Prose by Tax Pros - Another Article by Hale E. Sheppard

This article, the latest in a long series, describes the ERC legislation, relevant administrative guidance, evolution of the regulations addressing “transactions with contractual protection,” effects of reportable transaction status on employers and advisors, and more.

Lots of taxpayers are thinking about Employee Retention Credit (“ERC”) matters these days. Most are focused on employment tax issues, but they should be considering related tax issues, too. Specifically, they might analyze how the potential reduction or elimination of ERC amounts will affect income tax returns, when such events will occur, and what should be done in the meantime. This article, ano...

The Employee Retention Credit (“ERC”) is a polarizing tax benefit, but there are a few things on which most everyone can seem to agree. First, guidance regarding the ERC is dense and complicated. Second, ERCs often involve big money, for employers who obtain them, professionals who assist in procuring them, and others. Third, parties working toward the mutual goal of submitting proper ERC claims s...

Things are dynamic when it comes to the Employee Retention Credit (“ERC”). Among the most recent events is the introduction of the Voluntary Disclosure Program, which is designed for taxpayers that previously filed ERCs claims, got paid, later questioned their eligibility, and now want to give the money back with minimal financial downsides. This article, the latest in an ongoing series, compares...

Congress took action to help taxpayers economically suffering because of COVID, including creating the Employee Retention Credit (“ERC”). The number of claims filed, amounts sought, and grounds for relief far surpassed what was expected. These and other factors led to problems, among them the IRS’s struggle to administer the ERC program. The IRS has experienced challenges separating the wheat from...

Congress took steps to protect American businesses and workers during the COVID pandemic, such as creating the Employee Retention Credit (“ERC”). The IRS, tasked with implementing the ERC, issued various types of guidance. It now relies on such guidance in reviewing, and frequently denying, ERC claims. This is particularly true when it comes to taxpayers seeking ERCs on grounds that their business...

Most battles over “syndicated” conservation easements focus on the partnerships that made the donations. This is logical because they took the key actions, claimed the tax deductions, and then allocated them to the partners. A recent case, Glade Creek Partner, shows that the IRS is looking at other parties, too. These include the original landowners, who contribute the property on which the easeme...

Gifting can be rewarding, but it can also generate problems with the IRS. The applicable tax and information-reporting rules are complicated when foreign persons are involved. The IRS has attempted to capitalize on this reality in two recent cases, asserting large penalties against a U.S. individual receiving a gift from a foreign relative, and seeking significant gift taxes and penalties from ano...

Taxpayers often lack the time or patience to read an entire court decision. This is understandable, but it leads to problems. When taxpayers focus only on headlines, they tend to overlook important rulings that might be helpful to themselves and others. This is precisely what has happened with a recent conservation easement dispute, Mill Road 36 Henry. The ultimate outcome was not good for the tax...

Enforcement actions against alleged promotors of abusive transactions and taxpayers who participate in them are firmly linked. Therefore, effectively defending against IRS challenges requires an understanding of the overlapping rules, standards, and procedures. Many taxpayers are myopic, thinking solely about how certain events will affect them personally and immediately. This is understandable, b...

If people have learned anything from the recent disputes over conservation easement donations, it is that IRS has a playbook. It involves announcing that the main problem is excessive valuation, followed by attacking essentially everything but what the donation is worth. The IRS often concludes that taxpayers should get a tax deduction of $0, and steep penalties apply. The IRS has already experie...

Congress realized that taxpayers desperately needed financial help during the COVID crisis, so it created the Paycheck Protection Program and the Employee Retention Credit. Taxpayers that got dual relief are beginning to understand that enforcement actions, timeframes, and consequences differ for each. This article, the latest in a multi-part series, explains the fundamentals of these benefits, in...

For lovers of tax controversy, disputes between taxpayers and the IRS over Malta pension plans should be legendary. In short, taxpayers followed the letter of the law ( i.e. , the specific terms of the US-Malta treaty), the IRS detested the result, and now the IRS is implementing aggressive measures, including some that supposedly have retroactive effect. This article explores general U.S. tax tre...

Huge numbers of taxpayers have claimed Employee Retention Credits (“ERCs”) in the past few years. Some of them might know the substantive rules, but few of them likely understand the procedural nuances. This is a problem because a large percentage of clashes with the IRS ultimately turn on procedural issues. Taxpayers and their advisors are raising many procedural questions: Has the IRS created sp...

It is obvious that the IRS has been scrutinizing, and will continue to pursue, those that it considers “promoters” or “enablers” of improper employee retention credit (“ERC”) claims. What is not apparent, though, is the wide range of tools at the IRS’s disposal and how they might affect not only the targets, but also the taxpayers who relied on them. This article, the latest in a series, summarize...

The deadlines for seeking Employee Retention Credits (“ERCs”) are fast approaching, large numbers of claims are being filed, and fears of widespread fraud abound. What is the solution? The IRS says pumping the proverbial brakes is the way to go. It recently imposed a “moratorium” of at least three months on processing future ERC claims. The IRS made several other important announcements, too. Thes...

Congress introduced the employee retention credit (“ERC”) back in March 2020, some taxpayers are still making ERC claims today, and others have the ability to do so until April 2025. These protracted solicitations have triggered questions about the validity of recent ones. Some ask, for example, why taxpayers with legitimate ERC claims did not file them right away, on their original employment tax...

There are thousands of blogs, articles, comments, advertisements, infomercials and more about the Employee Retention Credit (“ERC”). Regardless of their slant, all these items generally have one thing in common: a disturbing lack of substance. Everything in the ERC realm seems to have devolved into sound bites based on partial information, which is not helpful for taxpayers and advisors who are lo...

The U.S. economy is humming along, a major disruption occurs, Congress introduces tax incentives to stabilize matters, the IRS provides guidance to implement them, some taxpayers exploit voids and ambiguities, and the IRS takes actions to halt perceived abuses. This is a timeless tale that has recently centered on the Employee Retention Credit (“ERC”). To understand the inevitable clashes, one mus...

Many taxpayers desperately needed an economic injection from the government to survive massive problems caused by COVID. Needing financial benefits is one thing, but qualifying for them is another. When it came to eligibility for employee retention credits (“ERCs”), employers had to demonstrate several things, including that their total revenue dropped by a certain percentage or that a governmenta...

In life, things often are going great, until they are not. This is true in the tax world, too. Congress introduced the employee retention credit (“ERC”) in early 2020 to assist businesses struggling because of COVID. Things started positively, but they changed when the IRS began identifying significant numbers of aggressive or fraudulent claims. The IRS increased enforcement efforts. This scrutiny...

You start with the macro and then move to the micro, as time permits and need demands. This method is followed in many contexts, including taxes. Congress first introduced the employee retention credit (“ERC”) in early 2020, and then made several legislative tweaks thereafter. The IRS, likewise, issued multiple Notices over the years supplying more detail. Naturally, as time passes and unanticipat...

The IRS has argued that the existence of Tax Result Insurance might deprive an entity of partnership status, taxpayers cannot claim deductions for premiums paid, and purchasing coverage supposedly demonstrates that taxpayers lack reasonable cause for their positions, such that penalties apply. This article explains why certain taxpayers are acquiring insurance, two major types of coverage, several...

Taxpayers with Canadian retirement plans have long faced tricky issues when it comes to U.S. income taxes and information-reporting duties. As the situation evolved over time, the IRS issued several pieces of guidance that facilitated tax-deferral and decreased disclosure obligations. The IRS ultimately announced that it would grant automatic, retroactive and prospective, tax-deferral elections. N...

It appears that the IRS is on its way to stopping taxpayers from taking what it considers improper positions related to charitable remainder annuity trusts (“CRATs”). The IRS has prevailed in two recent cases, with the Tax Court rejecting all arguments raised by the taxpayers. Consequently, taxpayers with similar CRATs must make a critical decision. Should they hunker down and prepare to fight, or...