Steven Toscher was quoted in a Tax Notes Article on the Tax Court’s recent decision in Mukhi v. Commissioner concerning an 8th Amendment challenge to foreign trust information reporting penalties.
While the Tax Court rejected the 8th Amendment challenge to foreign trust information penalties, the controversy and arguments will continue. As noted by Steve ….
“. . . the government will continue to argue that tax penalties aren’t subject to the excessive fines clause, adding that there is “a long line of precedential support” for that position, going back to Mitchell. Still, he argued, taxpayers should continue to advance the argument, and they could prevail in the right case.”
“The information reporting penalties under the code are draconian and excessive [and] have little or no relation to the conduct involved,” Toscher said. “This is especially true where the government piles on with multiple penalties — where the tax harm itself is very small. Smart tax administration would suggest the government show restraint, but where they do not, it will be the role of the courts to protect taxpayers.”
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We are pleased to announce that Steven Toscher will be receiving the prestigious Jules Ritholz Memorial Merit Award presented by the Civil and Criminal Tax Penalties Committee of the Taxation Section of the American Bar Association. The Award is being presented at the May meeting of the Taxation Section taking place May 2nd to 4th in Washington DC.
The Jules Ritholz Memorial Merit Award recognizes lawyers who have demonstrated outstanding dedication, achievement and integrity in the field of civil and criminal tax controversies.
The Award was established in 1994 to honor the legendary Jules Ritholz, a founder of the firm then known as Kostelanetz & Ritholz.
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Steven Toscher specializes in civil and criminal tax controversy and litigation. He is a Certified Tax Specialist in Taxation, the State Bar of California Board of Legal Specialization, a Fellow of the American College of Tax Counsel and has received an “AV” rating from Martindale Hubbell. Mr. Toscher was the 2018 recipient of the Joanne M. Garvey Award. The award is given annually to recognize lifetime achievement and outstanding contributions to the field of tax law by a senior member of the California tax bar.
Using a portion of the tens of billions of dollars now set aside for enhanced IRS enforcement under the Inflation Reduction Act of 2022 (the “IRA”),[1] the IRS announced a new campaign under its Large Business & International (LB&I) Division: The Business Aircraft Campaign (the “BAC”) on February 21, 2024.[2] In an effort to ensure tax compliance and increase awareness related to the business aircraft regulations and reporting requirements, the IRS[3] plans to substantially increase its issued-focused examinations to determine whether large corporations, large partnerships, and high-income individual filers are properly allocating private aircraft flights between business and personal use and whether fringe benefit inclusions are properly addressed.[4] While this is part of a larger effort[5] the IRS is taking to ensure large corporate, large partnerships and high-income individual filers are paying their fair of taxes, the IRS will begin with “dozens” of these BAC audits.[6]
[1] The amount was once $80 billion but was decreased to $60 billion by the Fiscal Responsibility Act of 2023; https://www.congress.gov/bill/118th-congress/house-bill/3746.
[2] https://www.irs.gov/businesses/corporations/lbi-active-campaigns#collapseCollapsible1709079673889_469816.
[3] Id.
[4] Id.
[5] The IRS’s news release discussing new initiatives using the IRA: https://www.irs.gov/newsroom/irs-ramps-up-new-initiatives-using-inflation-reduction-act-funding-to-ensure-complex-partnerships-large-corporations-pay-taxes-owed-continues-to-close-millionaire-tax-debt-cases.
[6] IR-2024-46 (February 21, 2024).
On February 29, 2024, the IRS announced a new initiative targeting approximately 125,000 high-income taxpayers who have failed to file federal income tax returns since 2017. With funding from the 2022 Inflation Reduction Act, the IRS will send compliance letters to these individuals, including over 25,000 letters to individuals with incomes above $1 million and over 100,000 letters to those earning between $400,000 and $1 million. The new initiative aims to address tax non-compliance, with penalties for failure to file ranging up to 25% of the non-filer’s tax bill, potentially a 75% penalty for willful failures, and potential criminal liability. The IRS believes that hundreds of millions of dollars in unpaid taxes are involved.
We are pleased to announce that Michel R. Stein will be speaking at the upcoming ABA Section of Real Property, Trust & Estates Law webinar on the on the topic of “IRS Exams for High Wealth Individuals and Partnerships” on Tuesday, April 2, 2024, 10:00 a.m. – 11:30 a.m. (PST), along with co-panelists, Eric Cirelli (IRS Field Director for Global High Wealth), Cliff Scherwinski (IRS, LB&I Director Pass-Through Entities) and Hans Famularo (IRS Special Counsel).
In connection with the additional appropriations in the Inflation Reduction Act, the IRS has committed to shift more attention to wealthy taxpayers – including high-income earners and high wealth individuals and large partnerships. This panel will address the IRS’s announced enforcement priorities for high-income earners, the expected timelines for additional enforcement, and strategies for representing clients in corresponding IRS examinations of high-income taxpayers.
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Dear Colleague-
We cannot believe that it is March already and it’s time to Save the Date for the 2024 UCLA Extension Tax Controversy Institute, which will be held this year on October 24, 2024 at the Beverly Hills Hotel. It will be the 40th Anniversary of the Institute and you will not want to miss it.
We have linked to this Save the Date Sandra’s and my Message from the Chairs published in the UCLA Edition of CCH’s Tax Practice and Procedure Journal which provides some more detail of last years Institute and Claudia Hill’s article from the Editor of the Journal, which contains some amazing pictures from last October.
Last year was an amazing conference with record attendance and where we were honored by the attendance of Commissioner Danny Werfel and covered cutting edge topics and issues facing the tax controversy practitioner. This year will not disappoint with topics including —
Strategies for Handling High Wealth and High Income Examinations
The Fall Out of the Employer Retention Credit – A Good Idea that has caused a
Tax Administration Headache
An Interim Report Card on the IRS New Non-Filer Initiative and The Best Practices to Avoid Collection Problems and Potential Criminal Prosecution.
The State of Tax Litigation in the United States Tax Court
Please join us and celebrate 40 years of the Institute.
Steven Toscher and Sandra R. Brown, Co-Chairs
2024 UCLA Extension Tax Controversy Institute
Hochman Salkin Toscher Perez P.C.
toscher@taxlitigator.com
We are pleased to announce that Steven Toscher, Evan Davis, and Sandra Brown will be speaking at the upcoming CalCPA webinar “New Corporate Transparency Act: The World is Changing” Tuesday, March 19, 2024, 9:00 a.m. – 10:00 a.m. (PST).
On January 1, 2021, Congress enacted the National Defense Authorization Act for Fiscal Year 2021 (NDAA). Contained within the NDAA is the Anti-Money Laundering Act of 2020 (the AMLA), which introduces extensive reforms to U.S. anti-money laundering (AML) and counter-terrorism financing (CFT) laws. Within the AML, Congress passed the Corporate Transparency Act (CTA). The CTA requires certain corporations and limited liability companies (reporting companies) to disclose beneficial owner information to FinCEN and update ownership information within one year of any changes. More than 32 million entities are estimated to be affected and required to file.
While the reporting requirements became effective January 1, 2024, in March, a Federal District Court held the reporting requirements of the CTA were unconstitutional. While this decision may appear to lessen the requirements for compliance in the short term, since noncompliance can result in civil and criminal liability and in light of the government having now filed its Notice of Appeal, an awareness of and best efforts in continuing compliance with these new reporting obligations, should be considered by corporations, limited liability companies, limited partnerships, and any entity whose existence is created by the filing with a Secretary of State in any state.
Join our panelists for a discussion on what is next.
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We are pleased to announce that Michel R. Stein will be speaking at the upcoming SVBA webinar “IRS Enforcement Priorities for 2024 and Beyond” Tuesday, March 19, 2024, 12:00 p.m. (PST).
Michel Stein will lead a discussion on what tax practitioners can expect from the Internal Revenue Services’ audit priorities and enforcement action after the Inflation Reduction Act of 2022.
Information about signing up for the webinar can be obtained from the following link:
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Each year the majority of taxpayers who retain the services of return preparers to navigate the complexities of the tax laws to ensure the filing of accurate returns are in good hands. However, countless numbers of taxpayers who look to others to assist in this often daunting task discover years later, when the IRS knocks, that their returns were actually prepared by return preparers who are incompetent, poorly trained, or who knowingly prepare false returns claiming deductions and, credits to which the taxpayer is not entitled. The continuing problem with such return preparers has been repeatedly highlighted by the National Taxpayer Advocate in her Annual Report to Congress. These types of return preparers are the targets of IRS civil and criminal investigations.
The Employee Retention Credit (ERC) is a refundable tax credit created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in 2020 to help businesses negatively impacted by the COVID-19 pandemic maintain their payroll. The credit has very specific eligibility requirements including full or partial suspension of business operations because of government orders and significant declines in gross receipts during 2020 or the first three quarters of 2021. Despite, or perhaps because of, these complex eligibility requirements, the IRS received a deluge of dubious claims caused by aggressive third-party promoters encouraging (oftentimes ineligible) employers to claim the ERC – receiving a percentage of the (oftentimes illegitimate) refund as payment for their “service.” For employers who have determined their claim is incorrect but have already received the ERC, the IRS created the Employee Retention Credit Voluntary Disclosure Program (ERC-VDP). The program allows employers to repay 80% of the credit to avoid paying interest or penalties, with an approaching deadline of March 22, 2024.
