The Treasury Inspector General for Tax Administration (TIGTA) recently released a report finding that accuracy-related penalties are not often proposed in audits of large businesses, and the penalties are generally not sustained on appeal. Between FY 2015 and FY 2017, TIGTA found that of the $773 million in proposed penalties that went to the Office of Appeals, there was a reduction of those penalties totaling $765 million. Of some 4,600 business return exams studied, which resulted in additional tax assessments of $14 billion, only 6 percent had accuracy-related penalties assessed.
The Internal Revenue Service (IRS) recently announced that it will waive the estimated tax underpayment penalty for many taxpayers who did not have sufficient withholding in 2018. The penalty waiver usually applies to taxpayers who paid at least 90 percent of their total liability through estimated payments or federal income tax withholding, but for 2018, this threshold will be lowered to 85 percent.
A taxpayer recently found out the hard way that if something sounds too good to be true, get a second opinion. His San Francisco-based CPA helped him prepare and file tax returns that failed to report over $18 million in income between December 2007 and September 2013, which resulted in $4.7 million of unpaid tax liabilities. In this case, both the taxpayer and his CPA were indicted; the taxpayer entered into a plea agreement and the tax preparer took his chances --- he lost.
Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
California counties will not automatically reassess homes due to the recent fires, because the law requires that the counties first receive an application from the homeowner. Those who lost property will need to file the appropriate county casualty abatement form for the 2016-2017 year.
Certain partnerships that failed to file their required federal tax returns by the new, April 15th due date for tax years beginning with 2016 may be provided penalty relief, according to Internal Revenue Service Notice 2017-47. The calendar-year partnership due date was moved up from April 18th by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. If your partnership filed its returns with the IRS and provided appropriate copies to receipients by the historical due date, or requested an extension by that time, you may qualify for penalty relief. For more information, click here.
The Internal Revenue Service Advisory Council (IRSAC) released its annual report today for 2016. Based on IRSAC's findings and discussions in 2016, the council made recommendations on topics including:
The California Franchise Tax Board recently announced that it will be increasing the interest rate for personal, corporate, and franchise taxes from three to four percent beginning January 1, 2017. The rate for corporation tax overpayments will remain zero percent. The interest rate has not changed since July 1, 2012.
On January 27, 2016, the Department of Justice announced that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program with HSZH Verwaltungs AG (HSZH). The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA.
On November 2, 2015, the Bipartisan Budget Act of 2015 was signed into law, the text of which can be found here. Among the provisions related to tax compliance, the Act imposes significant changes to the manner in which the IRS will determine audit adjustments related to partnerships.