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November 18,  2008

Federal Headlines

Jurisdiction over Overpayment Claim Not Lost Where IRS Concedes Fraud Penalty Barring Assessment (Fisher, TCM)

 

The Tax Court had jurisdiction over an individual's claim for tax overpayment after the regular three-year limitations period had expired. Although the IRS had conceded the fraud penalty, which justified the unlimited limitations period, and argued that the court lacked jurisdiction because the deficiency notice was issued after the limitations period had expired, it did not dispute the validity of the deficiency notice. Thus, the individual properly invoked the court's jurisdiction by timely filing a petition for redetermination of the deficiency. Because the Tax Court acquired jurisdiction to redetermine the deficiency, it also had jurisdiction to determine the amount of any overpayment of the same tax for the same taxable period under Code Sec. 6512(b). The IRS's subsequent concession of the fraud penalty, which barred the assessment for the tax year in question, did not cause the court to lose jurisdiction since its jurisdiction did not depend on the IRS's ability to assess a deficiency.

R.D. Fisher, TC Memo. 2008-256, Dec. 57,585(M)

Other References:

 

Code Sec. 6512

 

CCH Reference - 2008FED ¶39,100.393

 

Tax Research Consultant

 

CCH Reference - TRC LITIG: 6,126

Extension of Limitations Period Not Executory Contract Extinguishable in Bankruptcy (Greenfield Est., CA-11)

 

The Tax Court properly determined an estate's income tax deficiency. Contrary to the taxpayers' contention, a Form 872-A, Special Consent to Extend the Time to Assess Tax, is a unilateral waiver of the statute of limitations on assessment, not an executory contract that can be extinguished in bankruptcy. The extension could be terminated only if the taxpayer filed a Form 872-T, Notice of Termination of Special Consent to Extend the Time to Assess Tax, or the IRS issued a notice of deficiency to the taxpayer for that tax year. Moreover, the taxpayers' argument that Form 872-A constituted a waiver that extended only to the tax deficiency, and not to the increased interest rate on that deficiency, was rejected. Since the word "tax" in Form 872-A includes penalties and interest, Form 872-A constituted a waiver of the statute of limitations as to both tax and interest.

 

Further, res judicata did not preclude the IRS from asserting a tax deficiency for a particular year since it failed to assert that deficiency in the bankruptcy proceeding. Since the IRS's proof of claim included tax liabilities for other tax years, the taxpayers' tax liability for that year was not at issue in the bankruptcy proceeding and there was no final judgment reagrding that year. Further, the IRS's failure to include that tax deficiency in its proof of claim did not render it a dischargeable debt and did not preclude the IRS from assessing or collecting that tax after the bankruptcy discharge was granted. The tax deficiency for that year was a priority tax because it had not yet been assessed, but was still assessable by Form 872-A when the debtor filed for bankruptcy.

 

Unpublished opinion denying review, per curiam, of the Tax Court, 95 TCM 180, Dec. 57,317(M), TC Memo 2008-16.

M.E. Greenfield Est., CA-11, 2008-2 USTC ¶50,635

Other References:

 

Code Sec. 6501

 

CCH Reference - 2008FED ¶38,963.16

 

CCH Reference - 2008FED ¶38,963.32

 

CCH Reference - 2008FED ¶38,967.599

 

CCH Reference - 2008FED ¶38,967.624

 

CCH Reference - 2008FED ¶38,967.6265

 

CCH Reference - 2008FED ¶38,967.704

 

Tax Research Consultant

 

CCH Reference - TRC IRS: 27,212

 

State Headlines

California --Personal Income Tax: More Information Provided on Mandatory E-Pay Requirement for Individuals

 

The California Franchise Tax Board (FTB) has released additional information on the new requirement that personal income taxpayers with estimated tax or extension payments over $20,000, or with tax liabilities over $80,000, send payments electronically (e-pay). The mandatory e-pay requirement, enacted by A.B. 1389, Laws 2008, is based on estimated tax or extension payments made or tax returns filed for taxable years beginning on or after January 1, 2009. Once the mandatory e-pay threshold is met, a taxpayer is required to make that payment and subsequent payments electronically, regardless of the amount, type, or taxable year. Details of the legislation and an FTB Tax News article on the new requirement were previously reported. (TAXDAY, 2008/10/03, S.9, TAXDAY, 2008/11/05, S.7)

 

Fiduciaries, estates, and trusts are not required to make payments electronically, regardless of the amount owed.

 

As previously reported, the FTB will send a courtesy notice to taxpayers who meet the mandatory e-pay threshold and who pay using a nonelectronic method. Some tax preparation software may also remind taxpayers to e-pay. However, if any tax preparation software generates paper Form 540-ES vouchers when a taxpayer meets the mandatory e-pay threshold, the taxpayer must still pay electronically.

 

A penalty equal to 1% of the amount paid may be imposed for failure to comply with the new requirement, unless the failure to pay electronically is for reasonable cause and not willful neglect.

 

A taxpayer can obtain a waiver of the requirement if the FTB determines that the amounts paid in excess of the threshold amount were not representative of the taxpayer's tax liability. The FTB will review waiver requests and notify taxpayers in writing when it approves or denies such requests. The FTB previously announced that the waiver request form will be available on its Web site in March 2009. If the FTB grants a waiver and the taxpayer subsequently meets the mandatory e-pay requirement, the taxpayer must resume making payments using an electronic method.

 

Individuals who meet the e-pay criteria and file their own tax returns are not required to e-file their returns, but the FTB encourages those individuals to e-file. If an individual uses a tax preparer that files 100 or more tax returns, the FTB requires that tax preparer to file tax returns electronically.

Announcement, California Franchise Tax Board, November 14, 2008

 

 

Washington --Sales and Use Tax: Model 2 Volunteer Sellers to Receive Compensation

 

In order to comply with a requirement of membership in the Streamlined Sales and Use Tax Agreement (SSUTA), Washington will provide compensation to model 2 volunteer sellers collecting and remitting sales and use taxes in Washington.

 
Model 2 Volunteer Sellers

 

A "model 2 volunteer seller" uses a certified automated system to perform part of its sales and use tax functions, retains the responsibility to remit sales and use taxes to Washington, and is registered with the SSUTA central registration system (CRS) as a model 2 seller. Further, to qualify as a model 2 volunteer seller, one of the following conditions must be met:

 

-- the seller represents that it does not have a legal requirement to register and does not in fact have a legal requirement to register in Washington at the time of registration with CRS; or

 

-- the seller registers with the CRS after November 12, 2002, and prior to the date of registration and continuing thereafter, has no fixed place of business in Washington for more than 30 days, has less than $50,000 of property in Washington, has less than $50,000 of payroll in Washington, and has less than 25% of its total property or payroll in the state.

Status as a qualified seller does not remove the requirement to register with the Department of Revenue for state tax purposes.

 
Monetary Allowances

 

Monetary allowances consist of a portion of the sales and use taxes collected by the qualified seller. If a qualified seller installs a certified automated system on or after July 1, 2007, it may receive monetary allowances for a period of up to 24 months following the date of installation. A qualified seller's compensation is determined by multiplying the rate of 1.5% by the total amount of retail sales and use tax collected. The monetary allowances are limited to $10,000 per 12-month period.

 
Filing of Returns

 

Qualified sellers are required to file returns electronically. The sales and use taxes must be remitted using ACH Debit, ACH Credit, or the Fed Wire Funds Transfer System.

 

Subscribers to CCH Tax Research NetWork can view the rule.

 

WAC 458-20-27701, Washington Department of Revenue, effective December 1, 2008

 
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