WHISTLEBLOWER VERSUS IRS WHISTLEBLOWER OFFICE IS THE TAX COURT

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1 September 2016 Monthly Journal of Tax Controversy Contents Whistleblower versus Whistleblower Office 1 Deferring Assessment of the Trust Fund Recovery Penalty 12 New York Department of Taxation and Finance: Lessons Learned from LIU 17 Taxpayers Assistance Corporation Tip 24 Firm News 25 Tax Court Calendar 27 Upcoming Seminars and Events 28 Upcoming Free Events Tax Court Rules of Practice & Procedure- Part II October 4 RSVP: goo.gl/cu51h5 Hackensack, NJ New Jersey Tax Collection Forum October 27 RSVP: goo.gl/ft1hmr Hackensack, NJ The Ethics of Tax Practice November 1 RSVP: goo.gl/ktr6qh Hackensack, NJ WHISTLEBLOWER VERSUS IRS WHISTLEBLOWER OFFICE IS THE TAX COURT THE PLACE TO REMEDY THE PROBLEMS WITH THE WHISTLEBLOWER PROGRAM? By Frank Agostino, Esq. Esha Dahake Nicholas R. Karp 1 Whistleblowers 2 are people that draw attention to something they believe to be wrong. The program is based on the principle, If you know something, say something. Tax whistleblowers individuals who report on the underpayment of taxes or on the violation of tax laws by others help the IRS collect billions in tax revenue that may otherwise go uncollected. 3 In his August 2014 Statement on the Whistleblower Program, Internal Revenue Service ( IRS ) Commissioner Koskinen explained: The IRS Whistleblower Program, revised and expanded by Congress in 2006, is an important tool for improving tax administration. I am a strong believer in this program and proud of the work being done by the IRS Whistleblower Office. The information received from whistleblowers has the potential to assist the (Continued on page 2)

2 (Continued from page 1) IRS in detecting tax compliance issues, which in turn helps ensure the integrity and fairness of our tax system. Average taxpayers who play by the rules must be confident that corporations and wealthy individuals cannot avoid paying their fair share of tax through the creation and use of complicated financial structures that exploit the tax law. 4 IRC 7623(b) gives whistleblowers with information about tax evasion a significant financial incentive to report the information to the IRS. Public announcements by the IRS acknowledge the importance of whistleblowers. Many of the litigating positions taken by the IRS before the United States Tax Court 5 have the effect of undervaluing the contribution of whistleblowers and discouraging future whistleblowers. 6 Indeed, the U.S. Government Accountability Office (GAO) recently completed a study of the IRS Whistleblower Program. The title chosen speaks volumes: IRS Whistleblower Program: Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers. 7 Since 2014, the Tax Court has issued 14 opinions and dozens of substantive orders in whistleblower cases. These opinions address everything from drafting pleadings, establishing jurisdiction, obtaining discovery, and calculating the whistleblower award. The teaching of the cases is that (a) all tax controversy professionals, including those drafting and prosecuting reward claims, 8 should familiarize themselves with guidance being issued by the Tax Court, and (b) Tax Court review can ameliorate some, but not all of the deficiencies in the IRS Whistleblower Office (sometimes, IRSWO ). IRC 7623(b) Provides for a Mandatory Whistleblower Award If the Tax, Penalties, Interest, Additions to Tax, and Additional Amounts in Dispute Exceed $2 Million, and for the Tax Court s Review of the IRS Determination. By way of background, the IRS has had a discretionary informant award program since The recent litigation in the Tax Court results from the addition of IRC 7623(b) to the Internal Revenue Code (the Code ) 10 as part of the Tax Relief and Health Care Act of : If the Secretary proceeds with any administrative or judicial action described in subsection (a) based on information brought to the Secretary s attention by an individual, such individual shall, subject to paragraph (2), receive as an award at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action. 12 (Continued on page 3) 2

3 (Continued from page 2) Stated simply, the statute provides that if the IRS institutes an administrative or judicial action against a taxpayer and collects proceeds as a result of information provided by the whistleblower, the informant will receive a portion of the collected proceeds. Thus, IRC 7623(b)(1) changed the historical IRS reward programs by guaranteeing qualified whistleblowers a reward of at least 15 percent and as much as 30 percent of the amount the IRS collects because of information provided to the IRS. 13 More importantly, IRC 7623(b)(4) provides appeal of an award determination; that is, [a]ny determination regarding an award mentioned in the statute, may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). Congress gave the Tax Court the jurisdiction to review award determinations made by the IRS. 14 In the past several years, dozens of whistleblowers have appealed to the Tax Court for a review of their awards. The Tax Court s opinions reviewing these IRS determinations have given the public insight into the IRSWO 15 procedures for determining awards. Below, we summarize some of the lessons learned from recently decided cases. A Whistleblower Need Not File His/Her IRS Form 211 with the IRS Whistleblower Office. Generally, IRS whistleblower cases start with the filing of IRS Form 211, Application for Award for Original Information, with the IRS Whistleblower Office. 16 The plain language of IRC 7623(b)(1), however, provides for the payment of awards based on information brought to the Secretary's attention. Until recently, the IRS argued that whistleblowers were ineligible for an IRC 7623(b) award if he or she provided the information to any operating division of the IRS before submitting the information on Form 211 to the Whistleblower Office. In Whistleblower W, 17 the Court rejected the IRS s position. The cooperating witnesses/ claimants in the case filed their Forms 211 with the IRSWO after the Targeted Business had already pleaded guilty and paid the United States $74 million. However, the claimants had supplied their information to other federal agencies, including an IRS operating division, before submitting the information to the IRSWO on Form 211, which assisted in the eventual indictment of the Targeted Business. The IRS determined that the claimants were ineligible for an award under IRC 7623(b). The Tax Court ruled that the claims were timely, and that the IRSWO does not have exclusive authority to investigate the individual or entity that is the subject of an application for an award. Ultimately, the Tax Court reversed the IRS determination of no reward and awarded the claimants $17,791, (Continued on page 4) 3

4 (Continued from page 3) The IRS Has No Duty to Investigate the Whistleblower s Application, and the Tax Court Cannot Compel the IRS to Commence an Investigation, Redetermine the Tax Liability of the Target, or Determine That the Target Should Be Punished by a Fine. The whistleblower program is intended to elicit information not already in the IRS s possession. Claimants have argued that an informant that provides the government with information it does not already possess is entitled to a reward, whether or not the IRS pursues the information. Several Tax Court cases involve the IRS s failure to pursue information provided by the claimant. 19 The IRS rejected the whisteblowers reward claims, because under the plain language of IRC 7623, if nothing is collected, no reward is due. The claimants appealed to the Tax Court, asserting that their information was valuable, and they were owed a portion of what should have been collected had the government done its job. In effect, the whistleblowers argued that the collection of tax is not a discretionary agency action; it is a Congressional mandate. Consequently, the Code imposes a duty of diligence on the IRS to pursue whistleblower s allegations. 20 In its February 16, 2016 Order and Decision in Comparini v. Commissioner 21 the Court, citing Cooper v. Commissioner 22 explained: Congress did not authorize the Court to direct the Secretary to proceed with an administrative or judicial action. *** [W]histleblower awards are preconditioned on the Secretary s proceeding with an administrative or judicial action. *** If the Secretary does not proceed, there can be no whistleblower award. 23 Moreover, IRC 7623 does not give the Tax Court the ability to order the Commissioner to commence an investigation, redetermine the tax liability of the target, or determine that the target should be punished by a fine. 24 The IRS Needs to Conclude Its Investigation and Make a Determination Before the Tax Court Will Intercede on Behalf of a Whistleblower. Whistleblower claims take years to process. 25 The IRS will not discuss its investigation with the claimant until the investigation of the target taxpayer is complete. The IRS will not evaluate the merits of a reward claim until the end of the government s investigation of a target taxpayer. Also frustrating is that during an investigation, the only information the IRS provides claimants is whether the case is still open. As a result, some frustrated claimants have petitioned the Tax Court and requested a reward before the IRS sent its award determination. (Continued on page 5) 4

5 (Continued from page 4) In Whistleblower W v. Commissioner, 26 the claimant filed a Tax Court case based on an IRS letter implying, but not explicitly stating that the reward applicant s claim had been denied. The IRS moved to dismiss on grounds that it had not made a final determination, and therefore the Tax Court did not have jurisdiction. The Tax Court agreed with the IRS and held that to be treated as a determination for purposes of IRC 7623(b)(4), a communication must state the IRS s final conclusion that petitioner is not entitled to an award: [A] determination regarding an award means a determination as to the amount of an award or a determination to deny an award. Congress cannot possibly have intended that this phrase would embrace every subsidiary finding of fact or conclusion of law that enters into the Office s ultimate decision as to whether an award is appropriate and (if so) the amount thereof. 27 The Tax Court may exercise jurisdiction only to the extent expressly provided by Congress. Congress has only given the Court jurisdiction under IRC 7623(b)(4) when (a) the IRS makes any determination regarding an award under IRC 7623(b)(1), (2), or (3); and (b) a petition invoking the Court s jurisdiction is timely filed. In Whistleblower Cases, Tax Court Jurisdiction Is Conditioned on a Final Determination by the IRS and the Filing of a Timely Petition by the Claimant. As previously stated, the Court has jurisdiction under IRC 7623(b)(4) when the IRS makes any determination regarding an award under IRC 7623(b)(1), (2), or (3), and a petition invoking the Court s jurisdiction over that matter is timely filed with the Court. 28 The cases show that if there is any doubt as to whether a petition is timely, the IRS will file a motion to dismiss for lack of jurisdiction. Thus, in Allibone v. Commissioner, 29 the IRS moved to dismiss a whistleblower s petition as untimely notwithstanding its lack of direct evidence as to the date the Whistleblower Office actually mailed the notice of determination. Against this background, the Court reminded the Commissioner that: [T]he Commissioner s submission of indirect evidence such as testimony of habit or standard business practice is insufficient to prove the date of mailing of a final determination letter in a whistleblower case. 30 The Court denied the motion, because the IRS failed to provide the mailing date of the determination starting the 30-day clock to timely file a petition under IRC 7623(b)(4). (Continued on page 6) 5

6 (Continued from page 5) In Whistleblower Cases, the Court Has Jurisdiction to Determine Whether It Has Jurisdiction. After the IRS has determined that (a) the whistleblower qualifies for an award, or (b) the whistleblower should not receive an award or the claimant is unsatisfied with the award, the whistleblower may petition the Tax Court. IRC 7623(b)(5) prohibits the Tax Court from hearing whistleblower cases unless more than $2 million is in dispute. The $2 million threshold is a frequently litigated issue. In Lippolis v. Commissioner, 31 the IRS moved to dismiss claimants case for lack of jurisdiction on the grounds that (a) the potential award did not meet the $2 million threshold of IRC 7623(b)(5)(B), and (b) IRC 7623(b)(5)(B) was jurisdictional. The Tax Court disagreed. Reasoning that absent discovery petitioners would not have access to the information needed to demonstrate that the threshold was met, the Court determined that IRC 7623(b)(5)(B) created an affirmative defense. Specifically, the Court found: It would be unduly burdensome to require the whistleblower to provide or perhaps even to know of the existence of [the relevant records]. We conclude that section 7623(b)(5)(B) is an affirmative defense and that the Commissioner bears the burden of proof on this issue. 32 Thus, in whistleblower actions, the Court has jurisdiction to determine whether it has jurisdiction to review the IRS determination, and the $2 million requirement is an affirmative defense, not a jurisdictional condition precedent to review. By contrast, the Court will not review an award where the agreed-upon facts show that, as a matter of law, the jurisdictional amount cannot be met. In Whistleblower W v. Commissioner, 33 the Court determined that for a whistleblower to qualify for the mandatory whistleblower award, (a) the tax, penalties, interest, additions to tax, and additional amounts in dispute [must] exceed $2 million, and (b) the FBAR penalties do not constitute tax, penalties, interest, additions to tax, * * * [or] additional amounts for purposes of IRC 7623(b)(5)(B). 34 Once the Court Has Jurisdiction Over a Claim, the IRS Cannot Take Away or Rescind the Court s Ability to Review the Reward Determination. In deficiency cases, whether the Court has jurisdiction depends on facts as of the time that the Court s jurisdiction is invoked. Ringo v. Commissioner 35 held that the same rule applied to reward (Continued on page 7) 6

7 (Continued from page 6) cases. In Ringo, the IRS issued, but then attempted to rescind a determination against the claimant. The Court analogized the case to those involving notices of deficiency: The Court acquires jurisdiction in a deficiency case when the IRS has determined a deficiency and the taxpayer timely files a petition.... It is the determination... that provides the basis for the Court's jurisdiction.... Thus, even if a determination in a notice of deficiency is erroneous or the Commissioner concedes the determination in full, the notice is generally not rendered void but continues to provide a basis for our jurisdiction. 36 Similarly, in Comparini v. Commissioner, 37 the IRS issued multiple determination letters, some more definitive than others. When claimants petitioned the Tax Court, the IRS asserted that the Tax Court did not have jurisdiction, because the petition was not timely with respect to the first letter. The Tax Court held that it had jurisdiction if a petition was timely filed with respect to any determination letter, concluding, if it were otherwise, the Commissioner could largely frustrate judicial review by issuing ambiguous denials that did not seem to be, but were, determinations. 38 Ringo and Comparini compel the conclusion that once the IRS issues a determination, and the taxpayer petitions the Court, then nothing the IRS does can deprive the claimant of his or her day in court or the Tax Court of the power to review the IRS award determination. Whistleblowers Can Maintain Their Confidentiality in Tax Court Proceedings. Revealing a whistleblower s identity could adversely affect the whistleblower s professional reputation, current employment, and future employment opportunities. Accordingly, the IRS protects the identity of the whistleblower to the fullest extent permitted by the law. 39 Tax Court Rule 345 allows whistleblowers to file a motion requesting to proceed anonymously and to have the Tax Court filings sealed. In Whistleblower W v. Commissioner 40 the Court explained the showing necessary for a whistleblower to proceed anonymously. There, the petitioner reported a tax fraud scheme and received an award under IRC 7623(a), which he appealed. Whistleblower W s employer used physical force and armed men to intimidate him. Petitioner had received death threats. The Tax Court granted petitioner s motion to proceed anonymously under Rule 345, explaining, A whistleblower is permitted to proceed anonymously if the whistleblower presents a sufficient showing of harm that outweighs counterbalancing societal interests in knowing the whistleblower s identity. To date, there are no opinions suggesting that the Tax Court has ever denied a whistleblower s motion to proceed anonymously. (Continued on page 8) 7

8 (Continued from page 7) The IRS Cannot Limit the Claimant s Ability to Review Discovery That Is Relevant to the Determination. IRC 7623(b)(4) authorizes the Court to review the IRS award determinations. In addition to its standard practice of filing motions to dismiss in whistleblower actions, the IRS litigation strategy includes attempts to limit (a) the claimants ability to obtain information, and (b) the Court s review of the information that informed the IRS determination. To date, the Tax Court s reported opinions reject the IRS attempts to limit the Court s scope of review. Indeed, the Court s opinions suggest a preference that the IRS make its decision-making process more transparent so that the Court can conduct a meaningful review. In Whistleblowers W v. Commissioner, 41 the IRS refused to comply with the claimant s discovery requests on the ground that the Court s review should be limited to the administrative record compiled by the IRS. The Court rejected the IRS argument: Even were we to agree with [the IRS] that the Court s scope of review is the administrative record, [the IRS] cannot unilaterally decide what constitutes that record, and [the IRS s] response indicates that the purported record is incomplete. 42 In Whistleblower W v. Commissioner, 43 the IRS attempted to limit claimant s discovery request to only those documents that the IRS considered relevant. The Court rejected the IRS objection, reminding the government that, in the Tax Court: Rule 70 governs discovery, and paragraph (b) thereof provides that the scope of discovery is any matter not privileged and which is relevant to the subject matter involved in the pending case. The paragraph further provides: It is not ground for objection that the information or response sought will be inadmissible at the trial, if that information or response appears reasonably calculated to lead to discovery of admissible evidence. 44 *** [I]n a discovery dispute, once the discovering party makes some minimal showing of the relevance of the information or response sought to the subject matter involved in the pending case, the party opposing the production of information has the burden of establishing that the documents sought by the other party are not relevant or otherwise not discoverable. 45 Stated another way, in whistleblower cases, the IRS cannot unilaterally decide what is relevant. The Court s designated orders in Insinga v. Commissioner 46 and Crestek Inc. and Subsidiaries v. (Continued on page 9) 8

9 (Continued from page 8) Commissioner 47 suggest that the Tax Court will allow claimants discovery needed for the Court to meaningfully review IRS award determinations. 48 Collected Proceeds Include All Proceeds Collected by the Government from the Taxpayer. The last trend identified in the Tax Court s orders and opinions is the IRS attempt to limit the base from which to compute the mandatory award. IRC 7623(b) provides for a mandatory whistleblower award if the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2 million. The award required by IRC 7623(b)(1) is at least 15 percent, but not more than 30 percent of the collected proceeds. In Whistleblower W v. Commissioner, 49 the parties subsequently agreed that the petitioners were eligible for an award of 24 percent 50 of collected proceeds, but disagreed as to the amount of collected proceeds, much of which were in the form of fines and civil forfeitures, rather than tax, interest, and Title 26-based penalties. The Court rejected the government s attempt to limit whistleblower awards to proceeds collected under the Code. Indeed, the Court held: Section 7623(b)(1) uses plain language. The words and terms in question are commonly understood. The term for amounts used to calculate the award is collected proceeds. The term collected proceeds means all proceeds collected by the Government from the taxpayer. The term is broad and sweeping; it is not limited to amounts assessed and collected under title Consequently, collected proceeds include all amounts collected by the Government from the taxpayer including tax restitution payments, criminal fines, and civil forfeitures. Conclusion. Congress created an expansive mandatory reward program for whistleblowers. Between fiscal year 2011 and June 30, 2015, the IRS awarded over $315 million to whistleblowers. The Tax Court cases suggest that Tax Court review of IRS award determinations can increase the whistleblower s recovery. Tax professionals assisting whistleblowers should familiarize themselves with (a) the existing IRS procedures for evaluating claims, (b) the Tax Court Rules applicable to the appeal of an adverse IRS determination, and (c) the Tax Court s cases establishing de facto best practices for obtaining a meaningful review of IRS determinations. (Continued on page 10) 9

10 (Continued from page 9) Footnotes: 1. Frank Agostino, Esq., is principal of Agostino & Associates, P.C. Esha Dahake & Nicholas R. Karp are students in Agostino & Associates seminar series preparing tax professionals for the written examination for applicants other than attorneys at law (nonattorney applicants) for admission to practice before the United States Tax Court. This article was written to familiarize the class on the procedural and substantive issues relative to the Tax Court Rules that apply to whistleblower actions under IRC 7623(b)(4). 2. The IRS sometimes refers to persons who submit information under IRC 7623 as informants, and claimants. IRM, pt (3) (Dec. 23, 2008). Like the IRS, this article uses those terms interchangeably. 3. U.S. GOV T ACCOUNTABILITY OFFICE, GAO-16-20, IRS WHISTLEBLOWER PROGRAM: BILLIONS COLLECTED, BUT TIMELI- NESS AND COMMUNICATION CONCERNS MAY DISCOURAGE WHISTLEBLOWERS (2015) (hereinafter GAO REPORT ), available at 4. IRS Commissioner John Koskinen, Statement on IRS Whistleblower Program (Aug. 2014), available at For ease of reading, this article uses the terms United States Tax Court, the Tax Court or the Court interchangeably. References to the Court are to the United States Tax Court. 6. The IRS mission is to provide America s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. See Press Release, New IRS Mission Statement Emphasizes Taxpayer Service, available at 7. See GAO REPORT, supra note 3. The GAO Report observed: [T]he whistleblower community, including whistleblowers and their attorneys, continue to voice concerns that limited communication by IRS and lengthy award processes are frustrating current whistleblowers and discouraging potential whistleblowers. This jeopardizes the success of the program and hinders IRS s ability to reduce the tax gap. Id. at Existing IRS procedures require whistleblowers to use IRS Form 211, Application for Award for Original Information, to apply for an award. IRS Form 211 is available at 9. IRC 7623(a) is based on legislation enacted in 1867, which authorized the Secretary to pay such sums * * * as may in his judgment be deemed necessary for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws, or conniving at the same. Whistleblower W v. Commissioner, 146 T.C. No. 6, at 7-8 (2016). 10. All references to the Code are to the Internal Revenue Code as amended. 11. Pub. L. No , 120 Stat IRC 7623(b)(1) (emphasis added). 13. Claims submitted under IRC 7623(a) are not eligible for judicial review by the Tax Court. The IRS evaluates IRC 7623(a) claims using the criteria it uses to determine IRC 7623(b) awards. IRM, pt (Aug. 7, 2015), Filing a Claim for an Award under Sections 7623(a) or (b). 14. Tax Court Rules ( Rules ) 340 through 345 set forth the procedures for prosecuting a whistleblower action before the Court. Mostly, the Court adopted procedures similar to those it uses in deficiency actions. The claimant begins the process by filing a Petition for Whistleblower Award Action under Code Section 7623(b)(4). Rule 341 sets forth the Contents of Petition. Rule 342 directs petitioner to request a place of trial under Rule 140. Rule 343 gives the IRS 60 days from the date the petition was served an file an answer. Rule 344 defines the Joinder of Issue that allows discovery to proceeds. Rule 345 set forth procedures for claimant confidentiality. 15. For example, one lesson learned from the cases is that the informant should always request and review the IRS Form 11369, Confidential Evaluation Report on Claim for Award, prepared by the IRS. The Form includes narratives prepared by the relevant IRS operating division, explaining the claimant s contributions to the investigation and documenting the actions taken by the IRS. IRM, pt (Aug. 7, 2015), Form The Form may also lead to the discovery of other documents relevant to the issues raised in by the claim, including, revenue agent reports, copies of agreements entered into with the taxpayers, tax returns, and activity records. See, e.g. (Continued on page 11) 10

11 (Continued from page 10) Whistleblower W v. Commissioner, 147 T.C. No. 3 (2016). 16. IRM, pt (Aug. 7, 2015), Filing a Claim for an Award under Sections 7623(a) or (b); see also IRM, pt (Dec. 23, 2008)(Use Form 3949, Information Report Referral, to record information from whistleblowers.). 17. Whistleblower W v. Commissioner, 144 T.C. 290 (2015). 18. Whistleblower W v. Commissioner, 147 T.C. No. 4 (2016). 19. See, e.g., Simmons v. Commissioner, T.C. Docket No W (Aug. 30, 2016). 20. The IRS s failure to pursue meritorious claims is inconsistent with the spirit of the whistleblower program and the IRS mission. In the current resource challenged environment, Congress should amend the Code to (a) allow claimants to sue target taxpayers on behalf of the IRS, and (b) allow the Tax Court to determine the appropriate reward. Compare Dennis J. Ventry Jr., Whistleblowers and Qui Tam for Tax, 61 TAX LAW. 357, 372 (2008) (arguing that the whistleblower program should be expanded to allow qui tam suits) with Franziska Hertel, Note, Qui Tam for Tax?: Lessons from the States, 113 COLUM. L. REV. 1897, 1902 n.27 (2013). 21. Comparini v Commissioner, T.C. Docket No W (Feb. 18, 2016) T.C. 597, (2011). 23. Comparini, T.C. Docket No W, at Id. 25. GAO REPORT, supra note 3, at Whistleblower W v. Commissioner, T.C. Memo Id. at Kasper v. Commissioner, 137 T.C. 37, 41 (2011). 29. Allibone v. Commissioner, T.C. Memo Id. 31. Lippolis v. Commissioner, 143 T.C. 393 (2014). 32. Id. at Whistleblower W v. Commissioner, 146 T.C No. 6 (2016). 34. As discussed below, in Whistleblower W v. Commissioner, 147 T.C. No. 4 (2016), the Court observed that words used in the jurisdictional threshold requirement of IRC 7623(b)(5)(B) ( if the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000 ) are different from those used in IRC 7623(b)(1), which provides for an award of a percentage of the collected proceeds ( including penalties, interest, additions to tax, and additional amounts ). 35. Ringo v. Commissioner, 143 T.C. 297, 301 (2014). 36. Id. (citations omitted). 37. Comparini v. Commissioner, 143 T.C. 274 (2014). 38. Id. at IRM, pt (Aug. 7, 2015), Confidentiality of the Whistleblower. 40. Whistleblower W v. Commissioner, T.C. Memo , 41. Whistleblower One W v. Commissioner, 145 T.C. 8 (2015). 42. Id. 43. Whistleblower W v. Commissioner, 147 T.C. No. 3 (2016). 44. Id. at Id. at Insinga v. Commissioner, T.C. Docket No W (July 27, 2016). 47. Crestek Inc. v. Commissioner, T.C. Docket No (June 27, 2014). 48. Crestek, Docket No , (Aug. 8, 2016) (Order). 49. Whistleblower W v. Commissioner, 147 T.C. No. 4 (2016). 50. See IRM, pt (Aug. 7, 2015) for the factors used to determine award percentage. At a minimum, the claimants submissions in support of an award should discuss these factors. In discovery, the claimant should pursue discovery as to the IRS evaluation of each of the factors raised by the claimant. 51. Whistleblower W, 147 T.C. No. 4, at 32 (emphasis added). 11

12 DEFERRING ASSESSMENT OF THE TRUST FUND RECOVERY By Frank Agostino, Esq. Jairo G. Cano, Esq. 1 PENALTY Practitioners with clients that have employment tax issues may assume that assessment of the trust fund recovery penalty ( TFRP ) is mandatory in all cases. This is not true. When working these cases, it is important to keep in mind the IRS s position that the TFRP is a collection device designed to ensure collection of trust fund taxes. Accordingly, the IRS is not mandated to pursue assessment in all cases. This article explains the IRS s procedures for assessment of the TFRP and identifies the factors that are considered when the determination to defer assessment is made. Once a case with employment tax balances is assigned to a revenue officer, that officer has 120 days to determine whether he or she will pursue assessment of the TFRP. 2 The analysis and determination must be made in a manner that conforms with IRS Policy Statement 5-14 (Formerly P-5-60), which provides: Absent statutory considerations, assertion recommendations normally will be withheld in cases of approved and adhered to business installment agreements and bankruptcy payment plans. To the extent necessary, information with be gathered to support a possible assessment in the event the agreement is defaulted. 3 Based on this policy statement, the revenue officer has the discretionary authority to withhold assertion of the TFRP while the employer is attempting to resolve the liability through an in-business installment agreement or bankruptcy. 4 Accordingly, a revenue officer is not obligated to assess the TFRP, provided that: 1. The employer qualifies for an in-business installment agreement or will resolve the outstanding tax liabilities through a payment plan determined in a bankruptcy proceeding; 2. The potential responsible person(s) 5 agree to extend the statute of limitations for assessment of the TFRP; and 3. The investigation for assessment of the TFRP has been concluded. 6 When seeking to defer assessment of the TFRP, it is important to note that the decision to defer assessment is discretionary. In cases involving a repeater 7 or where the proposed installment agreement covers an extended period of time, i.e., the outstanding balances will not be paid within one year prior to the expiration of the earliest statute of limitations, the revenue officer can 12

13 (Continued from page 12) determine that assessment is in the best interest of the government. 8 Consequently, the IRS may not agree to defer assessment in those cases. Regardless of whether the IRS will pursue assessment, the revenue officer will want to conduct his or her investigation so that he or she can maintain a file in the event that assessment is required in the future. The investigation includes a request for bank statements, cancelled checks, bank signature cards, and corporate documents including articles of incorporation, bylaws, and documents that identify corporate officers and those with financial decision making authority. 9 In addition, the IRS will want to interview the potential responsible persons. Furthermore, the revenue officer will request a collection information statement from each of the potential responsible persons. 10 Once the fact-finding is completed and the revenue officer determines that assessment of the TFRP should be deferred, the taxpayer will receive a Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty. The taxpayer should sign the form and return it to the IRS to ensure non-assertion of the TFRP. To the extent that the employer complies with its repayment terms, the TFRP will not be assessed. However, if the employer defaults on its in-business installment agreement or bankruptcy plan, the IRS will seek assessment of the TFRP against those individuals for whom non-assertion was determined. While the provisions for seeking non-assertion are straightforward, practitioners should be familiar with the procedures that apply in cases where the revenue officer decides to pursue assessment. First, regular engagement with the revenue officer is important. To the extent that the revenue officer indicates that he or she will pursue assessment, it is prudent to request a meeting with the revenue officer and his or her manager before the Letter 1153(DO), Notification of Proposed Assessment, is issued to the potential responsible persons. During the manager meeting, the practitioner should discuss the case and explain why non-assertion is the right decision in the case. The discussion should include a reference to section 7803(a)(3) of the Internal Revenue Code ( Execution of Duties in Accord with Taxpayer Rights ) and its incorporation of the Taxpayer Bill of Rights. Specifically, premature assertion violates the right to challenge the position of the IRS, the right to be heard and the right to a fair and just tax system. If the revenue officer and the manager disagree with the application of TFRP assessment deferral, it may be necessary to seek assistance from the Taxpayer Advocate Service ( TAS ). In order to make the request, the individual will have to file IRS Form 911, Request for Taxpayer Advocate Service Assistance, with the local TAS office. Once engaged, the Taxpayer Advocate should reach out to the revenue officer and may delay the decision to assert pending review of the facts in the case. (Continued on page 14) 13

14 (Continued from page 13) In cases where both the revenue officer and the manager agree that the TFRP should be assessed, the revenue officer will issue Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, and Letter 1153(DO) to the potential responsible person. Those individuals will have 60 days from the date of the Letter 1153(DO) to file a formal protest explaining why the TFRP should not be assessed. In addition to the analysis of the relevant factors that explain why the penalty should not be asserted, i.e., the responsible person and willfulness factors, the protest should also explain why the deferred assessment policies apply in this case. The protest must be filed with the revenue officer who issued the Letter 1153(DO). In addition, the protest must include the necessary elements in order to be a valid protest. Those elements are: 1. The individual s name, address, and social security number; 2. A statement of where the individual wants to hold the Appeals conference; 3. A copy of Letter 1153(DO); 4. A statement of the tax periods involved; 5. A list of the findings that the individual disagrees with; 6. A statement of facts signed under penalties of perjury that explains why the individual disagrees with the findings; 7. The laws and other authorities on which the individual relies to support his or her claim. Once the timely protest is received, the revenue officer will forward the case to Appeals. If the deadline to protest has passed, the individual s procedural avenues to challenge assessment of the TFRP are limited. For example, when the case proceeds to collection and the individual receives a Final Notice of Intent to Levy or a Notice of Federal Tax Lien, he or she can request a Collection Due Process Hearing, provided that he or she files a timely request for such hearing. At the hearing, the individual can challenge the enforced collection actions and request a collection alternative. In addition, the individual can challenge the underlying liabilities, provided that he or she did not have a prior opportunity to challenge those liabilities. 11 According to the IRS, the receipt of an IRS Letter 1153(DO) constitutes a prior opportunity to challenge a liability. 12 This position has been sustained by the United States Tax Court. 13 Consequently, a taxpayer who was issued a Letter 1153(DO) that was received or refused will not be able to challenge the underlying liability in a Collection Due Process hearing. (Continued on page 15) 14

15 (Continued from page 14) However, a taxpayer can propose collection alternatives that are designed to protect his or her assets while the employer continues to pay the liability. During the CDP hearing, the Appeals Officer is required to verify that the requirements of the applicable laws and procedures have been met. 14 Furthermore, IRS Policy Statement 5.16 provides that: Whenever a taxpayer raises a question or presents information creating reasonable doubt as to the correctness or validity of an assessment, reasonable forbearance will be exercised with respect to collected provided: 1. Adjustment of the taxpayer s claim is within the control of the Service; and 2. The interest of the Government will not be jeopardized. 15 When these provisions are read together, it is appropriate to seek a collection alternative that protects the individual in the same manner that he or she would be protected if assessment were deferred. Therefore, when the facts of the case support non-assessment, the individual may request currently not collectible status while the company is paying the liability. The individual may make such request because the IRS did not follow proper procedures when it evaluated the basis for requesting non-assertion of the TFRP, and there is reasonable doubt regarding the validity of the assessment. Furthermore, the IRS s interest is not jeopardized, because the full tax will be paid through the employer s collection alternative. In addition, the individual may request a withdrawal of the tax lien, because the IRS filed the Notice of Federal Tax Lien prematurely or not in accordance with IRS procedures. 16 In order to present the argument, the individual will need to file IRS Form 12277, Application for Withdrawal of Filed Notice of Federal Tax Lien, with the Appeals Officer who is assigned to the CDP hearing. Against this background, it is clear why early intervention in employment tax cases is necessary. In cases where a practitioner is retained early, a proactive representative can evaluate the case and provide a clear payment plan to the IRS that will full pay the taxes and at the same time defer assessment of the TFRP. Once the case proceeds beyond the assessment determination, the practitioner can still advocate on behalf of the taxpayer. However, if the deadline to respond to the Letter 1153(DO) has passed, the individual assessed with the TFRP will have a harder time to protect himself against the consequences of a TFRP assessment. (Continued on page 16) 15

16 (Continued from page 15) Footnotes: 1. Frank Agostino, Esq., is principal of, and Jairo G. Cano, Esq., is an associate at Agostino & Associates, P.C. 2. IRM, pt (Nov. 12, 2015). 3. IRM, pt (June 9, 2003). 4. IRM, pt (2) (Nov. 12, 2015). 5. A responsible person, against whom the TFRP can be assessed, is one who has the duty to perform or the power to direct the act of collecting, accounting for, or paying over trust fund taxes. Determining responsibility is a fact-based analysis, often reliant on court precedent, though a responsible person for TFRP assessment purposes is most frequently found to be an officer of a corporation. See IRM, pt (Dec. 12, 2012). 6. IRM, pt (1) (Nov. 12, 2015). 7. A repeater is a taxpayer who has more than one delinquency for employment tax during the immediate past two years. IRM, pt (1) (May 7, 2012). 8. IRM, pt (2) (Nov. 12, 2015). 9. IRM, pt (Nov. 12, 2015). 10. IRM, pt (2) (Nov. 12, 2015). 11. IRC 6320(c), 6330(c)(2)(B). 12. IRM, pt (7) (Sept. 23, 2014). 13. See, e.g. Mason v. Commissioner, 132 T.C. 301, (2009). 14. IRC 6330(c)(1). 15. IRM, pt (2) (Mar. 1, 1984). 16. IRC 6323(j); IRM, pt (Oct. 14, 2013). 16

17 NEW YORK DEPARTMENT OF TAXATION AND FINANCE: LESSONS LEARNED FROM LIU POST S CIVIL AND CRIMINAL TAX CONTROVERSY UPDATES 2016 By Frank Agostino, Esq. Jairo G. Cano, Esq. 1 On August 18, 2016, Agostino & Associates, P.C. co-sponsored and participated at the annual Long Island University discussion on current civil and criminal tax controversy issues. This article highlights the significant New York State Department of Taxation and Finance ( Department ) issues that were discussed at Long Island University, with an emphasis on tax collection, residency audits and audits of cash intensive businesses. New York State Tax Collection Update Collection remains a top priority for the Department. 2 During the 2014 through 2015 fiscal year, the Department collected $68.1 billion in state taxes, including income, sales and use, franchise, property and other taxes. 3 Despite the growth in tax collection, the Department continues to work on initiatives designed to foster full compliance with its collection efforts. For example, the Department publishes lists of the top 250 individual tax debtors and the top 250 business tax debtors. The former list reports individuals with liabilities ranging from approximately $438,400 to approximately $24,900,000; 4 and corporate taxpayers with liabilities ranging from approximately $327,900 to approximately $26,100, Of the programs and initiatives designed to increase collection compliance, the driver s license suspension program has been very successful for New York. The program authorizes the Department to suspend a taxpayer s license if the taxpayer owes more than $10, Since its inception, the Department has collected over $244 million in previously unpaid taxes. 7 Before the Department can suspend a taxpayer s license, it is required to provide written notice of its determination no later than 60 days prior to when the Department intends to make the referral to the DMV. 8 Once notification is received, the taxpayer can protest the decision to suspend his or her license if one of the following conditions applies to the case: 1. The Department issued the notice to the wrong taxpayer; 2. The past due taxes have been satisfied; 3. The taxpayer s wages are being garnished to satisfy his or her tax liabilities or his or her liabilities for past due child support or combined child and spousal support; 17

18 (Continued from page 17) 4. The taxpayer s wages are being garnished for past due child support or combined child and spousal support; 5. The taxpayer s driver s license is a commercial driver s license; or 6. The Department erroneously determined that the taxpayer failed to comply with the terms of an existing installment agreement. 9 Although most tax debtors want to avoid the suspension because of the potential hardship that would result, this is not a valid basis for filing a protest. 10 A taxpayer whose license is suspended pursuant to New York Tax Law 171-v can apply for a restricted use license. 11 A restricted use license is available for an individual whose license has been suspended but who needs a license for employment, business, attending school, or travel for medical examination or treatment. 12 Consequently, the hardship issue can be alleviated through the issuance of a restricted use license. In addition to the license suspension program, the Department also relies on its tax warrant and levy programs to collect unpaid taxes. The tax warrant provides the Department with a security interest in the taxpayer s assets whenever there is an unpaid liability. Once the warrant is filed, the amount stated therein becomes a lien on the title of the taxpayer s real, personal and other property. The warrant remains in place until the liability is satisfied or the warrant expires. For real property, the warrant expires 10 years after filing and for personal property, the warrant can be enforced for 20 years. If the taxpayer does not engage the Department to resolve the issues, the Department will seek a levy to collect unpaid taxes. Before the levy is issued, the Department is required to provide the taxpayer with written notification of the property that is exempt from levy. 13 Once the levy is issued to the taxpayer s bank, the taxpayer s bank account will be frozen for 90 days. 14 Any bank that receives a levy is required to provide the taxpayer with a copy of an Exemption Notice, which informs the taxpayer of his or her rights and the exemptions that may apply to the taxpayer s case. 15 If an exemption is applicable, the taxpayer needs to deliver or mail a completed exemption claim form within 20 days to both the bank and the attorney for the Department. 16 From a practical perspective, it is prudent to negotiate a release of exempt funds with an understanding that the Exemption Notice will be filed by the statutory deadline if the exempt funds are not released prior to that deadline. In addition to a response by filing an Exemption Notice, a taxpayer can request non-issuance of a levy in cases where the costs associated with the levy exceed the amount that the Department (Continued on page 19) 18

19 (Continued from page 18) would receive from the sale of the levied assets. 17 Furthermore, the Department is required to release a levy under the following circumstances: 1. The liability becomes unenforceable because the period for collection expired; 2. The release of the levy will facilitate collection; 3. The taxpayer entered into an installment agreement; 4. The fair market value of the taxpayer s assets exceeds the amount of the liabilities and the partial release on the excess value would not hinder the timely collection of the liability; 5. The levy is creating an economic hardship due to the financial condition of the taxpayer. 18 When a taxpayer claims that a levy will create an economic hardship, the Department will evaluate factors similar to those evaluated by the IRS to determine if a levy is creating an economic hardship. Therefore, the taxpayer must demonstrate that the levy does not allow the taxpayer to provide for his or her basic living expenses. The taxpayer should refer to the IRS National Standards for guidance on the amount of each basic living expense that the Department will consider reasonable. Before the case proceeds to the enforced collection stage, taxpayers are encouraged to pursue a collection alternative that will allow them to resolve the outstanding liabilities on more favorable terms. For instance, the Department is authorized to enter into installment agreements if the agreement will facilitate collection. 19 In order to determine whether a taxpayer qualifies for an installment payment agreement, the Department will review: 1. prior compliance history; 2. current financial condition; and 3. compliance with all requirements. 20 An installment agreement can be requested by telephone or by completing the Department s online form. 21 Information about the taxpayer s current financial condition may be requested on Form DTF-5, Statement of Financial Condition and Other Information. In addition, the Department may request copies of three years of federal tax returns and one year of bank statements to evaluate the taxpayer s ability to pay. 22 Once the agreement is granted, the taxpayer must con- (Continued on page 20) 19

20 (Continued from page 19) tinue to comply with all current filing and payment obligations in order to prevent a default on the agreement. In addition to installment agreements, the Department is authorized to compromise a liability in cases where: 1. The taxpayer was discharged in bankruptcy; 2. The taxpayer demonstrates insolvency; or 3. The taxpayer demonstrates that payment of the full amount owed would create an undue economic hardship. 23 A taxpayer who believes that he or she will qualify for an offer should submit either Form DTF-4, Offer in Compromise, or DTF-4.1, Offer in Compromise Fully Determined Liability. The Form DTF-4 is appropriate when the taxpayer has a doubt as to the total amount of the liability. If there is no dispute on the liability, the taxpayer should use Form DTF-4.1. In addition, the taxpayer must submit Form DTF-5, Statement of Financial Condition and Other Information, to identify all assets, liabilities, and income and expenses. New York Statutory Residence Cases The Department has pursued individuals whom it believes are statutory residents of New York who are required to file Resident Income Tax Returns in the state. The Department relies on informational returns that are filed using a New York State address, including IRS Forms W-2 and 1099 to identify individuals who may have this requirement. For example, if Taxpayer A lives in New Jersey, but opened a bank account with Bank B using a New York address, the Form INT issued by Bank B will report the New York address. The Department can rely on that informational return to audit Taxpayer A to determine if he or she is a statutory resident that should have filed a resident income tax return. Because these cases are brought after the return is filed and may conclude well after the three year period following the filing of the return, these individuals may be precluded from filing an amended return in their domicile state to claim a foreign tax credit for the income taxes that New York assesses against them. Accordingly, residency cases should be handled with care to ensure that these individuals are able to take advantage of the tax credit in these cases. 24 A statutory resident is an individual who is not domiciled in New York, but maintains a permanent place of abode in New York State and spends an aggregate of more than 183 days of the taxable (Continued on page 21) 20

21 (Continued from page 20) year in the State. 25 When evaluating a taxpayer s time spent in New York, any part of the day spent counts towards the calculation. 26 For example, a taxpayer who crossed the border into New York for a few hours of shopping and dining was deemed to have spent each of those days in New York for purposes of determining his or her time spent in the state. 27 Given these procedures, any individual who maintains a permanent place of abode in New York is encouraged to maintain adequate records to substantiate the fact that he or she did not spend more than 183 days in the state during the taxable year under review. 28 The laws governing the maintenance of a permanent place of abode are more complex. The Department s long-held view was that an individual maintained a permanent place of abode if that individual had mere property rights in the property. The Department did not consider the property s actual use in its evaluation. This analysis was rejected by the New York Court of Appeals in Gaied v. New York State Tax Appeals Tribunal. 29 The Gaied case involved a taxpayer who owned a three-unit apartment building in New York. The taxpayer allowed his parents to live in one unit rent free and rented the other two units during the years at issue. The Department argued that the taxpayer maintained a permanent place of abode in the state, despite the actual use of the property. The Court of Appeals rejected the Department s interpretation of the statute and concluded that the analysis must include a review of whether the taxpayer actually has a residential interest in the property. New York State Audits of Cash Businesses The Department has increased its review of cash intensive businesses to ensure compliance with sales and use, franchise and income tax requirements. Businesses that operate in the state are required to maintain adequate books and records for three years. The records must relate to every sale, the amount charged, the sales tax due or if the transaction is exempt, a copy of the sales tax exemption certificates must be maintained. A company that fails to comply with these requirements will subject itself to an indirect method of proof audit where the Department will most likely rely on a mark-on analysis to redetermine the company s gross receipts. For example, in the Matter of Casa Di Pizza, Inc. and Joseph Jacobbi, 30 the business operated a restaurant with a take-out and delivery business and a catering and banquet hall facility. During the audit, the Department determined that the taxpayers did not maintain guest checks, POS system reports, or sales summary reports. Sales were reported on weekly spreadsheets and the taxpayer maintained a box of records showing sales tax exempt sales. The Department was unable to reconcile purchase information received from vendors with the information reported on the company s general ledger. In addition, it was unable to reconcile sales reported on the general ledger and income tax returns with the sales reported on the company s sales tax returns. Finally, (Continued on page 22) 21

22 (Continued from page 21) there was a huge discrepancy between the credit card receipts deposited into the company s bank accounts and the amounts reported on the sales tax returns. Because the taxpayer maintained inadequate books and records, the Department conducted an on-premises review of the taxpayer s business for one day. Based on that review, the Department concluded that the taxpayer sold $6, in taxable sales during the day and that of this amount $4, represented taxable credit card sales. Accordingly, the department calculated a sales-to-credit card percentage that was applied to each of the audit periods to determine adjusted taxable sales. The Court concluded that the audit method used was reasonable and that the taxpayers failed to demonstrate that this audit method was unreasonable or resulted in an erroneous assessment of tax. Footnotes: 1. Frank Agostino is the principal of and Jairo G. Cano is an associate at Agostino & Associates, PC. 2. Readers who would like to learn more about the New York Department of Taxation and Finance collection process are encouraged to read A Primer on New York State Tax Collection, published in the April 2016 issue of the Agostino & Associates Monthly Journal of Tax Controversy, available at a=v&pid=sites&srcid=zgvmyxvsdgrvbwfpbnxzzw1pbmfybwf0zxjpywxzfgd4ojcyywvkyzjjnmflngy4mj M. 3. Fiscal Year Tax Collections: , N.Y. STATE DEP T OF TAXATION & FIN., collections/fy_collections_stat_report/2014_15_annual_statistical_report_of_ny_state_tax_collections.htm (last updated Aug. 17, 2015). 4. New York State Delinquent Taxpayers Top 250 Individuals (Aug. 2016), available at enforcement/delinquent_taxpayers_individuals.pdf 5. New York State Delinquent Taxpayers Top 250 Businesses (Aug. 2016), available at enforcement/delinquent_taxpayers_businesses.pdf. 6. N.Y. Tax Law 171-v. 7. Comments from Karen J. Tenenbaum, Esq., at LIU Posts Civil and Criminal Tax Controversy Updates 2016, Aug.18, N.Y. Tax Law 171-v(3). 9. N.Y. Tax Law 171-v(5). 10. Id. 11. N.Y. Veh. & Traf. Law 510(4-f)(5). 12. N.Y. Veh. & Traf. Law N.Y. Tax Law N.Y.C.P.L.R. 5232(a). 15. N.Y.C.P.L.R N.Y.C.P.L.R a. 17. N.Y. Tax Law N.Y. Tax Law 3022(a)(1). 19. N.Y. Tax Law 3010(a). 20. Request an Installment Payment Agreement, N.Y. STATE DEP T OF TAXATION & FIN., ipa.htm (last updated Jan. 8, 2016). (Continued on page 23) 22

23 (Continued from page 22) 21. Id. 22. N.Y. STATE BAR ASS N TAX SECTION, REPORT ON NEW YORK STATE INSTALLMENT PAYMENT AGREEMENTS, Nov. 26, 2013, available at Tax_Section_Report_1294.html 23. N.Y. Tax Law For taxpayers domiciled in New Jersey, a protective claim should be filed with the Division of Taxation prior to the expiration of the three year statute of limitations. A claim filed after the conclusion of the three year period will be denied as untimely, even in cases where the Department concludes its case after the three year period. See, e.g. Bernard v. Dir., Div. of Taxation, Docket No , 2014 WL (Feb. 23, 2015) (unreported). 25. N.Y. Tax Law 605(b)(1)(B). 26. N.Y.C.R.R See, e.g. Matter of John & Patricia D. Klingenstein, DTA No See N.Y.C.R.R (c) N.Y.3d 592 (2014). 30. Matter of Casa di Pizza, Inc. and Joseph Jacobbi, DTA Nos , , , & (June 23, 2016). 23

24 MONTHLY TAXPAYERS ASSISTANCE CORPORATION TIP: IRS PROPOSES NEW INSTALLMENT AGREEMENT FEES By law, federal agencies are required to charge a user fee to recover the cost of providing certain services to the public that confer a special benefit to the recipient, and agencies must review these fees every two years to determine whether they are recovering the costs of providing these services. Installment agreements are an example of this special benefit. In the past, the IRS often charged less than the full cost for many services, but given the current constraints on agency resources, the IRS can no longer continue this practice in most cases. Nevertheless, the IRS intends to continue subsidizing part of the cost for low-income taxpayers. The proposed revised schedule of user fees, which would take effect on Jan. 1, 2017, are as follows: Regular installment agreement $225 Regular direct debit installment agreement $107 Online payment agreement $149 Direct debit online payment agreement $31 Restructured or reinstated installment agreement $89 Low-income rate $43 Further details on these proposed changes can be found in the proposed regulations, 1 now available in the Federal Register for comment. A public hearing on the regulations will take place in Washington, D.C. on October 19, For details on submitting comments, see the proposed regulations. 2 Desa Lazar, Esq. 1. User Fees for Installment Agreements, 81 Fed. Reg (proposed Aug. 22, 2016), available at s3.amazonaws.com/public-inspection.federalregister.gov/ pdf 2. IRS Proposes Revised Fees for Installment Agreements; New Lower Fee Available for Direct Debit Online Payment Agreements; Special Relief Provided to Low-Income Taxpayers, IR , IRS.GOV, Aug. 19, 2016, 24

25 FIRM NEWS: A&A Attorneys to Speak at UCLA Tax Controversy Institute Frank Agostino, Esq. and Lawrence A. Sannicandro, Esq. will participate in the 32nd Annual Tax Controversy Institute in Beverly Hills, CA. On October 25, 2016, Frank will present on Gotchas: The Unanticipated Consequences of Late Filings, Amended Return Filings, and Quiet Voluntary Disclosures. Larry will present on Liability of Banks, Financial Advisors, and Return Preparers for Their Clients Failure to File FinCEN Form 114 and Other Information Returns. A&A Attorneys to Speak at ABA Tax Section Joint Fall CLE Meeting Frank Agostino, Esq., Jairo G. Cano, Esq., and Lawrence A. Sannicandro, Esq. will also participate in the ABA Tax Section Joint Fall CLE Meeting in Boston, MA. On Thursday, September 29, 2016, Larry will present on Tax Court 101: Pre-Trial Tips & Best Practices. On Friday, September 30, 2016, Frank will present on Asset Transfers and Tax Liens: The IRS Monkey-Wrench in Probate and Business Succession Planning, and Jairo will present on Fundamental IRC 501(c)(3) Organization Issues through the Eyes of Current Case Law. Upcoming Webinars on CPAacademy.org Jairo Cano, Esq. and Lawrence A. Sannicandro, Esq. will continue to present webinars through CPAacademy.org, the country's largest provider of free live CPE webinars. A list of Jairo and Larry s upcoming webinars are: 1. Fundamentals of Representing Taxpayers in Collection Matters Before the IRS: (a) 4 p.m. E.D.T. on September 19, 2016; (b) 4 p.m. E.D.T. on October 24, 2016; and (c) 4 p.m. E.S.T. on November 21, Audits of Cash Intensive Businesses; (a) 11 a.m. E.D.T. on October 5, 2016; and (b) 11 a.m. E.D.T. on October 31, Representing the Innocent Spouse in Pre-and Post-Filing Tax Controversies: (a) 11 a.m. E.D.T. on October 6, 2016; and (b) 11 a.m. E.D.T. on November 2, Nuts and Bolts of Employment Taxes and the Trust Fund Recovery Penalty: (a) 4 pm E.D.T. on October 6, 2016; and (b) 4 p.m. E.S.T. on November 9, An Introduction to Valuation Discounts: (a) 11 a.m. E.D.T. on October 7, 2016; and (b) 11:00 a.m. E.D.T. on November 3,

26 (Continued from page 25) 6. What Non-Attorneys Need to Know About Litigating Valuation Cases: (a) 11 a.m. E.D.T. on October 14, 2016; and (b) 11 a.m. E.S.T. on November 15, Everything You Need to Know About Audits of Estate and Gift Tax Returns: (a) 4 p.m. E.S.T. on November 22,

27 UPCOMING UNITED STATES TAX COURT CALENDAR CALLS All Calendar Calls Are Held at: Jacob K. Javits Federal Building 26 Federal Plaza Rooms 206, 208 New York, NY September 26, 2016 October 31, 2016 November 14, 2016 November 28, 2016 December 12, 2016 The United States Tax Court has announced its non-attorney admissions exam ( USTCE ) will be held at 12:15 p.m. on Tuesday, November 15, 2016 at the Ronald Regan Building and international Trade Center in the Atrium Hall, 1300 Pennsylvania Avenue, NW, Washington, DC Enrolled agents, CPAs, or other non-attorneys who are interested in being admitted to practice before the US Tax Court should download the application via Click on the Forms tab and select the document labeled Admissions Information for Nonattorneys. Applications for the USTCE must be submitted in hard copy to Admissions Clerk, United States Tax Court, 400 Second Street, NW, Room 121, Washington, DC and must be received by the US Tax Court by October 11, For further information on the USTCE, see press/ pdf. AGOSTINO & ASSOCIATES, P.C. CONTACT INFORMATION Frank Agostino, Esq. Ext. 107 Fagostino@agostinolaw.com Jairo Cano, Esq. Ext. 144 Jcano@agostinolaw.com Robert Dennerlein, Esq. Ext. 131 Rdennerlein@agostinolaw.com Jeffrey Dirmann, Esq. Ext. 119 Jdirmann@agostinolaw.com Eugene Kirman, Esq. Ext. 142 Ekirman@agostinolaw.com Jeremy Klausner, Esq. Ext. 130 Jklausner@agostinolaw.com Dolores Knuckles, Esq. Ext. 109 Dknuckles@agostinolaw.com Tara Krieger, Esq. Ext. 118 Tkrieger@agostinolaw.com Lawrence Sannicandro, Esq. Ext. 128 Lsannicandro@agostinolaw.com Michael Wallace, EA Ext. 143 Mwallace@agostinolaw.com Caren Zahn, EA Ext. 103 Czahn@agostinolaw.com TAXPAYERS ASSISTANCE CORPORATION- OF COUNSEL Desa Lazar, Esq. Lazar@tac-nj.org 27

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