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2018 Government Shutdown is the IRS Nightmare | IRS Lawyer & Attorney

A government shutdown is always bad for the normal functioning of federal agencies, but the 2018 government shutdown spells disaster for the IRS, especially if it lasts for a significant amount of time.

2018 Government Shutdown Comes at the Worst Time for the IRS

What makes the current 2018 government shutdown so bad is the timing. The shutdown comes just nine days before the tax season begins. For the IRS, the tax season is always the busiest time of the year.

Moreover, this year, the shutdown also comes right after a huge tax reform passed. Many of the provisions of the Tax Cuts and Jobs Act of 2017 still need to be implemented, the IRS software needs to be adjusted and the employees at the Call Centers need to be prepared to answer the questions of millions of Americans about the new tax laws.

2018 Government Shutdown Comes After Years of Budget Cuts

The 2018 government shutdown also comes after many years of the IRS budget cuts. Since 2010, the IRS lost more than $900 million in funding, eliminated 18,000 full-time positions and had to implement hiring freezes. Moreover, many IRS veterans are now retiring without being able to train proper replacement. This means that the IRS is gradually losing its best, highly-knowledgeable and experienced cadres – professionals who know how to enforce tax laws in an equitable manner. This unfortunate circumstance will inevitably have a profound impact on IRS ability to properly implement US tax laws in the future.

It is not only the professionals that the IRS is losing. The long years of budget cuts dramatically reduced the IRS ability to staff its call centers. Even before the shutdown, the IRS projected that, with its current budget, it will only be able to answer at best four calls out of every ten – i.e. the IRS said that it could answer only 40% of the calls, leaving 60% of Americans without any assistance.

Furthermore, the budget cuts came at a time when there was an unprecedented explosion of new tax laws, domestic and international, which have created an enormous demand for more IRS employees. The Tax Cuts and Jobs Act of 2017 is just the latest example of these new laws.

So far, the IRS has been able to more or less survive by cutting everything it could in the non-essential areas and relying on new technology to save costs. However, it does not appear that this is a sustainable situation in the future.

2018 Government Shutdown: Immediate Impact

The most immediate impact of the 2018 government shutdown will be the fact that only 43.5% of IRS employees will be coming to work on next week. 56.5% of the IRS workforce will be forced to stay at home.

While the IRS will continue to do “excepted activities” such as processing 2017 tax returns (this is a matter of life and death for the federal government), a number of its functions will be suspended.

Here is the list of the most common examples of the suspended activities: issuing refunds, processing of amended tax returns (Forms 1040X), conducting any audits or examinations, processing of non-electronic tax returns that do not include remittances, non-automated collections, legal counsel, planning, research, training, all development activities, most information systems functions, headquarters and administrative functions not related to the safety of life and protection of property, service center processing after the point of batching (i.e. Code & Edit, data transcription, error resolution, un-postables) and other activities. With respect to offshore voluntary disclosures, they are not likely to be processed while the government shutdown continues.

At this point, we can only wish that the government shutdown be over as soon as possible to minimize the negative impact it may have on the IRS, our nation and our fellow citizens.

Sherayzen Law Office will continue to monitor the situation.

IRS Written Advice Abatement Procedures | IRS Tax Lawyer

This is the concluding article in our series of articles on the topic of the IRS Written Advice Defense. In prior articles, we have outlined the general legal test of the IRS Written Advice Defense and described each of the three prongs of this test. In this article, I would like to discuss the IRS Written Advice Abatement Procedures – i.e. the actual administrative process for requesting abatement of penalties based on this defense.

This article is for educational purposes only and I strongly encourage you to retain the services of an experienced tax attorney before engaging in the IRS Written Advice Abatement Procedures.

IRS Written Advice Abatement Procedures: Form 843

The centerpiece of the IRS Written Advice Abatement Procedures is Form 843. Taxpayers who are entitled to an abatement of penalties pursuant to 26 U.S.C. §6404(f) should complete and file Form 843. At the top of Form 843, taxpayers should write: “Abatement of penalty or addition to tax pursuant to section 6404(f).” Furthermore, taxpayers should state on Form 843 whether the penalty or addition to tax has been paid.

IRS Written Advice Abatement Procedures: Documents to Be Submitted with Form 843

The taxpayers must submit copies of the following documents together with their Form 843 (note that these documents are directly related to the three-prong legal test for the IRS Written Advice Defense):

1. A copy of the taxpayer’s written request for the IRS advice (with a statement of adequate and accurate facts);

2. A copy of the erroneous written advice provided by the IRS to the taxpayer and relied upon by the taxpayer; and

3. A copy of a report (if any) of tax adjustments (the report should identify the penalty or addition to tax and the item for which the erroneous IRS written advice was requested).

In addition to these required documents, I recommend that most of Form 843 abatement requests be accompanied by a detailed description of facts, the erroneous IRS written advice, the taxpayer’s reliance on this advice and how this reliance led to the imposition of a penalty.

IRS Written Advice Abatement Procedures: Time Limitations for Filing Form 843

The IRS regulations also address the issue when Form 843 should be submitted in order to be considered a timely request for abatement. The regulations specified that any abatement of a penalty or addition to tax pursuant to 26 U.S.C. §6404(f) will be permitted only if the request for such an abatement “is submitted within the period allowed for collection of such penalty or addition to tax, or, if the penalty or addition to tax has been paid, the period allowed for claiming a credit or refund of such penalty or addition to tax.” Treas. Reg. §301.6404-3(e).

IRS Written Advice Abatement Procedures: Where to File Form 843

The mailing address of Form 843 depends on whether the incorrect IRS advice is related to an item on a federal tax return. If the advice is related to an item on the taxpayer’s tax return, then Form 843 should be submitted to the IRS center where the tax return was originally filed. On the other hand, if the erroneous IRS advice is not concerning any item of the taxpayer’s federal tax return, then the taxpayer should submit Form 843 to the IRS Center where the taxpayer’s return was filed for the taxable year in which the taxpayer relied on the erroneous advice.

Contact Sherayzen Law Office for Professional Help With Respect to Abatement or Reduction of IRS Penalties

If the IRS imposed a penalty with respect to your prior noncompliance with US international tax returns, such as FBAR, Forms 926, 3520, 5471, 5472, 8621, 8865, 8938, et cetera, you should contact Sherayzen Law Office to explore your IRS penalty reduction options. Sherayzen Law Office is an international tax law firm that has helped US taxpayers around the world to deal with these penalties. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Will Be Closed Five Extra Days in 2013; Filing and Payment Deadlines

On May 15, 2013, the Internal Revenue Service announced additional details about the closures planned for May 24, June 14, July 5, July 22 and August 30, 2013.

Due to the current budget situation, including the sequester, all IRS operations will be closed on those days. This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed on those days. IRS employees will be furloughed without pay. No tax returns will be processed and no compliance-related activities will take place.

Taxpayers needing to contact the IRS about their returns or payments should be sure to take these furlough dates into account. In some instances, this may include taxpayers with returns or payments due soon after a furlough day, such as the June 17 deadline for taxpayers abroad and those making a second-quarter estimated tax payment as well as the September 3 deadline for truckers filing a highway use tax return.

No Impact on Tax-Filing and Tax-Payment Deadlines, but No Confirmation of Receipt

Because none of the furlough days are considered federal holidays, the shutdown will have no impact on any tax-filing deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.

Similarly, tax-payment deadlines are also unaffected. The only tax payment deadlines coinciding with any of the furlough days relate to employment and excise tax deposits made by business taxpayers. These deposits must be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS), which will operate as usual.

Impact on Providing Documents to the IRS

IRS states that it will give taxpayers extra time to comply with a request to provide documents to the IRS. This includes administrative summonses, requests for records in connection with a return examination, review or compliance check, or document requests related to a collection matter. No additional time is given to respond to other agencies or the courts.

Where the last day for responding to an IRS request falls on a furlough day, the taxpayer will have until the next business day. If the last day to respond is Friday, May 24, for example, the taxpayer will have until Tuesday, May 28 to comply (Monday, May 27 is Memorial Day).

Some Services Will Continue to Function

Some web-based online tools and phone-based automated services will continue to function on furlough days, while others will be shut down. Available services include Withholding Calculator, Order A Transcript, EITC Assistant, Interactive Tax Assistant, the PTIN system for tax professionals, Tele-Tax and the Online Look-up Tool for those needing to repay the first-time homebuyer credit. Services not available on those days include Where’s My Refund? and the Online Payment Agreement.

Additional Furlough Days Possible

At a later date, the IRS may possibly announce one or two additional furlough days if necessary.

Hiring Incentives to Restore Employment Act: Two New Tax Benefits for Employers

On March 18, 2010, the Hiring Incentives to Restore Employment Act (“HIRE”) was enacted into law. The Act offers timely benefits to the employers who hire unemployed workers.

HIRE Benefits

Under the HIRE, qualified employers who hire unemployed workers may qualify for two main tax benefits.

First, under the HIRE, Employers who hire unemployed workers between February 3, 2010 and January 1, 2011 may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers will still have to withhold the employee’s share of Social Security taxes, as well as income taxes. Moreover, both employers and employees will still have to pay their share of Medicare taxes.

Second, employers may claim an additional general business tax credit of up to $1,000 per each worker retained.

Notice, new workers filling existing positions may also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

Types of Employers Qualified to Claim HIRE Benefits

Businesses, agricultural employers, tax-exempt organizations and public colleges/universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

When to Claim HIRE Benefits

Employers may claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.

The additional business tax credit should be claimed on the employers’ 2011 income tax returns.

Additional Requirements

Under the HIRE, in order to benefit from the new law, employers must get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.