Program, according to an audit report that the Treasury Inspector General for Tax Administration (TIGTA) issued today.

TIGTA found that IRS estate and gift tax examiners do not always follow estate and gift tax return examination case documentation and timeframe guidelines and that the impact of the Estate and Gift Tax Program’s compliance efforts is uncertain.

Federal estate tax is a tax on the right to transfer property at death.  The Federal gift tax is a tax on transfers of property from a living person to other persons or trusts.  After taxpayers file tax returns with estate or gift transfers and the IRS processes them, the IRS might select some and assign them for further examination if filing requirements have not been met or there are pending issues.  Taxpayers could be treated inconsistently if estate and gift tax returns are not properly assigned to IRS personnel or not properly examined by them.

The IRS reported in its Fiscal Year 2016 data records that it estimated that over $1 billion of tax should be assessed for estate and gift tax returns that were examined and closed for that fiscal year.  TIGTA initiated this audit to determine whether the IRS in its Estate and Gift Tax Program is effectively processing and selecting estate and gift tax returns for examination and to determine the overall compliance impact of the program.

TIGTA’s review found that there is minimal IRS operational guidance for estate and gift tax return examination case classification, prioritization, and examination case inventory assignment processes.  In addition, TIGTA auditors found that some classification documentation sheets, when filled out by classifiers, are difficult to read or are incomplete; that only one employee is responsible for prioritizing cases selected for examination during classification sessions and assigning these cases to the field for examination; and that risks are present due to a lack of documented managerial reviews over the processes.  TIGTA also found that examination case documentation guidelines were not followed in 18 (47 percent) of 38 randomly sampled estate tax examinations, and in 17 (46 percent) of 37 randomly sampled gift tax examinations.

“Taxpayers must be treated fairly and consistently,” said J. Russell George, Treasury Inspector General for Tax Administration.  “The IRS must effectively process, select, and assign estate and gift tax return cases for examination and identify the overall compliance impact of the program,” he added.

TIGTA made several recommendations to improve the examination of estate and gift tax returns, including the creation of a readable document for classifying cases; revisions to the IRM; strengthening of internal controls; and development of guidance on the circumstances in which it is advisable to propose and issue inconsistent notices of tax return case deficiency in estate and gift tax examinations.  IRS management agreed with all of TIGTA’s recommendations and plans to take corrective actions.

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Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

 

 

 

IRS Budget Cuts Results In Fewer Criminal Tax Investigations

According to Law360, Criminal investigations by the IRS reached their lowest levels over the past five years last year because of a reduction in IRS resources, according to a report by the Treasury Inspector General for Tax Administration.

The office said there were "unfavorable trends" in criminal investigations of businesses due to declining resources, like budget challenges, which resulted in attrition of field special agents, in a report on trends over the past five years that the office made public on September 18, 2017.

The Criminal Investigation division initiated 3,395 cases in fiscal year 2016, down 34 percent from 2012, the report said, and tax-related investigations in 2016 made up 57.8 percent of those, the lowest proportion of the past five years.

“TIGTA identified a trend of special agent inventory taking longer to turnover because of the increased time it takes for special agents to determine a case did not contain prosecution potential,” the report said. Investigations discontinued in 2016 had taken an average of 540 days to determine there was no prosecution potential, up from 422 days in 2012.

The report found the number of agents decreased because attrition, with 148 agents lost in 2016 compared with 125 lost in 2012. When combined with agent hiring during those same years, there were 2,217 agents in fiscal 2016, down more than 400 from 2,664 agents working in fiscal 2012. But the report found the agents “consistently maintained inventory levels over an average of 5.30 cases per field special agent.”

Although the Decrease in Agents resulted in fewer investigations, "International Cases" that resulted in

Sentencing Increased 33 percent in 2016

compared to 2012, the report said.

 

Initiated international investigations rose to 221 in 2016 from 211 in 2012, as did the completion of international investigations, growing to 311 in 2016 from 290 four years earlier.

In FY 2016, International Cases resulting in sentencing Increased 33 Percent from FY 2012,” the report said.

The office said it did not make any recommendations along with this report but it did gave the IRS an opportunity to review a draft of the findings.

 

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Utah Chiropractor Sentenced to Prison for Tax Evasion and Obstructing the IRS

An Orem, Utah former chiropractor, who also owned a health care products business, was sentenced to 33 months in prison for tax evasion and corruptly endeavoring to obstruct the internal revenue laws

Louis Hansen, 65, was convicted following a jury trial in July.  According to documents submitted to the court and evidence presented at trial, Hansen attempted to evade the payment of his federal income taxes for the years 2005, 2006, 2007 and 2010. 

For the years 2005, 2006 and 2010, Hansen filed a tax return reporting that he owed taxes, but did not fully pay the amounts due. For 2007, Hansen’s return was audited and additional taxes assessed.  In March 2012, Hansen sent a check to the Internal Revenue Service (IRS) in the amount of $342,699 that was drawn on a closed bank account held in the name of another individual, and claimed that the check paid off his tax debt. 

Hansen then sent a signed letter to the revenue officer assigned to collect his unpaid taxes, claiming that he had paid the taxes owed.  A few months later, Hansen sent 10 additional checks all in the amount of $425,000, to at least six IRS locations, all drawn on another closed account in the name of a different individual, claiming to pay the back taxes due.    

In addition to the term of prison imposed, U.S. District Court Judge Clark Waddoups sentenced Hansen to serve three years of supervised release and to pay restitution to the IRS in the amount of $342,699.  

Nothing Surprising About This Result!

 

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Source

DoJ

IRS Provides Relief for Missing TINs for IGAs

Notice 2017-46 provides guidance for financial institutions required to collect taxpayer identification numbers (TINs) and dates of birth under temporary regulations under Chapter 3 or a Model 1 Intergovernmental Agreement (IGA) as follows:

            (1) With respect to foreign financial institutions (FFIs), this notice provides that FFIs in Model 1 IGA jurisdictions will not be in significant non-compliance with an applicable IGA during 2017, 2018, and 2019 solely as a result of a failure to report U.S. TINs for preexisting accounts, provided the FFI reports the account holder’s date of birth, makes annual requests for the TIN, and searches its electronic records for missing U.S. TINs before reporting information on 2017.

            (2) With respect to U.S. financial institutions, this notice delays the start date of the requirement to collect foreign TINs for account holders to January 1, 2018, provides a phase-in period for obtaining foreign TINs from account holders documented prior to January 1, 2018, and narrows the circumstances in which a foreign TIN is required. 

Taxpayers may rely on the provisions of this notice prior to the issuance of amendments to the temporary Chapter 3 regulations reflecting the notice.

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IRS Appeals Reverts Back to Face to Face Appeals Conferences

On September 20, 2016, we posted No More Face to Face Meetings at IRS Appeals Division? where we discussed that the IRS announced that effective Oct. 1, 2016, it will rarely conduct Appeals Conferences in person.

More specifically, Internal Revenue Manual (IRM) 8.6.1.4, blandly entitled “Conference Practices,” provides that ALL conferences will be held by telephone except under certain specific enumerated circumstances.

The mission of the IRS Appeals Division is to “resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.” We then stated: "Unfortunately, This New Policy Will Not Further That Mission, and Indeed Will Impede It."

Now the IRS agrees with us and even though the IRS is still cash-strapped, the decision to reduce the number of in-person meetings it grants taxpayers during appeals may defeat the agency's goal to save resources if it is forced into litigation as a result of less effective communication by mail, telephone or videoconferencing.

Web-Based Virtual Conferences

On July 24, 2017 The Internal Revenue Service Office of Appeals issued IR 2017-122 
where they stated that the IRS will pilot a new web-based virtual conference option for taxpayers and their representatives. This virtual face-to-face option will provide an additional option for taxpayer conferences. The IRS expects it to be especially useful for taxpayers located far from an IRS Appeals office.

While a phone call works well for most taxpayers, others prefer face-to-face interaction. Appeals’ pilot program will use a secure, web-based screen-sharing platform to connect with taxpayers face-to-face from anywhere they have internet access.

Appeals started the pilot on August 1, 2017 and will assess the results, including taxpayer satisfaction with the technology.  

Optional Requested Face to Face Conferences  Now according to BNA IRS Appeals will revert to accommodating taxpayers who want in-person conferences rather than phone conferences, an IRS official said.

1. “Step one is going to be for field cases to turn the decision back over to taxpayers,” Andy Keyso, acting deputy chief at the Internal Revenue Service Office of Appeals, said at the American Bar Association tax section meeting in Austin, Texas. “Do you want an in-person conference? If so, you’ll get it.”
2. Step two is to include campus cases. Currently, Appeals is unable to offer in-person conferences for smaller cases that are worked out of the IRS campuses, Keyso said.

Field cases include audits by a field revenue agent or office examiner, while campus cases include correspondence exam cases, according to Keyso.  The campus buildings however, don’t have conference facilities.

“For campus cases, we have some adjustments to make internally before we can do that...” Keyso said

Long term IRS Appeals has to realign its workforce, “which is difficult to do right now.”

The IRS will issue guidance to employees about the agency’s rollback of the in-person conference issue, Keyso said. The guidance will include information on what IRS employees need to be prepared for taxpayers in field cases who want in-person conferences as well as issues with campus cases.

Still, Appeals isn’t working well for small business and individual taxpayers, Nina E. Olson, IRS national taxpayer advocate, said during the panel.

About 75 percent to 80 percent of individual taxpayer appeals are conducted by correspondence, Olson said, and no employee is assigned to any correspondence examination. Individual taxpayers should be able to get the opportunity to speak with someone from the IRS, Olson said, to understand the agency’s side of a tax dispute.   

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I

IRS Provides Leave-Based Donation Relief to Victims or Hurricane Irma

The Internal Revenue Service announced on September 14, 2017 special relief designed to support leave-based donation programs to aid victims of Hurricane and Tropical Storm Irma. This parallels relief granted to Hurricane and Tropical Storm Harvey victims.

Under these programs, employees may forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2019, to charitable organizations providing relief for the victims of this disaster.

Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the cash payments as business expenses.

This relief is similar to that provided following Hurricane Katrina in 2005, Hurricane Sandy in 2012, the Ebola outbreak in West Africa in 2014, and last year following Hurricane Matthew and severe flooding in Louisiana.

• Details of this relief are in Notice 2017-52, posted today on IRS.gov.
• Information on other tax relief available to victims of Hurricane Irma can be found at www.irs.gov/hurricaneirma.
• For information on government-wide relief efforts, visit www.USA.gov/hurricane-Irma

We here at Marini & Associates, PA, are grateful for the fact that our attorneys, staff, and their families are safely accounted for. As always, their well-being and that of our clients are our top priorities.

Our thoughts are with those still affected!

 

 

As the focus now turns to recovery, Marini & Associates, PA is prepared and ready to serve both the interests of our clients and the needs of our community. Our Office is Open & Fully Operational! 

 

Have a Tax Problem?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 

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or Toll Free at 888-8TaxAid (888 882-9243). 



 

 

 

 

 

Marini & Associates, PA Survives Hurricane Irma!

Here in South Florida, Hurricane Irma has flooded parts of our region and left many without power.

However, at Marini & Associates, PA, we are grateful for the fact that our attorneys, staff, and their families are safely accounted for. As always, their well-being and that of our clients are our top priorities. Our thoughts are with those still affected!

As the focus now turns to recovery, Marini & Associates, PA is prepared and ready to serve both the interests of our clients and the needs of our community.

Our Office is Open & Fully Operational! 

Marini & Associates, PA continues to be a leader in providing Tax Advice and Tax Defense Representation to clients throughout the United States and around the world.

Based in Miami, Florida our focus is the practice of Tax Law, with an emphasis on Zealously Representing & Defending Taxpayers before the IRS and various Other Tax Authorities.

If you have been contacted by the IRS or Other Tax Authority, regarding you or your tax liability, contact Marini & Associates, PA immediately for HELP in representing and defending you from further Governmental Actions!

Our Team of Tax Attorneys:

• Have > 100 years of combined experience,
• Are highly effective,
• Solution-oriented tax attorneys,
• Who care about the clients we represent.

We have successfully represented numerous taxpayers before the IRS and we are included in Martindale–Hubbell's Bar Registry of "Preeminent Lawyers" and we are also listed in "Lawyers of Distinction".

Have a Tax Problem?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 

 for a FREE Tax Consultation Contact US at 

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).