Wednesday, January 22, 2014

Did you expense the lap dances?

Not long ago, I came across this online gem that has been floating around for while.  The spoof of the most well known scene of the movie "A Few Good Men" questions the whether lap dances at a strip club can be reimbursed as a business expense.  

The video is entertaining, but a more substantive discussion on the issue can be found at The article correctly identifies the questions as whether a lap dance is an ordinary and necessary business expense under Internal Revenue Code section 162 and whether the expenses can be adequately substantiated.  The article generally concludes that a claimed lap dance deduction will not likely hold up on audit.  However, it is a fact based inquiry that will depend on the circumstances.    

 Link to the video: 

Tuesday, January 21, 2014

Can the IRS do more with less?

President Obama has signed the Omnibus Spending Bill which will fund the U.S. Government through fiscal year 2014.  This bill gives the IRS $11.3 billion to fund its operations.  This is a reduction in IRS funding levels by $526 million compared to the previous year.  While the reduction is small in comparison to the total funds allocated to the IRS (only 4.4 percent decrease), it is still a substantial decrease in the funding levels.  

What does this mean?  The IRS will be forced to do more with less.  In addition to undertaking additional responsibilities under the Affordable Care Act, the IRS has been committing substantial resources to combating identity theft.  Of course, they will still be involved in tax audits, collections and enforcement of the tax laws.  

Responsibilities are growing, but the budget has been cut, so where will the sacrifices be made?  

Hiring will likely be at a minimum and some employees may be reassigned to cover the growing responsibilities of the agency.  As a result, the problem will likely be seen heavily in IRS "customer service." If the IRS cannot absorb the reduced funding through increased efficiency, it will mean that IRS auditors, collection agents and other representatives will not be able spend enough time to adequately work a case. Trying to do so would result in an increasing backlog such that tax cases could draw to a virtual standstill. Therefore, IRS employees will be forced to spend less time on cases than before. Don't misunderstand however, this is not a good thing.  It may become more difficult to thoroughly get to the bottom of complicated legal or factual issues.   

Someone dealing with an IRS problem will have to watch their case to make sure that it is getting the attention it requires.  In doing so, make sure to comply with deadlines set by the IRS agents and follow up regularly to ensure that your case is not being sidelined in favor of a squeakier wheel.  You won't be able to overcome all delays, but letting the IRS know that you are paying attention to your case will help ensure that they pay attention to it as well.  If you run into obstacles, the Taxpayer Advocate Service may be helpful as well.  Of course, they are also facing the budget cuts and will have delays of their own. 

Tuesday, October 22, 2013

Waking the Government

Restarting the government after a two and one half week shutdown is like waking up on a weekend after you found the time to sleep in.  It doesn't happen quickly.  The websites of each the IRS and Tax Court have each posted notices about what to expect from them as they wake up and the wheels start turning again. 

The IRS has issued news releases concerning the resumption of operations following the shutdown.  They can be found here and here. The IRS is substantially backlogged.  They continued to receive returns, correspondence and information from people during the shutdown, but there was nobody to look at any of it.  As a result, they are telling taxpayers to expect substantial delays and to wait to call the IRS “if their issue is not urgent.”

The tricky part is that there is no clear explanation of what is urgent.  The IRS likely takes the position that questions concerning your refund are not urgent, but, those concerning liabilities… probably should be treated as urgent.  As the IRS resumes operations, they will resume issuing liens and levies.  Those that owe tax and wish to avoid liens or levies, should get in touch with the IRS regardless of how long they might have to wait to get through to someone.  It may take a while to get a response, but being proactive is better than having to deal with an empty bank account because you and the IRS disagreed about whether the case was urgent.

Those individuals and businesses dealing with a specific IRS agent might expect to receive a phone call to discuss the timing of any future action.  In the meantime, any previous deadlines set by the IRS should be respected unless otherwise discussed with the agent.

The United States Tax Court has posted detailed guidance on its website.  Those with trials that were scheduled during the shutdown will hear from the Court about rescheduling.  Those trials that were to start this week and later will begin as scheduled unless there was an inability to discuss the cases with the IRS.  In such cases, the Court should be advised and it will consider how best to proceed.  The notice also identifies the deadlines for taking certain actions that were/are impacted by the shutdown. 

The Tax Court notice advises, however, that any statutory filing deadlines provided in the Internal Revenue Code are not impacted by the shutdown.  That is, if you have a fixed 90 day deadline in which to file a case with the Tax Court, the 90 days still stands.  If that 90 days would have expired during the shutdown, the postmark date of any filed Petitions will govern whether the time period was satisfied.  If a Petition to the Tax Court is outside of the 90 days, it will likely mean that the case will be dismissed as filed late.

Friday, October 18, 2013

Wisconsin's Solo and Small Firm Practitioner Conference

On October 24th, I will be speaking at the State Bar of Wisconsin’s 8th Annual Solo and Small Firm Conference:  

My talk, entitled: "The Tax Man Cometh: What are the IRS, Wisconsin Department of Revenue and Local Authorities Up to in Audits, Appeals and Collections" will provide information on current developments in tax controversies at each level of government.  

The conference aims to help solo and small firm practicing attorneys build their business while improving their life.  There is still time to sign up!

Thursday, October 17, 2013

Start Your Engines…the Internal Revenue Service is Back to Work.

October 17th marks the end of the lapse in appropriations that caused the Federal Government Shutdown.  The Shutdown kept IRS employees home from work for the past 16 workdays.  Because the IRS has now returned to work, it is time to put the back to work as well. 

With approximately 91 percent of IRS employees returning to work, we should expect that operations will be back to full swing in the next few days.   During the shutdown, individuals and business owners were unable to move forward with the resolution of any tax matters (audits, collections, appeals, etc.)  Those with outstanding tax liabilities were able to breathe a sigh of relief as the shutdown meant no new liens or levies. 

Now that the IRS is returning to work, audits will be resumed and collection activity will start again.  Of course there will be a 16 day backlog that has to be dealt with.  Unfortunately, however, this likely means that less time will be spent on each account.  While at first blush this may sound as though it will increase the number of favorable results, it may well mean the opposite.  Taxpayers should be prepared to make sure that their rights are safeguarded and that proper procedures are followed.  Overwhelming workloads may mean that corners are cut and that matters may not receive the attention that they require.  It is simply a question of workload vs. time available.  Therefore, whether working with a professional, or dealing with a tax matter alone, individuals and business owners should make sure that their matter is dealt with thoroughly and that the proper outcome of any case is achieved.