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Fulcrum Library

Tax Advice and News

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IRS To Finally Require Tax Preparer Registration, Continuing Education, And On-Site Visits

Tax preparer registration for paid preparers has been considered for years, and will finally begin. Perhaps more important, to crack down on a widespread problem of preparers that aid and abet fraudulent tax returns, the IRS will immediately begin an enforcement program that includes IRS agents posing as taxpayers seeking preparer services.

IRS needs significant additional controls in its role as disbursing agent for refundable tax credits

In two reports made public in December 2009, the IRS Inspector General concluded (i) the IRS ignored previous recommendations, causing significant refundable tax credits to be paid improperly, and (ii) by improperly issuing taxpayer identification numbers, the IRS allowed billions of dollars of fraudulent refundable credits.

November 2009 Law Provides More Stimulus And Unemployment Spending

We provide details not covered in the surface-level reporting you may have already seen.

Affluent Should Consider Roth Conversions

Starting in 2010, affluent taxpayers can convert assets from a traditional IRA to a Roth IRA. Many affluent taxpayers should take advantage of this.

California Service Firms Must Now Register With BOE, And File Annual Use Tax Returns

The first reporting will cover the three years of 2009, 2008, and 2007. Unless you are one of the rare businesses that fully reported use tax previously, penalties and interest will also be due.

Employee vs. Independent Contractor Status Receiving Increased Attention

The IRS announced a new audit initiative. In light of employers' risk under both tax and employment laws, companies and their legal advisors should proactively review this area.

First Circuit Guts Work Product Privilege When Financial Reporting Is Involved

The First Circuit determined that only documents and information directly "prepared for" use in litigation is protected from disclosure. Potentially, the ruling affects every public and private company that addresses litigation and/or tax exposures for financial reporting

Taxpayers With Unreported UBS Foreign Accounts Should Accept IRS Amnesty Deal

Previously-secret Swiss bank account information will soon be given to the IRS. The IRS contends that UBS has 52,000 of these unreported accounts containing $14.8 billion total asset value.

Tax Proposal Would Mean The Practical End Of The Most Popular Estate Planning Trust

A Senate bill would allow the unused portion of the first-to-die’s estate tax exemption to be used by the second-to-die spouse. This eliminates the primary reason for most estate planning trusts.

Major (and Expensive) Tax Changes In Stimulus Bill Explained

The American Recovery and Reinvestment Tax Act of 2009 makes over 300 changes to the Internal Revenue Code. Most changes are retroactive only to January 1, 2009, and affect primarily individual (vs. business) taxpayers. Practically none of the cuts benefit higher-income taxpayers. We explain who benefits, how much, and when.

2008 and 2009 Personal Tax Changes For The Affluent

IRS Toughens Position On Deductibility Of Government Settlements

California Loses Big Case Involving Its Tax Jurisdiction And Related Residency Audits

IRS crackdown on unreported foreign trusts gets big boost

Wealthy Americans are tempted to avoid high U.S. income taxation by moving funds ashore. Recent investigations have (or soon will) uncover the names and details of thousands of wealthy Americans who have engaged in illegal tax evasion.

IRS loses another case involving auditor work papers

Taxpayers won again in the ongoing dispute over whether tax accrual work papers are privileged. The case arguable applies regardless of which of the split in authority one adopts as the starting point. All of this is important because accounting requirements (FIN 48) would otherwise make accountants’ tax accrual work papers an IRS treasure trove. The case might also have applicability in battles over other types of work papers in which legal contingencies are at issue.

Tax Accrual Workpapers Are Probably Safe From The IRS’s Probing Eyes

Companies must assess their judgmental tax positions when preparing their financial statements. A new accounting rule (FIN 48) changes the rules for assessing and disclosing these contingencies. The IRS has long maintained that it has the right to these analyses. The IRS lost an important case that held this information (i) is subject to the work-product privilege, but (ii) is not subject to other protections if outside auditors are shown the documents.

IRS Raises Stakes On Tax Whistleblower Claims

Congress and the IRS are realizing that big money can be collected by using informants. Litigants in partnership/shareholder disputes and in family law matters continue to ignore the risks when attempting to use restated financial information that is inconsistent with prior tax reporting. We describe the new law change and the IRS whistleblower program.

USPTO is Getting it Wrong on Tax Strategy Patents

The IRS has sole jurisdiction to determine compliance with the Internal Revenue Code. An issued patent carries absolutely no assurance that the underlying tax strategy is appropriate or compliant with the law. Taxpayers are likely to get confused about the patent somehow being a U.S. government seal of approval.

IRS Informant Program to Get Greater Attention

Attorneys are often faced with business disputes and family law matters in which a party wishes to use "real" information, instead of the falsified information used for tax reporting. Attorneys are also commonly involved with investigations of fraudulent activity in closely-held business in which skimmed revenues or inappropriate expenses have not been properly reported for tax purposes.

Tax Relief for Employment-Law Plaintiffs

Tucked away in the 600-plus pages of the American Jobs Creation Act of 2004 is something called "Civil Rights Tax Relief". This is an important provision for employment lawyers.

Avoiding A Contingency Fee Tax Trap

In re: Commissioner vs. Banks and Commissioner vs. Banaitis, the Supreme Court ruled (8-0) that contingency attorney fees paid by an individual must be included in the taxpayer's income and then deducted. This has the following adverse outcomes:

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