bertrans

..and a bright and beautiful welcome to the wonders of form 1099-K. Prost!

Fully agreed. You just provided me with a delicious mental image of what Bernie Madoff would be experiencing in the general population of prison...Sigh.

The so-called First Time Abate is a procedural matter in the Internal Revenue Manual (IRM); it does not exist in the Internal Revenue Code (aka, The Law). Further, even in the IRM, it does not apply to any penalties asserted by Exam (the whole 6662 series.)

At some point in the last 25 years, somehow, the federal tax return ceased, largely, being perceived as a vehicle for remitting taxes, and became viewed and understood as a vehicle for the mysterious delivery of money to filers.

He may still be liable for Estimated Tax penalty.

It really was like that, once upon a time, long, long ago. Sic transit gloria fisci.

I must assume that you, as a former auditor (for the Service, I suppose), realise that my entire point dealt with how to present a case to the Appeals Officer - who determines if a case may reasonably be referred to Tax Court(the number of cases that actually make it from Appeals to the Court is minimal); I also must assume that you are familiar with the fact that Appeals is the only 'part' of the IRS that has not merely the permission but the authority and requirement to consider - Oh, so delightful phrase! - 'the hazards of litigation.' Please. By the way, despite my various assumptions, please be assured that it is not my intention to make an a** out of you or me. Live long and prosper.

You are partly corect; whilst a summary Tax Court ruling cannot, by statute, have precedential value (anymore than a Private Letter Ruling issued by the Office of Chief Counsel to TP 'A' can have precedential value for TPs 'B','C'.....n), nevertheless, such a summary decision may be incorporated into the plaintiff's argument as a whole to show that the position in question is not primafacially dismissable and, thus, worthy of being judged on its particular merits.

As other commenters have noted, the 'advice' given by the IRS fellow was plainly and simply wrong and bespeaks someone who wouldn't know the difference between a bowl of jelly and apoisonous jelly fish. The provisions of innocent spouse necessarily presuppose the existence of a marriage; therefore, whatever the spouse may have done prior to the marriage is moot. Now, as to injured spouse: although this shouldn't happen, nevertheless, if A marries B in 2013 (jointly), and A has liabilities that precede the marriage, the IRS computer is programmed to offset any refund from spouse B (after marriage) to spouse A's liabilities: spouse B should indeed file an 8379 with the original joint return (as a pre-emptive matter) - AND THE IRS MUST RESTORE THE OFFSET. PS: I don't use caps often - but the galloping ignorance on the part of the IRS person simply frosts my drawers. Yes, as someone here observed, it is getting worse, much worse.

If a person is a statutory employee, his compensation is reported on a W-2 (with the statutory employee indicator checked.) He must use Schedule C, and report the bottom line on 1040, line 7; HOWEVER, he must use his Schedule C gross receipts to compute EIC (provided the ceiling is not exceeded, etc.) Is that what happened?

Believe me or not, I actually wept in reading your last paragraph. I can only ask you and others like you to continue to believe that the Service is fighting the good (and ever more fifficult) fight - despite its occasional thundershowers of inanity. The Service, I submit, began to change for the worse, whe its leadership began to adapt the bells and whistles, without the substance, of the private sector: complete with back-slapping, glad-handing and happy horse-s**t masters-of-the-universe talk. It was and remains a fad. A big fad - but a fad. And as such, doomed to evanesce.

As has been noted by others, more information is needed. How long has the client been living in the States? Did he receive any sort of immigrant-visa? Form 8843 is normally used to exempt people from 'counting the days', i.e., becoming de facto resident aliens. If your client is a non-resident alien, he must report only those parts of foreign income that are US-sourced - he must pro-rate. As for his US income, the situation depends: there is a whole category called 'income non-effectively connected with a US trade or business' - e.g., stocks, bonds, insurance premiums, gambling, etc. Such income, whilst not reported like wages, interest,on the return as such, etc., is, nevertheless, subject to a special tax, which is based either on the target country's tax treaty with the US, or, absent a treaty, it is a flat 30% - no ifs, ands or buts. And remember: if a non-resident wants to leave the US, he has to secure the still quaintly named 'sailing permit', from the IRS district office, certifying that he has no US tax liabilities. In other words, this sort of thing is not exactly easy.And then there's the whole issue of dual status (which has nothing to do with dual citizenship). We want to help - but we need info.

Maybe it's just me,but does there not seem to be something vaguely 'disquieting' about many of our recent acronyms and initialisms? Something...I don't know exactly what...but somehow it puts me in mind of central Europe in the 'thirties... E.g.,consider our Department of Homeland Security and the monstrosity of the newest department listed above with this jawbusting classic from the...old days: Reichssicherheitsdiensthauptamt = Main Office for the Security Service of the Reich. Just wondering.

I ran out of space to complete my thought. Compliance Audits: Ravenous beasts from Hades, equal-opportunity destroyers, no mercy, no quarter.

To paraphrase Churchill on the subject of Russia, the IRS audit procedure is a mystery , wrapped in an enigma. As the procedure has become and continues to become more and more a function of computer algorithms, transparency is rendered a disatnt and nostalgic memory. So far as can be determined, the only 'Person' Who knows what the cutoff for a DIF audit is, is God, i.e., a complex of computer routines and sub-routines, and He is not talking, except to mainframe computers. There is then an entire series of computer algorithms ('filters'), each of which is focussed on ONE particular audit issue: yes, the raw returns, during submission processing, are 'run' through...one of the filters; if it is selected for that filter, it bypasses the other filters and is examined only for that one issue; if it is not, it proceeds to the next filter, and so on into cyber night. The Service, you must see, is striving to streamline. Now, let it be understood, that, at the level of a Field audit, the examining officer(i.e., the Agent) has the authority to open up any issue which he deems to have sufficient audit potential...but he doesn't have to, and his superiors tend to express reservations on such enthusiasm - they have to answer to THEIR superiors, etc. All of which means, alas, that as to the likelihood of an audit, flip a coin. NOTE: exception - compliance audits:

Form 8862 has one use: it is issued to a TP who, at some point in the past, had his return examined (audited) and the EIC was removed by deficiency procedures. TPs in that situation have to 'recertify' by filing that form for at least the next 2 years. Since the boyfriend got the 8862, HE is the one who got audited - and is staying mum. Look out.

I have sadly come to the conclusion, after 24 inglorious years of dealing with taxpayers, that they lie, that they lie all the time, and that they even lie when telling the truth would be to their advantage.

Although the 6662 penalty is arithmetically 'mandatory', as has been observed it may be waived (before assessment) or abated (after assessment.) Your client can sign the report, and make sure to pay the tax and the interest: he is not required to pay this penalty before requesting that it be abated.Given your description of the agent, a request for a waiver would indeed be a fart into a headwind. He can, however, file a claim (form 843) and explain what the agent seems already to have admitted - at least orally: viz., insufficient knowledge of record-keeping, etc. This request does not have to go to Appeals; he can file with the Service Centre where he filed the original return.The request will be handled by someone other than the original agent. Good luck.

First, you can find the list of all nations that have a totalisation agreement with the US on irs.gov, as well as on any search engine. Secondly, once your client receives the confirmatory certificate of payment from Spain, he(you) may file a 1040X, attaching a copy of the certificate. It is the sort of claim that is handled fairly straightforwardly.

Tax Court has problems with breast implants; the only case I can remember where thet were allowed involved an 'extreme' club which required extraordinarily large implants, which the court ruled could only have a business purpose.

During the period of Roman rule, when they were faced with collecting taxes from all over the known world, the Romans deviced an extraordinarly devilish method: each year, the fiscal authorities would decree, with force of law, how much money in tax was owed to the Empire from each province. Let's say that Gaul (France) was assessed at 'X' sesterces; that was considered a contract, and bid for at auction by wealthy businesmen; the contract was awarded to the highest bidder (higher than 'X'); the winner was then authorised, with Roman military backup, to send collectors to France to 'collect' the 'X' + the excess he had paid for the bid + then the profit margin..... The final collected tax could be up to 10-fold the original assessment (and there were NO deductions).And we think we've got it bad!

I hope many of you agree with me when I say that the statement attributed to the IRS auditor, viz., that she could 'consider' abating the penalty if there were preparer penalties involved is an obliquely made and/or obliquely reported view that she may consider abatement if the TP can credibly demonstrate reliance on a 'competent' professional (You just gotta love that adjective!). What is your client's history in this regard? New preparer? Same preparer - same errors? Also, the 6662 penalty,subdivided into accuracy-related and substantial understatement, has both similar and different criteria. The central criterion of the Sub penalty is that the TP failed to provide, on the return, the information needed for the correct computation of tax; for the Accuracy, the central criterion is credible evidence that the TP wilfully, recklessly and/or NEGLIGENTLY ignored the applicable law. They are both open to relief on the basis of reasonable cause. Phew!

If the TP, in response to this notice, files a 1040X and there is a resulting balance due in tax, the computer will automatically generate applicable statutory penalties and interest; the only penalty that will be 'escaped' is the accuracy-related/substantial understatement of income.

KC got it perfectly: no more privacy. PS: I just liked the sound of the phrase and, incidentally, I'm happy that it brought out the Latin lovers!!