News and miscellaneous legal topics – current

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Listed below are various legal items, with emphasis on Missouri and federal taxes. You can access these items as an RSS ("rich site summary" or "really simple syndication") feed by pointing your RSS reader to (copy this link and paste it as the RSS feed in your news/RSS reader) http://www.carnahanlaw.com/rss/rss.xml

The IRS released the 2010 version of its discussion and rebuttal of many of the more common frivolous arguments used in opposing compliance with federal tax laws. http://www.irs.gov/pub/irs-utl/friv_tax.pdf 2/5/10

The IRS Small Business/Self-Employed Division (SB/SE) released 3 interim optional guidances recognizing how the current economic downturn impacts OICs:

An additional review must be initiated before rejection if the difference between taxpayer's offer and IRS determined "reasonable collection potential" is solely attributable to a disagreement on real property equity.
Taxpayers are not required to include a 20% payment or periodic payments to change an accepted offer. Nospecific form is required (e.g., Form 656), but the proposal must be in writing. IRS employees are to review updated financial information and supporting documents and negotiate based on taxpayer’s current financial situation, recognizing how quickly circumstances change in the current economy.
Although IRS procedures require any OIC without Form 656-A, low income fee waiver, be returned as not processable, the OIC will be processed if the offer meets IRS Low Income Guidelines, as defined in Form 656, the offer will be considered processable. 2/4/10

The IRS posts information on its web site on the Health Coverage Tax Credit ("HCTC"). The HCTC is a federal tax credit that enables eligible individuals to pay only 20 % of qualified health insurance premiums for themselves and their family members. www.irs.gov/individuals/article/0,,id=109915,00.html 1/14/10

National Taxpayer Advocate Annual Report to Congress 1/6/10

National Taxpayer Advocate Nina E. Olson today [1/6/10] released her annual report to Congress, warning that increased demands on the IRS have eroded the agency’s ability to meet taxpayer service needs and expressing concern that IRS collection practices are harming financially struggling taxpayers without producing significant revenue gains. ...

In particular, the report cites IRS lien filing policies as the second most serious problem facing taxpayers. The IRS uses automated systems to file liens against taxpayers in a variety of situations, even when the taxpayer possesses minimal or no property and the lien will do little more than damage the taxpayer’s financial viability and access to credit. A study conducted by Olson’s office found no obvious causal relationship between the number of lien notices filed and the amount of overall revenue collected.

A second study found that IRS procedures for determining a taxpayer’s ability to pay outstanding tax liabilities may be driving some taxpayers into long-term noncompliance because the IRS fails to consider other debts such as credit card balances, school loans, and actual hospital or medical bills. Other tax systems, including Sweden’s, consider the taxpayer’s overall financial picture.

“Any taxpayer with these debts will tell you that these creditors don’t go away,” Olson said. “Taxpayers are placed in the intolerable position of agreeing to pay the IRS more than they can actually afford (given their other debts) and then defaulting on the IRS payment arrangements when they channel payments to unsecured creditors in order to get some peace. Thus, the IRS itself fosters noncompliance by its failure to take a holistic approach to the taxpayer’s debt situation.”

Letter Ruling No. LR5552, Missouri Department of Revenue, dated April 7, 2009, held that an out-of-state vendor ("Vendor") selling tangible personal property to customers and resellers in Missouri established nexus requiring the vendor to collect Missouri use tax, and to obtain signed resale certificates from its resellers and not collect use tax on such sales. The ruling cites 12 CSR 10-114.100(2)(B) defining "physical presence", including having agents, representatives, independent contractors, brokers or others that reside in, or regularly and systematically enter into, this state on behalf of the vendor.

Vendor operates a website selling products via mail-order, the Internet, telephone, or facsimile, and it delivers products to purchasers by mail or common carrier from out-of-state. Vendor does not send direct mailers to the public or advertise through television, radio, newspaper, or other media. Vendor's customers can purchase the products for their own use, or to sell to others ("resellers"). Resellers receive discounts and other incentives, and there are no sales quotas and there are no restrictions on sales, recruiting activities, or territories. Vendor employs five regional managers based out-of-state who held three one-day seminars to educate on products, but not on sales techniques, and they made approximately nine visits to top sellers in Missouri in 2007. Vendor holds two conventions each year in different cities in the United States, but held no conventions in Missouri in the past ten years. Customers may return products to Seller within 90 days of purchase for a full refund, replacement, or credit, but may not return products to resellers. 5/17/09

Information on the tax consequences of canceled debt is available in an audio podcast and a written transcript on http://www.irs.gov/businesses/small/article/0,,id=97726,00.html 4/28/09

Nina E. Olson, National Taxpayer Advocate, 2/26/09 statement before the Subcommittee On Oversight Committee On Ways And Means U.S. House Of Representatives Hearing on tax compliance challenges facing financially struggling taxpayers http://waysandmeans.house.gov/media/pdf/111/olson.pdf 4/28/09

The IRS has a comprehensive new insolvency worksheet included in the newly revised edition of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals), to determine whether and to what extent taxpayers are insolvent, and thus whether and to what extent their canceled debts are excluded from gross income. http://www.irs.gov/pub/irs-pdf/p4681.pdf 4/27/09

FICO, fka the Fair Isaac Corporation, has a new free web service to help determine eligibility for mortgage relief under the Making Home Affordable program (MHA) by the US Treasury to help up to 7-9MM US homeowners stay in their homes, and free credit counseling http://www.mortgagereliefonline.com/ 4/25/09

Where Do Our Federal Tax Dollars Go ? (Center on budget and Policy Priorities). 4/14/09

Where Do Our State Tax Dollars Go ? (Center on budget and Policy Priorities). 4/14/09

A divided Tax Court invalidated Reg. § 1.6015-5(b)(1), which required taxpayers seeking innocent spouse relief under I.R.C. § 6015(f) to request such relief within two years of the IRS's commencement of the collection action. Lantz v. Commissioner, 132 T.C. No. 8 (Apr. 7, 2009).

To be eligible for relief under section 6015(b) or (c), the statute explicitly provides that the requesting spouse must elect relief not later than the date that is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election. Sec. 6015(b)(1)(E) and (c)(3)(B). However, there is no such limitation in section 6015(f). “‘It is generally presumed that Congress acts intentionally and purposely’ when it ‘includes particular language in one section of a statute but omits it in another’”.

Appeal process for the COBRA subsidy. The United States Department of Labor issued a FAQ for Employers at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html. The DOL FAQ indicatesthe employer makes the initial subsidy eligibility determination based on the enrollment forms and the Request for Treatment as an Assistance Eligible Individual form provided with the new model notices. Employees make application for the subsidy and employers either approve or deny the request. Appeals of denial of the assistance will be made directly to the DOL (not to the employers) through a form and review process being developed by the DOL. The DOL has 15 days from receipt of an appeal to make a determination. Because of the short time period for response, employers should expect to have to give the basis for their rejection of the subsidy request to the DOL almost immediately. 4/7/09

The United States Department of Labor issued four model notices for employers and plan sponsors to use in administering this new COBRA subsidy, available at the DOL web site http://www.dol.gov/ebsa/COBRAmodelnotice.html. Each notice must be specifically tailored and customized to provide accurate information for the issuing employer or plan. 4/7/09

The American Recovery and Reinvestment Act includes a new set of obligations under the Children's Health Insurance Program Re-authorization Act of 2009 (CHIPRA), including certain notice and reporting requirements. It requires group health plans to allow individuals who were not covered by the plan to enroll when the become eligible for Medicaid/CHIP or when they become eligible for a premium subsidy from Medicaid/CHIP, regardless of whether such an event occurs during the plan's open enrollment period. 4/7/09

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