TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

We are pleased to announce that Steven Toscher, Michel Stein and Cory Stigile will be speaking at the upcoming Strafford webinar, on “IRS High-Wealth Examinations: IRS Wealth Squad, Targeted Issues, Preparation, IDRs, Appeals, and Litigation” on Thursday November 4, 2021, 10:00 a.m. – 11:50 a.m. (PST).

The IRS Large Business and International Division is auditing high net worth individuals and their related entities, including partnerships, S corporations, trusts, and private foundations. The Wealth Squad, a relatively new, highly-trained division of the IRS, is conducting these audits.

These examinations will target recently enacted and complex areas of taxation, including:

• Section 199A Qualified Business Income Deduction
• Section 163(j) Business Interest Deduction Limitation
• Section 965 Repatriation of Previously Untaxed Foreign Earnings
• Section 172 Net Operating Loss Deduction Refund Claims
• Required foreign reporting of trusts, bank accounts, assets, etc.

Although targeting specific areas, these are comprehensive audits covering most aspects of a taxpayers’ tax return. Tax professionals working with high-wealth clients need to prepare for potential examinations and understand how to represent these taxpayers.

Listen as our panel of tax experts provides the latest information on these comprehensive audits, including the IRS selection process, information document requests, supporting documentation, audit adjustments, appeals, and litigation.

We are also pleased to announce that we will be able to offer a limited number of complimentary and reduced cost tickets for this program on a first come first serve basis. If you are interested in attending, please contact Sharon Tanaka at sht@taxlitigator.com. 

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We are pleased to announce that Sandra Brown will be speaking on “What’s New in Criminal Tax and Fraud Enforcement,” Thursday November 4, 2021, 3:45 p.m. – 5:00 p.m. (PST) and Jonathan Kalinski on Income Tax Hot Topics,” Friday, November 5, 2021, 3:30 p.m. – 5:00 p.m. (PST) at the upcoming 2021 Annual Meeting of the California Tax Bar and California Tax Policy webinar. Joining Ms. Brown will be Ryan Korner, Special Agent in Charge, IRS Criminal Investigation, Los Angeles Field Office, and Elizabeth Hadden, Deputy Division Counsel/Deputy Associate Chief Counsel, Criminal Tax, Office of Chief Counsel, IRS.  Joining Mr. Kalinski will be Cassidy Collins, Senior Counsel, SB/SE Division, Office of Chief Counsel, IRS.

The Conference features two and a half energy-packed days with an agenda of 33 educational courses and numerous networking opportunities tailored to corporate tax executives, attorneys, CPAs, financial planners, enrolled agents, government tax officials, legislators and staff, and law students.

Expert panels also cover the latest developments in other key areas of State and Local Tax, as well as Estate and Gift Tax, Tax Procedure and Litigation, and include important updates regarding the taxation of corporate and other business entities, international tax, tax legislation and tax policy.

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We are pleased to announce that Dennis Perez, Sandra Brown and Cory Stigile will be speaking at the upcoming CalCPA webinar, “Advising High-Income Non-Filers, Voluntary Disclosure and Collection Issues”” on Tuesday, October 26, 2021, 9:00 a.m. – 10:00 a.m. (PST).

The IRS has increased their focus and efforts on high income taxpayers who haven’t filed their tax returns. The potential for significant penalties, limited voluntary disclosure options, and possible criminal prosecution forces tax counsel and advisers to grasp a complete understanding of applicable tax rules and procedures when representing high income taxpayers. The IRS issued IR-2020-34, which states the IRS “will step up efforts to visit high income taxpayers who in prior years have failed to timely file one or more of their tax returns.” The IRS now uses sophisticated data analytics to identify high income non-filers and tax preparers who promote false tax returns, as well as businesses with large amounts of unpaid employment taxes. Failure to file tax returns can have severe consequences. IRC 6651(a)(1) imposes substantial additions to tax for a failure to file a tax return.

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The tax system of the United States is often described as one of “voluntary compliance.”  However, there is little about the filing of required tax returns and paying amounts legally due that is truly voluntary.  The reality is taxpayers have a “legal duty” to comply with U.S. tax laws.  It is no great secret that hundreds of thousands of Americas do not file their tax returns each year.  In 2020, the IRS renewed its focus on those classified as high-income non-filers, defined by the IRS as taxpayers whose income equals or exceeds $100,000 during a tax year and fail to file an income tax return with the IRS.   In this article, Robert and Sandra discuss the impact high-income non-filers have on the “Tax Gap” and the tools the IRS has to collect financial information about these non-compliant individuals. 

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Robert S. Horwitz is a Principal at Hochman Salkin Toscher Perez P.C., former Chair of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. Additional information is available at http://www.taxli

Sandra R. Brown is a Principal at Hochman Salkin Toscher Perez P.C., and former Acting United States Attorney, First Assistant United States Attorney, and the Chief of the Tax Division of the Office of the U.S. Attorney (C.D. Cal). Ms. Brown specializes in representing individuals and organizations who are involved in criminal tax investigations, including related grand jury matters, court litigation and appeals, as well as representing and advising taxpayers involved in complex and sophisticated civil tax controversies, including representing and advising taxpayers in sensitive-issue audits and administrative appeals, as well as civil litigation in federal, state and tax court. 

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We are pleased to announce that Steven Toscher, Sandra Brown and Jonathan Kalinski will be speaking at the upcoming CalCPA webinar, “Cannabis Tax Examination Issues” on Tuesday, September 28, 2021, 9:00 a.m. – 10:00 a.m. (PST).

The sale and distribution of cannabis for recreational or medical use is a powerful economic engine generating billions in annual revenue, with over 40 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, regulated cannabis businesses can be subject to hefty tax assessments and penalties without careful planning.

Under Section 61, businesses must report all gross income from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for the cost of goods sold (COGS), resulting in a substantially higher tax rate than other companies on their income. The IRS issued guidance to its agents on conducting audits of cannabis businesses giving IRS agents the authority to change a cannabis business’ accounting method. Under Section 280E, certain costs are not included in COGS. Thus, they remain non-deductible for income tax purposes.

As more states legalize cannabis and make available licenses to grow, manufacture, distribute, and sell cannabis, the IRS has increased cannabis tax audits, which could result in unbearable tax liabilities.

Listen to our panel discuss recent IRS enforcement actions involving Cannabis Tax audits and examinations, including the IRS’s use of summons enforcement in this area and tax professional strategies.

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We are pleased to welcome everyone back to an in person meeting for the 37th UCLA Extension Tax Controversy Institute which will be on held on October 21st, at the Beverly Hills Hotel in Beverly Hills, California. For those who wish to attend remotely, we will also be providing that option. We have another great line up of esteemed panelists and government speakers who will be presenting on a full range of current tax controversy issues. We are also are pleased to be presenting the Bruce I. Hochman Award to the Honorable Juan F. Vasquez, U.S. Tax Court. I am honored this year to Co-Chair the Institute with my partner, Sandra R. Brown.

Our amazing line up of “can’t miss” programs will include – 

A Keynote from Commissioner Charles P. Rettig 

IRS Collection in the 21^st Century with Darren Guillot, Commissioner, Small Business/Self Employed (SB/SE) Collection, IRS 

Post-Covid IRS Examination with Timothy Bilotta, Acting Director, Southwest Area Small Business/Self Employed Field Examination, IRS  

IRS Promoter, Enforcement Actions & Penalties with Lois E. Deitrich, Acting Director of the new IRS Office of Promoter Investigations

In Search of Virtual Currency, with Ryan Korner Special Agent in Charge, IRS Criminal Investigation Los Angeles Field Office 

Getting ready for the New Fraud Frontier with Damon Rowe, Executive Director IRS Office of Fraud Enforcement, James Lee, Chief, IRS Criminal Investigation, Nathan Hochman, Former Assistant Attorney General DOJ Tax Division, and Alexander Robbins, Assistant U.S. Attorney, CDCA  

Click Here for Registration information. You do not want to miss this program. 

We are pleased to announce that Sandra Brown along with John Colvin, Monique (Mimi) R. Gabel, Sarah E. Paul and Cliff Scherwinski will be speaking at the upcoming ABA Section of Real Property, Trust & Estate Law eCLE webinar, “Practitioners Guide to IRS High Income/High Wealth Audits” on Wednesday, September 15, 2021, 10:00 a.m. – 11:30 a.m. (PST) | 1:00 p.m. – 2:30 p.m. (EST).

As part of the IRS’s renewed attention to the IRS Global High Wealth initiative and narrowing the tax gap, the IRS has increased its focus on high income non-filers and high wealth taxpayer audits. The IRS’s renewed emphasis on high income non-filers and high wealth taxpayers is a broad focus that manifests itself through the Global High Wealth program, various campaigns and directives as well as normal Exam workloads. This new focus has resulted in parallel civil and criminal investigations in several priority areas. This esteemed panel of current IRS officials, former DOJ Tax attorneys and private practice attorneys will discuss these audits, including the following: Ethical issues for tax practitioners, including representing multiple taxpayers in Exam and the potential impact of a practitioner’s prior role in structuring or promoting transactions subject to Exam scrutiny; Partnership tax audits under the BBA and IRS focus on pass-through tax issues, such as losses and distribution in excess of basis, sale of partnership interests, and self-employment taxes at the partner level; Other issues based areas including micro-captives, conservation easements, private foundations and Malta pension; and Criminal tax issues to consider before and during the audit process.

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We are pleased to announce that Michel Stein, and Sandra Brown along with Lois Dietrich, the Acting Director of the IRS’s Office of Promoter Investigations, will be speaking at the upcoming Strafford webinar, “IRS Promoter Investigations, Enforcement Actions, and Penalties: Syndicated Conservation Easements, Micro-Captives” on Tuesday, September 14, 2021, 10:00 a.m. – 11:30 a.m. (PST).

This CLE/CPE webinar will guide tax professionals through new IRS enforcement actions focused on promoters of syndicated conservation easements and micro-captive arrangements. The panel will discuss recent IRS investigations of promoters involved in what the IRS has determined as abusive tax avoidance transactions, navigating the processes involved for examinations, new procedures of the IRS Office of Promoter Investigation, penalties, and key strategies for tax professionals. The panel will also discuss issues involving micro-captives and conservation easement transactions to minimize IRS assessments and audits.

Recently, the IRS announced the new Office of Promoter Investigations to combat abusive tax avoidance transactions. As the IRS expands its operations and enforcement actions, tax professionals and advisers must prepare to defend targeted taxpayers on syndicated conservation easements and micro-captive insurance arrangements.
Over the past year, the crackdown on conservation easement transactions has forced taxpayers, tax counsel, and advisers to recognize critical tax issues in structuring and representing those involved in these transactions. Conservation easements are legally enforceable perpetual land preservation agreements between a landowner and either a government agency or a qualified land protection organization (such as a land trust) to conserve land and its resources. Grantors within these transactions enjoy significant tax benefits if the easement meets IRS approval for a donation.

In addition, the use of captive insurance companies, particularly Section 831(b) “micro-captives,” has come under increased IRS scrutiny as well. The IRS has explicitly recognized micro-captives as a legitimate form of risk protection but has expressed concern that these vehicles are being used more as a wealth transfer device than legitimate insurance.

The popularity of conservation easement transactions and micro-captive arrangements makes them prime targets for promoters and investors seeking to take advantage of their tax benefits. However, the IRS may consider these transactions to be abusive tax avoidance schemes based on their structure, leading to potential IRS audits and investigations.

Furthermore, although the IRS has focused investigations on promoters of syndicated conservation easements and micro-captive insurance arrangements, practitioners and taxpayers should anticipate that the Service will investigate other transactions that they deem abusive tax avoidance practices.

Listen as our panel discusses recent IRS enforcement actions on promoters, navigating the processes involved in abusive tax avoidance transaction cases, and key tax professionals’ strategies.

We are also pleased to announce that we will be able to offer a limited number of complimentary and reduced cost tickets for this program on a first come first serve basis. If you are interested in attending, please contact Sharon Tanaka at sht@taxlitigator.com. 

Click Here for more information.