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Recent Federal Circuit Decision Holds Fast to the Three Year Look-Back Provision Under § 6511.

In a recent decision, the Federal Circuit affirmed a lower court’s decision allowing the IRS to keep money withheld from an Italian citizen’s severance package, even though everyone involved agreed that the IRS had no right to the funds, and that the Italian citizen had no obligation to ever pay U.S. tax.The taxpayer never lived in the United States and never worked in the United States.He was employed by Verizon and worked for them in many countries, but never in the U.S.In 2004, he received a severance package from Verizon, and Verizon, in error, withheld over $70,000 in United States income tax, social security tax, and Medicare tax.In 2009, he sought a refund from the IRS for the wrongfully withheld tax.

The Court focused on the three year look-back provision of IRS § 6511, which provides that a taxpayer must seek a refund within three years of the tax having been paid.Withheld taxes are generally deemed paid on the return due date – in most cases April 15th of the following year.S…

Court Finds IRS Summons to Be a Necessary Annoyance

A case out of the Ninth Circuit demonstrates the importance of keeping copies of all documents provided to IRS auditors.In Action Recycling, Inc. v. United States, the Court approved the IRS summons requesting records which one Revenue Agent had already spent approximately 85 hours reviewing.Although the Court noted that Congress enacted a prohibition of “unnecessary” summonses, it went on to find that the IRS does not already “possess” documents, simply because a Revenue Agent has previously reviewed them.
What does this mean for those currently undergoing an IRS audit?To avoid what the Court calls “unnecessary annoyance,” provide your auditor with copies and retain the originals.
This blog is not intended to be legal advice.The full opinion of the Action Recycling case may be found here:http://docs.justia.com/cases/federal/appellate-courts/ca9/12-35338/12-35338-2013-07-09.pdf.

Common Forms Used by Banks Relating to the Bank Secrecy Act

The Bank Secrecy Act (BSA) of 1970 places requirements on financial institutions which are meant to assist the government in detecting and preventing money laundering and underlying crimes.  Perhaps the most commonly known requirement under the BSA is that financial institutions must keep records of and file reports for currency transactions exceeding $10,000.00.  The report filed for each transaction over $10,000.00 is called a currency transaction report (CTR).  The BSA further requires financial institutions to report suspicious activity when there is reason to believe a customer is attempting to structure transactions in order to avoid the CTR filing requirement.  This form is known as a suspicious activity report (SAR).  All CTRs and SARs are sent to government agencies for review. 
But what if you run a cash-intensive business?  For example, you have cash receipts each day that total $9,000.  You go to the bank on Monday and make a $9,000 cash deposit.  You go to the bank on T…

Portability Is Here to Stay

“Portability” is the big word legislators use for sharing.The Tax Relief Act of 2010 introduced portability, which allowed for the first time the transfer of a deceased spouse’s estate tax exemption to their surviving spouse.This allowance of sharing was set to expire at the end of 2012, but was extended along with the $5 million exemption (adjusted up to $5.25 million for inflation).While many breathed a sigh of relief with this news, some experts began speculating that the Obama administration may begin to eliminate some estate planning techniques which have been characterized as “tax loopholes” for the wealthy.No one knows for sure what will happen in the future, but going over your estate planning options with your attorney now while things are relatively calm can give you some peace of mind.

We Avoided the Fiscal Cliff!... Now What?

We all safely made it past the end of 2012 without falling off the fiscal cliff.  So, many are asking, what exactly happened?  And what sort of deal was made to avoid that ominous cliff?  Here are just a few of the tax-related points that found their way into the deal and that may affect you and the taxes you pay:

The number one point is that the payroll tax did go up, as expected.  There never seemed to be any doubt that it would.  Wage earners are now contributing another 2% of each paycheck via the social security tax.  This has already gone into effect and you have probably noticed a difference in your 2013 paychecks.

Another point that won't affect as many taxpayers is that the estate tax exemption remains at $5 million (plus even a little more for inflation).  The estate tax rate, however, did increase from 35% to 40%, but keep in mind that only affects estates worth over $5 million. 

Finally, the limits on the tax brackets were adjusted upward from the 2012 limits.  That&#…