Federal Tax Litigation

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Susan A. Berson

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Tax lawyers across the country have at least one thing in common — the feeling of frustration when trying to figure out the hows and whys of IRS action or inaction. Federal Tax Litigation helps to lift the veil of mystery. Written by a former litigator for the Tax Division of the Justice Department, this book offers an insider's perspective on both the legal issues and practical considerations involved in handling a federal tax controversy. It presents a comprehensive approach to tax litigation, covering audit, appeal, problems resolution office, collection and subsequent judicial proceedings involving the Justice Department.

You'll find coverage of every aspect of federal tax disputes, including: handling tax controversies at all levels of the IRS; alternative dispute resolution procedures; asserting the “innocent spouse defense”; representing a client who is the target of the Criminal Investigation Division; refuting jeopardy assessments; suits against the federal government for overpayments; establishing “reasonable cause” for failure to pay; fighting government suits for recovery of erroneous refunds; recovery of damages for improper government disclosures of tax return information; taxpayer recovery of attorney's fees; tax debts that may be discharged in bankruptcy; grand jury matters; and more. Whether you are experienced or new to the field, Federal Tax Litigation will show you what to expect and help you advise clients in difficult situations. Don't miss this essential guide used in government, private practice and law schools across the country!

Book #00664; looseleaf, one volume, 1,544 pages; published in 2001, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-101-9

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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 1544
  • ISBN: 978-1-58852-101-9
  • Pub#/SKU#: 664
  • Volume(s): 1

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  • Susan A. Berson
Susan A. Berson, a former senior trial attorney with the U.S. Department of Justice, Tax Division, is a partner with BersonLaw Group LLP (, based in the Kansas City area. Ms. Berson has litigated tax cases before judges and juries in numerous federal district and bankruptcy courts. The recipient of an Outstanding Attorney Award from the Justice Department, and voted Best of the Bar by her peers, she has also written and lectured at seminars about litigating cases against the government.

Volume 1

Assessment, Collection, Settlement and Litigation: An Overview of the Players and the Process

§ 1.01 Introduction
[1] Application of Law
[2] Revenue Rulings, Private Letter Rulings and Revenue Procedures
[3] Code of Federal Regulations
[4] Internal Revenue Bulletin and Cumulative Bulletin
[5] General Counsel Memorandum
[6] Technical Advice
[7] Generic Legal Advice
[8] Action of Decision
[9] Technical Assistance Memoranda
[10] Chief Counsel Notices
[11] Compliance Officer Memoranda
[12] Field Counsel Advice
[13] Field Directives
[14] Field Service Advice (“FSA”)
[15] Information Letters
[16] Legal Memoranda
[17] Litigation Guideline Memoranda (“LGM”)
[18] Office Memoranda
[19] Reviewed Briefs
[20] Service Center Advice
[21] Closing Agreement
[22] Advance Pricing and Mutual Agreements Program
[23] Internal Revenue Service Publications
[24] Case Law
[25] General Rules Concerning Deference
[26] Circular 230
[27] Privileged Communication and Work Product Doctrine
[28] Adjustments without Audit
§ 1.02 Taxpayer Advocates: Problems Resolution, and Taxpayer Services
[1] Problems Resolution
[2] Taxpayer Services
[3] Taxpayer Advocate and Form 911
[4] Identity Theft Unit
§ 1.03 Taxpayer Selection and Processing a Tax Return
[1] Filing a Return with the Proper Campus
[2] Discriminant Function System
[3] Unreported Income
[4] How to Obtain Copies of Documents Taxpayers Have Filed with the IRS
§ 1.03A The Modernized Structure of the IRS Follows a Taxpayer Classification System
[1] The Creation of Four Operating Divisions
[2] The Responsibilities and Structure of the Large Business and International Division (LB&I)
[3] Responsibilities and Structure of the Small Business/Self-Employed Operating Division (SB/SE)
[4] The Responsibilities and Structure of the Wage and Investment Operating Division (W&I)
[5] The Responsibilities and Structure of the Tax Exempt and Government Entities Division (TE/GE)
[6] Office of Chief Counsel Under the New Structure
§ 1.04 Assessment and Audit Examination Level
[1] Campus Conducts Correspondence Audits
[2] Unreported Income
[3] Random Audits via National Research Program
[4] Examination Division in Each of the Four Divisions Conducts Office and Field Audits
[5] What to Expect During an Examination
[6] Top Five Things to Keep in Mind During an Audit
[7] Industry Specialization Program
[8] Market Segment Specialization Program
[9] Internal Revenue Service Information Gathering Resources
[10] Meeting with Agents/Auditors
[11] “No Change” Letters Versus Adjustments
[12] Statute of Limitations
[13] Extending the Statute of Limitations for Tax Assessment
[14] Revenue Agent Report
§ 1.05 Collection Division
[1] Special Procedures Staff
[2] Revenue Officers
[3] Private Debt Collectors
§ 1.06 Early Referral Program: Examination/Collection to the Appeals Division
[1] Mechanics of the Early Referral Program
[2] Procedures After Internal Revenue Service Approval of Early Referral Request
[3] Offer in Compromise, Form 656
[4] Review of Form 656 and Form 443-A/Form 443-B
[5] IRS View Regarding Negotiation of an Acceptable Offer
[6] Combination Offers
[7] “Currently Uncollectible” Status
[8] Streamlining the Processing of an Offer
[9] IRS Reopening Cast Post-Acceptance
[10] Appealing a Denied OIC
[11] Criminal Tax Convictions
§ 1.07 Appeals Division
[1] Structure of the Appeals Division Under the Reorganized IRS
[2] Authority of Appeals Division
[3] Submitting a Written Protest to the Appeals Division
[4] Handling the Appeals Conference
[5] Settlement Positions in Negotiating with Appeals Division
[6] Evaluation of Settlement Prospects by Appeals
[7] Tactics to Follow Upon Tentative Agreement
[8] Alternative Dispute Resolution
[9] Collection Due Process Hearings
[10] CDP Hearing Appeals to Tax Court
[11] Installment Agreement
[12] Streamlined Online Payment Agreement Application
§ 1.08 Economic Substance Doctrine
[1] Judicial History
[2] 2010 Codification and Penalties
[3] Notice 2014
§ 1.08A Sham Transaction Doctrine
§ 1.08B Substance Over Form Doctrine
§ 1.09 Other Sources
[1] Problem Resolution Contacts
[2] Account Related Inquiries
[3] Organizational Charts
[4] MSSP Audit Technique Guides
§ 1.10 Forms
[1] Form 872: Consent to Extend Time to Assess Tax
[2] Form 872A: Special Consent to Extend Time to Assess Tax
§ 1.11 “Fast” Act


§ 1A.01 Introduction
[1] Filing Deadline
[2] Sealed Records
§ 1A.02 Burden of Proof
[1] Credible Evidence
[2] Standard of Review
§ 1A.03 Prohibited Positions for the Government
§ 1A.04 Federal Rules of Evidence
[1] Scope
[2] Purpose and Construction
[3] Rulings on Evidence
[4] Preliminary Questions
[5] Limited Admissibility
[6] Remainder of Related Writings or Recorded Statements
[7] Judicial Notice
[8] Presumptions in General in Civil Actions and Proceedings
[9] Applicability of State Law in Civil Actions and Proceedings
[10] Relevant Evidence
[11] Relevant Evidence Generally Admissible; Irrelevant Evidence Inadmissible
[12] Rule 403: Exclusion of Relevant Evidence on Grounds of rejudice, Confusion, or Waste of Time
[13] Character Evidence Not Admissible to Prove Conduct; Exceptions; Other Crimes
[14] Habit; Routine Practice
[15] Compromise and Offers to Compromise
[16] Inadmissibility of Pleas, Plea Discussions, and Related Statements
[17] Privileges
[18] Rule 502: Inadvertent Disclosure
[19] Rule 602: Lack of Personal Knowledge
[20] Rule 603: Oath or Affirmation
[21] Rule 607: Individuals Who May Impeach
[22] Rule 608: Evidence of Character and Conduct of Witness
[23] Rule 609: Impeachment by Evidence of Conviction of Crime
[24] Rule 610: Religious Beliefs or Opinions
[25] Rule 612: Writing Used to Refresh Memory
[26] Rule 615: Exclusion of Witnesses
[27] Rule 701: Opinion Testimony by Lay Witnesses
§1A.05 Hearsay
[1] Exceptions to the Hearsay Rule
[2] Rule 802, Hearsay Rule
[3] Rule 803. Hearsay Exceptions; Availability of Declarant Immaterial
[4] Rule 804: Hearsay Exceptions, Declarant Unavailable
[5] Rule 804(3)(b): Statement Against Interest
[6] Rule 805: Hearsay Within Hearsay
[7] Rule 806: Attacking and Supporting Credibility of Defendant
[8] Rule 807: Residual Exception
§ 1A.06 Authentication
[1] Rule 901: Requirement of Authentication or Identification
[2] Rule 902: Self-Authentication
[3] Originals Versus Duplicates
[4] Rule 1001: Definitions, Writings, Recording and Photographs
[5] Rule 1002: Requirement of Original
[6] Rule 1003: Admissibility of Duplicates
[7] Rule 1004: Admissibility of Other Evidence of Contents
[8] Rule 1006: Summaries
[9] Rule 1007: Testimony or Written Admission of Party
[10] Rule 1101: Applicability of Rules
§ 1A.07 Refund Versus Protest Routes
[1] Subjective Application of Variance Doctrine
[2] Tax Court Gives the IRS Ability to Raise Additional Items of Deficiency
[3] Delegated Authority Concerning Tax Court Litigation
§ 1A.08 Benefits and Burdens of Tax Court Versus Federal District Court
§ 1A.09 Federal District Court and Claims Court
§ 1A.10 United States Department of Justice Involvement
[1] Settlement Possibilities
[2] Delegation of Settlement Authority
[3] Classification of Settlement Option Procedure or Standard
[4] Amount at Issue Is Factor in Determining Level of Review
[5] Path of an Offer at the Tax Division
[6] Submitting an Offer
[7] Preservation of Evidence
§ 1A.11 Rule 30(b)(6) Deposition
[1] Background
[2] Obligations
[3] Designation of Witness(es)
[4] Witness Preparation Required
[5] e-Discovery
[6] The Deposition
[7] Privileged Communications
[8] Potential Problems
§ 1A.12 Sample Notice of Deposition
§ 1A.13 Checklist, Rule 30(b)(6) Deposition Outline
§ 1A.14 Sample Memorandum Regarding Preservation

Employment Taxes and the Trust Fund Recovery Penalty
§ 2.01 Introduction
§ 2.02 Statutory Background
[1] Form 941 and Federal Tax Deposit
[2] Trust Fund
[3] Personal Liability
[4] Standard for Imposing Liability Under Section 6672
[5] Limited Liability Company Members
[6] Non-Tax Business Purpose to Planning
[7] Immigration issues in Employment Tax
§ 2.03 Collection Division
[1] IRS Monitoring of Delinquent Businesses
[2] Investigation of Delinquent Trust Fund Taxes and/or Non-Compliance
[3] Procedures for Investigating Potential Section 6672 Penalty Assessment
[4] Preliminarily Establishing Who Are Responsible Persons
[5] When Third Parties Direct Payments to a Company’s Employees: Surety, Lender, Contractor
[6] Trust Fund Recovery Interviews
[7] Evidence that may Support a Recommendation to Assess Section 6672 Penalty
§ 2.04 Defenses to the Section 6672 Penalty
[1] Transferring the Blame
[2] Lack of Authority
[3] Liability no Longer Exists
[4] Contributory Liability
[5] The Amount of the Assessment is Incorrect
§ 2.05 Success of Collecting a Section 6672 Penalty
§ 2.06 Revenue Officer’s Recommendation of Trust Fund Recovery Penalty Assessment
[1] Practitioner’s Preliminary Analysis of the Recommendation
[2] Procedure Following Recommendation
[3] Form 656, Offer in Compromise
[4] Appeals Post-Mediation for Offer in Compromise and Trust Fund Recovery Penalty
§ 2.07 Delaying an Investigation of Section 6672 Penalty
§ 2.08 Installment Agreements
[1] Considerations for Installment Agreement with a Non-Business Taxpayer
[2] Considerations for an In Business Trust Fund Installment Agreement
[3] Taxpayer Compliance with the Installment Agreement
§ 2.09 Collateral Agreement
[1] Purpose of Collateral Agreement
[2] Guidelines for Securing Collateral Agreements
§ 2.10 Form 911, Application for a Taxpayer Assistance Order
§ 2.11 Appeals Consideration
§ 2.12 Procedures for Examination Division
§ 2.13 Application of Payments and Collection of the Penalty
[1] Designated Payments
[2] Installment Agreements or Offers in Compromise
[3] Accounting for Payments, Abatements, and Adjustments
§ 2.14 Claim for Abatement
[1] Procedures for Claim for Abatement
[2] Grounds for Abatement
§ 2.15 Claim for Refund
[1] The Procedures for Filing a Claim for Refund
[2] Protective Claim for Refund
[3] Collection Activities Should Be Halted
[4] Discussing Settlement with the Tax Division Attorney
§ 2.16 Litigating the Trust Fund Recovery Penalty
[1] Burden of Proof
[2] Mediation Jurisdictions
[3] Factual Inquires Made by the Court in Determining Whether Liability Exists
[4] Defining a Responsible Person
[5] Defining Willfulness Under Section 6672
[6] Liability for Delinquent Taxes
[7] Conducting Discovery
[8] Electronic Discovery Plan
[9] Confusing Calculations Before a Jury
[10] Injunctive Relief
§ 2.17 Advice a Practitioner May Give a Client to Minimize the Section 6672 Penalty
§ 2.17A Criminal Prosecution
[1] Standard for Criminal Prosecution
[2] Pyramiding
§ 2.17B Reasonable Compensation
§ 2.18 Forms
[1] Collateral Agreement
[2] Form 433-D: Installment Agreement
[3] Form 911: Application for Taxpayer Assistance Order (ATAO)
[4] Form 4181: Questionnaire Relating to Federal Trust Fund Tax Matters of Employees
[5] Form 2674: Report of Trust Fund Tax Violations
[6] Form 4183: Recommendation re: Trust Fund Recovery Penalty Assessment

Worker Classification: Independent Contractor Versus Employee
§ 3.01 Introduction to Independent Contractor Misclassification
[1] IRS Motivational Factors
[2] Substance of the Relationship is Key
[3] Consequences of Misclassifying a Worker
[4] IRS Discovery of a Misclassification
§ 3.02 How to Determine a Worker’s Status
[1] Service Industries Are Often Targets for Worker Classification Scrutiny
[2] Attorneys and CPAs
[3] Twenty Factor Test
[4] Judicial Scrutiny
§ 3.03 Establishing Relief Under the Safe Harbor of Section 530
[1] Legislative History of Section 530
[2] Safe Harbor’s Filing Requirement
[3] Workers in Substantially Similar Positions
[4] Published Rulings or Judicial Precedent
[5] Prior IRS Examination of the Business
[6] Industry Practice
[7] Other Reasonable Basis
§ 3.04 Effect of Section 530 on Employees
§ 3.05 Preliminary Procedures During an Audit Examination of the Worker Classification Issue
[1] Scheduling a Meeting with the Agent
[2] Settlement Negotiations with the Agent
[3] Negotiations with the Appeals Division
§ 3.06 Audit Examination Techniques
[1] Four Steps to Agent’s Analysis
[2] Classification Settlement Program
§ 3.07 Audit Techniques Used to Determine if a Worker Is an Employee or Independent Contractor
[1] Does the Business Qualify for Safe Harbor?
[2] Fact-Finding Investigation
[3] Adapting the Twenty Factor Test to the Case
§ 3.08 Choosing a Forum for Litigation
[1] Preliminary Considerations of Litigation
[2] United States Tax Court
[3] Expert Testimony
[4] Factual Development Is Most Important to Defeating the Government’s Case
§ 3.09 Planning to Survive Independent Contractor Scrutiny by the IRS
[1] Written Agreement
[2] Competitor/Industry Information
[3] Form 4667, Examination Changes—Federal Unemployment Tax
[4] Record Keeping
[5] Document Practice Points
§ 3.10 Source Material
[1] Petition to United States Tax Court
[2] Form 4667

Jeopardy and Termination Assessments

§ 4.01 Introduction to Jeopardy and Termination Assessments
[1] Judicial Review
[2] Taxes Subject to Jeopardy and Termination Assessments
§ 4.02 IRS Investigation Prior to Making Assessment
[1] Areas of Inquiry
[2] Methods for Verification of Income
[3] Review of Books and Records
[4] Accounting Method
[5] Mark-Up
[6] Initial Interview Is Crucial to Setting the Focus of the Audit
[7] Checklists of Issues for Which to Prepare the Client
[8] Agent’s Analysis
§ 4.03 Procedures for Making a Jeopardy or Termination Assessment
[1] Approval Authority
[2] Recommendation for Jeopardy Assessment
[3] Informing the Taxpayer of Assessment and Levying Assets
[4] Service of the Notice
§ 4.04 Appeal Process
[1] Exhaust Administrative Remedy Requirement
[2] Appeals Division
[3] Arguments in Support of Abatement
§ 4.05 Posting Bond to Stay Collection
§ 4.06 Summary Judicial Review of Assessment
[1] Arranging Payment Pending Judicial Review
[2] Time Period Governing Judicial Review
[3] Standard for Judicial Review Under Code Section 7429 is the “Reasonableness” of the Assessment
[4] Second Inquiry of Code Section 7429 Summary Review is the Amount of the Assessment
[5] District Court’s Determination Is Final and Not Open to Appeal
§ 4.07 Complaint for Review of Jeopardy Assessment

Refunds, Credits, and Abatements

§ 5.01 Introduction
§ 5.02 Procedural Requirements of Seeking a Refund or Credit
[1] Establishing the Existence of an Overpayment
[2] Claim for Refund or Credit of Overpayment
[3] Time Period Limitation on Filing Administrative Claim
[4] Determining When a Return Is Considered Filed
[5] Limitations on Amount Allowed for the Refund or Credit
[6] Determining when Payment of Taxes Occurred
[7] IRS Processing of Claim for Refund or Credit
[8] Jurisdictional Requirements of Initiating a Refund Suit
[9] Application of Judicially-Created Doctrines
[10] The Tucker Act and Tax Refund Suits
§ 5.03 Abatement Claims
[1] Abatement of Taxes and Penalties
[2] Requirements for Abatement of Interest Claims
§ 5.04 Doctrines Which May Be Invoked to Effect the Period of Limitations
[1] Equitable Recoupment or Setoff
[2] Equitable Estoppel
[3] Equitable Tolling of Statute of Limitations
[4] Mitigation Provisions, Sections 1311 Through 1314
§ 5.05 Procedural Requirements for the IRS to Recover an Erroneous Refund
[1] Statute of Limitations for Bringing Suit
[2] Recovery of Interest
[3] Section 6676 Penalty
[4] Burden of Proof
[5] Deficiency Procedures in Lieu of Erroneous Refund Suit
§ 5.06 Complaint for Tax Refund
§ 5.07 Forms
[1] Instructions for Form 843
[2] Form 843: Claim for Refund and Request for Abatement

Wrongful Levy

§ 6.01 Introduction
§ 6.02 Third Party Must Initiate Challenge Within Two Years of Date of Levy
[1] Two Year Period Applicable After December 22, 2017
[2] Pre-December 22, 2017, Extension Period
§ 6.03 Legal Standards Governing Adjudication of Wrongful Levy Action
§ 6.04 Nominee and Alter Ego Theories
[1] Nominee Situations
[2] Alter Ego Situations
[3] Fraudulent Conveyance Situation
§ 6.05 Transferee Theory of Liability
[1] Elements of Transferee Liability
[2] Proving Transferee Liability at Law
[3] Asserting Transferee Liability at Equity
[4] Definition of Transferee Under the Internal Revenue Code
[5] Transferee Acting as Fiduciary Can Be Liable for a Personal Penalty
[6] Transferee as Limited Liability Company Member
[7] Statute of Limitation for Transferee Liability
[8] Procedures for Litigating the Transferee Liability
§ 6.06 Defenses for Refuting an Assessment Based on Alter Ego/Nominee and Fraudulent Conveyance Theories
[1] Exercise of Dominion and/or Control
[2] No Record Assets
[3] Developing Evidence
[4] Relief Available
§ 6.07 Third Parties and Section 1346(a)(1) Versus Section 7426
[1] The Decision of United States v. Williams
[2] Wrongful Levy Exclusivity After Williams
[3] Substance Versus Form of IRS Collection Activity
[4] Post-Williams Statutory Relief
§ 6.08 Quiet Title, Wrongful Levy, and Real Property

The Reasonable Cause Defense

§ 7.01 The Reasonable Cause Defense
[1] Penalties
[2] Employment Taxes
§ 7.02 Administrative Procedure and Assessment
[1] Establishing Reasonable Cause at the Revenue Agent/Audit Level
[2] Practical Planning for Escaping Imposition of Certain Penalties
[3] Alternatives for Disputing Penalty Recommendation
[4] Deductibility of Civil Tax Penalties
§ 7.03 Establishing Reasonable Cause in Litigation
[1] Supreme Court Precedent
[2] Being Too Busy Does Not Establish Reasonable Cause
[3] Financial Instability May Establish Reasonable Cause
[4] Affirmative Action by Taxpayer to Comply with Law Must Be Evidenced
[5] Burden of Proof
[6] Abatement
[7] Disclosure Statement
§ 7.04 Developing the Case
[1] Checklists of Inquiries Concerning the Delinquencies
[2] Erroneous Calculation of the Assessment
[3] Common Considerations in Reviewing a Client’s Case
§ 7.05 Sample Complaint Requesting Recovery of Employment Tax Penalties

Volume 2

The Innocent Spouse Defense

§ 8.01 Innocent Spouse Defense
§ 8.02 Administrative Procedures
[1] Filing Deadline
[2] Nonrequesting Spouse’s Right to Appeal
[3] Collection Due Process Matters
§ 8.03 Theories of Innocent Spouse Relief
[1] Innocent Spouse Relief
[2] Separation of Liability
[3] Equitable Relief
§ 8.04 Alternatives to Litigation
[1] CDP Hearing
[2] Economic Hardship for Release of Levy
§ 8.05 Litigation
[1] Federal District Court and Federal Court of Claims
[2] Tax Court Review
[3] Bankruptcy Court

Collection Activities Via the Tools of Liens and Levies

§ 9.01 Introduction
§ 9.02 Creation of the Federal Tax Lien
[1] An Overview of the Federal Tax Lien
[2] What Constitutes a Proper Assessment?
[3] What Constitutes a Proper Notice and Demand for Payment?
[4] Taxpayer’s Failure to Pay Liability
[5] Filing of the Notice of Federal Tax Lien
[6] Scope of the Federal Tax Lien
§ 9.03 Priority Issues
[1] Two Step Inquiry
[2] Federal Tax Lien Act of 1966
[3] State Law Considerations
[4] Federal Law
[5] Superpriorities and Instances Where Federal Tax Lien May Be Defeated
§ 9.04 Certificate of Subordination of Federal Tax Lien
[1] Prerequisites for Certificate of Subordination
[2] Obtaining Certificate of Discharge or Subordination
[3] Investigation of Application for Discharge or Subordination
[4] Issuing the Certificate of Discharge or Subordination
§ 9.05 Revocation of Certificates of Release of Federal Tax Lien
§ 9.06 Certificate of Nonattachment of Federal Tax Lien
§ 9.07 Withdrawal of the Filed Notice of Federal Tax Lien
[1] Content of the Request for a Withdrawal
[2] Instances Where a Request for Withdrawal Should Be Submitted
[3] Notice of Lien Withdrawal Will Facilitate Collection of the Tax Liability
[4] Withdrawal Based on the Best Interests of the Government and Taxpayer
[5] Installment Agreements and the Notice of Withdrawal
[6] Withdrawal May Be Issued Without Taxpayer Intervention
[7] Credit Report Concerns
§ 9.08 The Special Liens for Estate and Gift Taxes
[1] Special Estate Tax Lien
[2] Special Gift Tax Lien
§ 9.09 The Levy
[1] IRS Procedures Prior to Issuing Notice of Levy
[2] Duty and Consequences of the IRS Levy
[3] Two Defenses to Failure to Honor Levy
[4] The Nature and Extent of a Notice of Levy
[5] Property Exempt from Levy
[6] Property Subject to a Levy
§ 9.10 Seizure and Sale of Property Subject to Federal Tax Lien or Levy
[1] Notice of Seizure
[2] Verifying Clear Title and Minimum Bid Price
[3] Notice of Sale
[4] Sale Conducted Within Ten to Forty Days of Notice of Sale
[5] Sale of Property Co-Owned with a Delinquent Taxpayer
[6] Appealing Seizure of Property
[7] Redemption
§ 9.11 The Administrative Appeals Process
[1] Overview of the Administrative Appeals Process
[2] Collection Appeals Program
[3] Collection Due Process Hearing
§ 9.12 Judicial Proceedings of Tax Liens or Levies
[1] Reducing Assessments to Judgment and Government Foreclosure Action
[2] Non-government Lienholder Seeking Foreclosure and Discharge of Property from Lien
[3] Interpleader
[4] Declaratory Judgment
[5] Quiet Title
[6] Injunctions
[7] Writ of Entry
[8] United States’ Right of Intervention
§ 9.13 Challenging the Validity of a Federal Tax Lien
[1] Checklist of Issues on IRS Procedures for Issuing a Federal Tax Lien
[2] Record Retention

Tax Return Preparers and Tax Shelter Promoters

§ 10.01 Introduction
[1] Ministerial Violations
[2] Uncertain Tax Positions
[3] Tax Preparer Due Diligence Penalty
§ 10.02 Overview of Preparer Penalties and Standards of Conduct
[1] Who May Qualify as a Return Preparer Under the Internal Revenue Code?
[2] Disclosure Rules and Standards
[3] Preparer Penalty Standards Under the Emergency Economic Stabilization Act of 2008
[4] Negligence
[5] Willful Conduct
[6] Fraud
§ 10.03 Assessment and Appeal Procedures of Preparer Penalties
[1] Assessment and Appeal Rights
[2] IRS Development of the Section 6694 Penalty Examination and Assessment
[3] Evaluation of Whether Substantial Authority Penalty Applies
[4] Examples of the Section 6694(a) Penalty Application
[5] Reckless or Intentional Disregard
[6] Understatement of Liability
[7] Unrealistic Position
[8] Examples of the Section 6694(b) Penalty Application
[9] Circumstances Where Preparer Is Subject to Multiple Penalties
[10] Statute of Limitations
§ 10.04 Overview of the Return Preparer Penalty Program
[1] Program Structure
[2] Penalty Screening Committee
[3] Role of the Return Preparer Coordinator
[4] Role of Revenue Agent or Auditor
§ 10.05 Program Action Cases
[1] Return Preparer Coordinator’s Recordkeeping
[2] Return Sampling
[3] Interviews with the Clients of the Subject Tax Preparer
[4] Accuracy Related Penalty and Reasonable Cause and Good Faith Defense
§ 10.06 Preparer Defenses
[1] Adequate Disclosure Defense
[2] Substantial Authority Defense
[3] Reasonable Cause/Good Faith Defense
[4] Reduction of Amount Assessed Where Both Penalties Under Sections 6694(a) and 6694(b) Apply
§ 10.07 Electronic Filing Program
[1] What is the Electronic Program?
[2] Obligations of an Electronic Filer Participant
[3] Penalties for Preparer’s Noncompliance with the Electronic Filing Program Obligations
[4] IRS Monitoring of Electronic Filers
[5] Director of Practice
§ 10.08 Litigation Involving the Preparer Penalties
[1] Injunction
[2] Refund Suits and Burden of Proof
[3] Disgorgement
§ 10.09 Practical Methods for Developing a Defense in a Preparer Case
[1] Factual Development
[2] Checklist of Criteria for Imposing the Section 6694(a) Penalty
[3] Summary Checklist of Criteria for Imposing the Section 6694(b) Penalty
§ 10.10 Responsibilities and Penalties of Tax Shelter Promoters
[1] Registration Responsibilities, In General
[2] List Retention Requirements of Promoters of Potentially Abusive Tax Shelters
[3] Disclosures Requirements
[4] Promoters Have Affirmative Duty Not to Provide False Information
[5] Fees
[6] Automated Process for Certain Penalties in Listed Transaction Situations
§ 10.11 Penalties for Failing to Comply with Code Requirements
[1] Penalty for Failure to Comply with Registration Process
[2] Calculation of the Penalty
[3] Protective Registration
§ 10.12 Use of Lists by the IRS
[1] General Rule: Seven Year Retention Period
[2] How the IRS Uses the Lists
[3] Consequences of Noncompliance with List Retention Requirements
§ 10.13 Lawyer as Witness
§ 10.14 Unreasonable Conduct by IRS

Recovering Monetary Damages from the Federal Government

§ 11.01 Introduction
§ 11.02 Disclosure of Tax Return Information
[1] Section 6103
[2] Statutory Exceptions to Confidentiality Which Permit Disclosure of Tax Return Information
[3] Disclosure Made in Good Faith Is Not Actionable
§ 11.03 Actual Damages
[1] Overview
[2] Establishing a Causal Relationship Between the Unauthorized Disclosure and the Actual Damage
[3] Establishing Proof of Causation
[4] Economic Loss as Element of Actual Damages
[5] Emotional Distress as an Element of Actual Damages
[6] Physical Harm as an Element of Actual Damages
§ 11.04 Punitive Damages
[1] In General
[2] View that Punitive Damages Are Recoverable Only When Actual Damages Are Proven
[3] View that Punitive Damages Award Does Not Require a Showing of Actual Damages
[4] Defining What Constitutes a Willful Disclosure
[5] Defining What Constitutes Gross Negligence
[6] Establishing Willful Disclosure and Gross Negligence for Punitive Damage Award
§ 11.05 Recovery Under the Privacy Act of 1974
§ 11.06 Government’s Right of Set-Off
§ 11.06A Whistleblower Awards
§ 11.07 Recovery for Damages for Failure to Timely Release a Federal Tax Lien
§ 11.08 Recovery for Damages for Unauthorized Collection Actions
§ 11.09 United States Must Be Named as a Defendant
§ 11.10 Constitutional Torts
[1] Qualified Immunity Defense of Government Employees for Constitutional Violations
[2] No Relief When Other Remedies Are Available
[3] No Relief for Torts in the Assessment and Collection Context
[4] Factual Circumstances Where Relief Was Afforded for a Constitutional Tort
§ 11.11 Recovery Pursuant to the Federal Tort Claims Act (FTCA)
§ 11.12 No Right to Jury Trial in Actions Brought Under Sections 7432 and 7433

Recovering Administrative and Litigation Expenses from the Government

§ 12.01 Introduction
§ 12.02 Pre-Suit Review of Award for Administrative Costs
[1] Recovery of Costs Incurred
[2] Jurisdiction
[3] Procedures for Recovering Administrative Costs
[4] Filing Deadline for Recovery of Administrative Costs
[5] Time Period During Which Costs Are Recoverable
[6] Appeals Division Determination
[7] Settlement of Claims for Attorneys’ Fees
§ 12.03 Appealing the IRS’ Disallowance or Partial Disallowance of an Award
[1] Procedures for Appeal
[2] Section 6673
§ 12.04 Post-Litigation: Seeking Reasonable Litigation and Administrative Costs and Fees
[1] Section 7430, in General
[2] Defining Reasonable Administrative Costs
[3] Defining Reasonable Litigation Costs
[4] Qualifications for an Award
[5] Examples
[6] Who Can Qualify as a Prevailing “Party” for Purposes of Recovering Litigation Expenses?
[7] Exhausting Administrative Remedies
[8] Unreasonably Protracting Proceedings
[9] Determining Whether a Party is a Prevailing Party
[10] Court Discretion in Award
[11] Evidence Supporting Reasonable Litigation Fees Award
[12] Burden of Proof
[13] Suits Where Recovery of Reasonable Litigation Fees Should Be Sought
[14] Determining Whether the United States Can Offset a Section 7430 Award
[15] Recovering Attorneys’ Fees in Bankruptcy Court
§ 12.05 Sanctions
[1] Government Award of Fees as Sanction Against Taxpayer
[2] Taxpayer Awarded Sanctions Against Government
[3] Fraud on the Court
§ 12.06 Practical Advice
§ 12.07 Checklists
[1] Evidentiary Checklist for Recovery of Fees in Administrative Proceeding
[2] Evidentiary Checklist for Recovery of Fees in Civil Tax Litigation

Criminal Tax Investigations

§ 13.01 Introduction
§ 13.02 Example of a Typical CID Investigation
[1] Phase One
[2] Phase Two
[3] Phase Three
[4] Phase Four
[5] Phase Five
§ 13.03 The Structure and Purpose of CID
[1] General Duties
[2] Marijuana Businesses
[3] Offenses Investigated by CID
[4] Triggers for Criminal Investigation
[5] Special Agent Responsibilities
[6] Responsibilities of Service Center Criminal Investigation Branch
[7] Three Categories of Investigations Conducted by a Special Agent
§ 13.04 Civil Audit/Assessment Pending Criminal Investigations
[1] Due Process Concerns
[2] Civil Versus Criminal Violations
[3] Civil Penalties that May Arise During Criminal Investigation
[4] Parallel Civil and Criminal Investigations
§ 13.05 Taxpayer Information that May Be Disclosed by Special Agent in Conducting Investigation
§ 13.06 Guidelines Special Agent Must Follow in Conducting Investigation
§ 13.07 Fifth Amendment Privilege
§ 13.08 Miranda Warning
§ 13.09 Fourth Amendment
[1] Probable Cause
[2] Requirement of Particularity
[3] Examination of the Scope and Execution Method
[4] Notice, Inventory Return
[5] Suppression and Standing
[6] Applicability of “Good Faith” Exception
§ 13.09A Privileged Communications/Documentation
[1] Attorney/Client Privilege
[2] Accountant/Client Privilege
[3] Attorney Work Product
[4] Corporate Privileges
§ 13.10 Information Gathering Tools Used by Special Agent
[1] Summons Power, Generally
[2] Third Party Record-Keeper Summons
[3] John Doe Summons
[4] Government Enforcement of Summons
[5] Compulsion Order
[6] Immunity
[7] Search Warrants
[8] Electronic Surveillance and Interception
[9] Electronic Tracking Devices (Beepers)
[10] Pen Registers and Trap and Trace Devices (Grabbers)
[11] Informants
[12] Mail Covers
[13] Hardware and Software Evidence
§ 13.11 Record-Keeping Resources of Taxpayer Information
[1] Currency Transaction Reports
[2] Suspicious Activity Report (SAR) Forms
[3] Report of Cash Payments Over $10,000 Received in a Trade or Business
[4] Social Security Administration
[5] State Department
[6] Securities and Exchange Commission (SEC)
[7] Comptroller of Currency
[8] Customs Records
[9] Bureau of Alcohol, Tobacco and Firearms Records
[10] Federal Bureau of Investigation Records
[11] Drug Enforcement Agency Records
[12] United States Postal Service Records
[13] Financial Crimes Enforcement Network (FinCEN)
[14] Financial Institutions
[15] FinCEN, Financial Institutions, and the USA PATRIOT Act
[16] Foreign Corrupt Practices Act
[17] Hiring Incentives to Restore Employment (“HIRE”) Act/Foreign Account Tax Compliance Act (“FATCHA”)
§ 13.12 Special Agent’s Prosecution Report
[1] History of the Taxpayer
[2] Taxpayer Contacts
[3] Theory of the Case
[4] Reconciliation of Books and Records to Tax Returns
[5] Other Evidence for use in Criminal Proceedings
[6] Evidence of Intent
§ 13.13 Taxpayer Conferences with the Government
[1] Conference with the Special Field Agent and Group Manager
[2] Conference with Field Counsel
[3] Conference with the Tax Division
[4] Conference with the United States Attorney’s Office
§ 13.14 Expedited Plea
[1] Taxpayer’s Representative Must Initiate Plea Discussion
[2] Justice Department Authority and Jurisdiction
[3] Evidentiary Analysis
[4] Affect of Plea Negotiations on Civil Liability
[5] Citizenship
§ 13.15 Bank Secrecy Act: Title 31 Referral Guidelines for Civil Penalties
[1] Severity of Violations
[2] Inconsequential Violations
[3] Disclosure of Tax Return Information Based on Related Statute Test
[4] Criteria for Determining Whether Bank Secrecy Act Violations Warrant a Penalty Referral
[5] Mitigating Factors to Offer in Defense to Bank Secrecy Act Violations
§ 13.16 Grand Jury Matters
[1] Function of a Grand Jury
[2] Challenging a Grand Jury Subpoena
[3] IRS Initiation of a Grand Jury Investigation
[4] Initiation of Grand Jury by Department of Justice
[5] Grand Jury Secrecy
[6] Use of Subpoenas Duces Tecum in Grand Jury Investigation
[7] Immunity
[8] Informants
[9] Grand Jury and the Corporate Taxpayer
[10] IRS Final Report on Grand Jury
[11] Inappropriate Prosecutorial Actions
[12] Sentencing Guidelines
§ 13.17 Criminal Tax Prosecution
[1] Dual and Successive Prosecution
[2] Pleas After Arrests
[3] Indictment
[4] Information
[5] Complaint
[6] Warrant or Summons
[7] Preliminary Hearing
[8] Arraignment
[9] Invoking the Fifth Amendment During Discovery and/or Trial
[10] Discovery and Inspection
[11] Trial Preparation Methods
[12] Sentencing in Criminal Tax Prosecutions
§ 13.18 Taxpayer Defenses
[1] Preparation for the Taxpayer Interview with the Special Agent
[2] Selective Enforcement
[3] Production of Evidence
[4] Cooperation with the Special Agent
[5] Affidavits
[6] Voluntary Disclosure Policy
[7] Attacking the Method of Proof Used by CID
[8] Statute of Limitations
[9] Suppression of Evidence as Remedy for Improper Use of Immunized Testimony During Prosecution
[10] Suppression of Evidence Due to Prosecutorial Misconduct
[11] Under Seal
[12] Appeal of Conviction or New Trial
§ 13.19 Forfeitures
[1] Seizures
[2] IRS Internal Forfeiture Procedures
[3] Quick Release of Property Procedures
[4] Administrative Review
[5] Judicial Forfeiture
[6] Role of the United States Attorney’s Office
[7] Judicial Action
[8] Defenses to Forfeiture
§ 13.19A Multiple or Dual Representation Problems
[1] Potential for Ethical Dilemma
[2] Disqualification Upon Showing of Conflict of Interest
[3] Government Motion to Disqualify Counsel
[4] Conflicts of Interest Resulting in Disqualification
§ 13.20 Recovering Attorney Fees in a Criminal Case
[1] Defining a “Prevailing Party”
[2] Burden of Proof
[3] Final Judgment
[4] Net Worth Requirement
[5] The “Position of the United States”
[6] Discovery of the Conduct of the Government May Be Allowed
[7] Scope of Record
[8] Deadline for Filing Claim
[9] Common Government Arguments to Refute Award Under Hyde Amendment
[10] Statutory Loophole of Special Circumstances Making an Award Unjust
[11] Practical Advice
§ 13.21 Title 18 Bootstrap
§ 13.22 Sample Petition to Enforce Summons and Accompanying Declaration of Revenue Agents
§ 13.23 Form 8300: Report of Cash Payments Over $10,000 in a Trade or Business

Bankruptcy and the IRS

§ 14.01 Introduction
[1] The Estate
[2] Separate Entity in Chapters 7 and 11
[3] Bankruptcy Rules
§ 14.02 Government Players in the Bankruptcy Process
[1] Special Procedures Function
[2] United States Department of Justice
[3] Field Counsel
§ 14.03 Bankruptcy: The Process
[1] Automatic Stay
[2] What May Be Discharged?
[3] When a Tax Return Is Not a Return for Dischargeability Purposes
[4] What Is the Effect, If Any, of a Federal Tax Lien?
[5] Exempt Property
[6] Notice of Levy Requires Harmonization of Bankruptcy Code and Internal Revenue Code
[7] Tenancy by the Entirety
[8] Employment Tax Payments
[9] Turnover Requirement
[10] Implementing an Offer-in-Compromise Prior to and During the Bankruptcy
[11] Determinations of Tax Liabilities
[12] Application of the Doctrine of Sovereign Immunity
[13] Damages for Violations of the Automatic Stay
[14] Effect of Confirmation
[15] Effect of an Order of Discharge from the Bankruptcy Court
§ 14.04 Determinations by Bankruptcy Courts of Income Tax Consequences
[1] In General
[2] Case or Controversy
[3] Analysis of Short-Year Election in Chapters 7 and 11
[4] General Requirements for Confirmation
§ 14.05 Internal Jurisdiction and Settlement Authority Between the IRS and the Department of Justice
[1] Before or After Objection to a Proof of Claim Is Filed
[2] Before an Objection to a Proof of Claim Is Filed
[3] After an Objection to a Proof of Claim Is Filed
[4] Assistant United States Attorneys
[5] Department of Justice, Tax Division
[6] Burden of Proof
[7] Service of Process
§ 14.06 Practical Considerations
§ 14.07 Complaint to Determine Tax Lien Priorities
§ 14.08 Practice Tips
[1] Using the Taxpayer Advocate to Avoid Unreasonable Revenue Officer
[2] Post-Bankruptcy Activity
[3] Litigating Tax Liabilities
[4] Innocent Spouse Relief May Allow Debtor/Spouse to Escape Liability
[5] Counsel Client Regarding Consequence of Bankruptcy Filing
[6] Willful Evasion in the Context of Luxury Purchase
[7] Ordering Transcripts of Debtors’ Tax Accounts/Periods
[8] Foreclosure by Lender and Tax Consequences
[9] Asserting the Fifth Amendment
[10] Divorced or Divorcing Couples, Only One Spouse in Bankruptcy
[11] Post-Petition Interest in Chapter 13
§ 14.09 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
[1] Retirement Plan Exemptions
[2] Education IRAs
[3] Notice of Request for Determination of Taxes
[4] Discharge of Estate’s Liability for Unpaid Taxes
[5] Rate of Interest on Tax Claims
[6] Repeat Bankruptcy Filers
[7] Chapter 13 Discharge
[8] Chapter 11 Discharge
[9] Tax Court Stay Provision Limited
[10] Periodic Payment of Taxes Under Chapter 11
[11] Avoidance of Statutory Tax Lien Prohibited
[12] Payment of Taxes in the Conduct of Business
[13] Tardily Filed Priority Tax Claims
[14] Return Defined, “Hanging Paragaph”
[15] Return Must Be Filed to Confirm Chapter 13 Plans
[16] Tax Disclosure Standards
[17] Setoff of Tax Refunds
[18] Dismissal for Failure to Timely File Returns
[19] Homestead Exemption
[20] “Means” Test
§ 14.10 Dischargeability Checklists
§ 14.11 Recovering Attorney’s Fees
§ 14.12 Debt Forgiveness Situations Creating Tax Debt
[1] Outside of Bankruptcy
[2] Debtor in Bankruptcy
[3] When to Use the Form 982

Access to Information from the Federal Government

§ 15.01 The Freedom of Information Act
[1] FOIA Legislative Structure
[2] Procedure for Making an FOIA Request
[3] FOIA Exemptions
§ 15.02 The Privacy Act
[1] Legislative Purpose of the Privacy Act
[2] Exemptions Under the Privacy Act
[3] Submitting a Privacy Act Request
[4] Advanced Pricing Agreements Between Corporate Taxpayers and the IRS
§ 15.03 Section 6110: Access to Government Documents
§ 15.04 Judicial Review of FOIA and Privacy Act Requests
[1] Venue
[2] Burden of Proof
[3] Complaint
[4] Tax Division, Department of Justice
[5] In Camera Review of Withheld Materials Is Discretionary