NYU Tax Controversy Forum
For a while now, NYU has held an annual tax controversy forum. Generally, it is held in-person in New York City. Of course, this year, the COVID-19 pandemic sidelined the in-person event, but, thankfully, NYU decided to provide the forum free of charge online through webinars. The forum provides tax professionals a valuable opportunity to hear from top-level government officials on IRS enforcement and collection activities. This year, although via webinar, was no different. Some of the more noteworthy discussions included:
- Micro-Captives and Syndicated Conservation Easements. These continue to be a priority for the IRS. Moreover, IRS officials made it well known that they intend to use various penalties in the Code to stop abusive transactions, including I.R.C. §§ 6707, 6707A, 6695A, and 6662. Commonsensically, the IRS also recognized that many of these transactions were not entered into alone via the taxpayer, but rather many taxpayers were aided with the assistance of professionals, including actuaries, appraisers, bankers, and even CPAs and tax attorneys. Thus, the IRS has indicated it intends to use various penalty provisions and other means, to the extent it can, against professionals as well. For example, for tax professionals, the IRS has indicated it intends to utilize referrals to the Office of Professional Responsibility (OPR) for real or perceived violations of Circular 230. In addition, the IRS intends to utilize I.R.C. § 6695A penalties against appraisers, which essentially imposes a civil penalty of 125% of the amount of gross income made from the appraisal.
- TIGTA Report. On May 29, 2020, the Treasury Inspector General for Tax Administration (TIGTA) released a report called “High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service.” It can be found here. The report was critical of the IRS’ ability to discover and audit high-income nonfilers, which TIGTA estimated owed the government approximately $21 billion. When asked about the TIGTA report, high-level IRS officials indicated they wanted to correct the issues identified by TIGTA, and moreover, that they were “laser-focused” on addressing the issue.
- Taxpayer Fraud. The IRS also made it well known that they intend to focus on specific areas of taxpayer fraud, which include: (1) offshore activities; (2) fraudulent payroll tax credit claims under the CARES Act, and (3) cryptocurrency tax evasion. The IRS cautioned that they have an overwhelming amount of data they receive that can be used for these enforcement initiatives, such as whistleblower submissions, blockchain informants, and the continued sharing of information across federal and state agencies. Moreover, the IRS warned that they are implementing third-party technology tools that are top of their industry standards in addition to looking at using artificial intelligence to assist with data review.
IRS Collection Actions. IRS officials discussed the IRS’ People First Initiative, which has delayed collection action against most taxpayers until July 15, 2020. When asked about whether collection action would be stayed beyond July 15, 2020, an IRS official indicated this would be determined at a later date. IRS officials also indicated that they had implemented new procedures for installment agreement requests. Previously, it was standard procedure for the IRS to refer a case to a Revenue Officer (i.e., to the field) if there was a request for an installment agreement and the aggregate taxes at issue were in excess of $100,000. Currently, the IRS has increased that amount to $250,000 in an attempt to help taxpayers more easily enter into installment agreements, potentially over the phone. With respect to offers-in-compromise, the IRS acknowledged that many OICs had not been reviewed yet due to IRS office closures. However, they indicated that their OIC offices in Brookhaven, New York and Memphis, Tennessee were beginning to slowly open back up again. The IRS also indicated that they are not sending out failure-to-deposit notices for unpaid employment taxes like they have in the past but that they are currently reviewing whether they should do so after the second quarter of 2020. The IRS cautioned that the new Forms 7200, Advanced Payment of Employer Credits Due to COVID-19, were being carefully reviewed and would be subject to scrutiny in the future.