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1. Taxpayers must reveal tax shelter opinion letters despite attorney-client privilege   WebExclusive

BY Alistair M. Nevius, J.D.
By attempting to establish good-faith and state-of-mind defenses, taxpayers put their legal knowledge and understanding into contention, and therefore they waived attorney-client privilege, the Tax Court held on Wednesday (Ad Investment 2000 Fund LLC, 142 T.C. No. 13 (2014)). As a result, the court will order the taxpayers to produce letters that expressed their attorneys’ opinions as to whether anticipated tax benefits of a son-of-boss tax shelter would be upheld.

2. IRS clarifies: Electronic signatures permitted for Form 8879   WebExclusive

BY Alistair M. Nevius, J.D.
Correcting an oversight, the IRS on Thursday updated the online version of Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (rev. 3/20/14), to clarify that electronic signatures are permitted for Form 8879, IRS e-File Signature Authorization, as well as Form 8878, IRS e-file Signature Authorization for Form 4868 or Form 2350.On March 11, the IRS updated the publication to provide that a taxpayer can sign Form 8878 by electronic signature pad in an electronic return originator’s office.

3. IRS expands use of electronic signatures   WebExclusive

BY Alistair M. Nevius, J.D.
With the updated version of IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (rev. 3/11/14), the IRS provides new methods for taxpayers to electronically sign Form 8878, IRS e-file Signature Authorization for Form 4868 and Form 2350, the e-file signature authorization form.Taxpayers can use one of two methods to electronically sign tax returns.

4. Report reveals breadth of criminal tax activities   WebExclusive

BY Sally P. Schreiber, J.D.
From shady tax preparation businesses to identity theft gangs to corrupt IRS agents, the IRS Criminal Investigation division’s annual report reviewing its accomplishments in 2013 reveals the wide range of criminal tax activities it investigated in the past year. And, the report points out, despite a continued significant decline in staffing, the division maintained a conviction rate of more than 93%, which it noted “reflects the quality of ...[its] casework” (IRS Criminal Investigation (CI) Annual Business Report, p.

5. Final FATCA rules are issued   WebExclusive

BY Sally P. Schreiber, J.D.
On Thursday, the IRS released a large package of regulations needed to implement the Foreign Account Tax Compliance Act (FATCA). FATCA, enacted as part of the Hiring Incentives to Restore Employment Act of 2010, P.L. 111-147, requires U.S. withholding agents to withhold tax on certain payments to foreign financial institutions (FFIs) that do not agree to report certain information to the IRS regarding their U.S.

6. New IDR procedures postponed until March 3   WebExclusive

BY Alistair M. Nevius, J.D.
The IRS announced in an email to practitioners that it is pushing back the effective date for its new information document request (IDR) procedures to March 3 (e-News for Tax Professionals 2014-6 (Feb. 7, 2014)). The new procedures had been scheduled to start Jan. 2.The new IDR procedures were announced in a directive issued last November by the IRS’s Large Business & International (LB&I) Division (LB&I-04-1113-009).

7. Simplified method offered for requesting extended time to make portability election   WebExclusive

BY Alistair M. Nevius, J.D.
The IRS on Monday offered certain executors a simplified way to request an extension of time to make the “portability” election to transfer a deceased spouse’s unused estate tax exclusion to the surviving spouse (Rev. Proc. 2014-18). Executors of estates of spouses who died in 2011, 2012, or 2013 and that did not timely file an estate tax return to make the portability election will have until Dec.

8. Supreme Court resolves circuit split on 40% gross valuation misstatement penalty   WebExclusive

BY Sally P. Schreiber, J.D.
On Tuesday, the U.S. Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero (Woods, No. 12-562 (U.S.

9. What to do when a client has an undisclosed foreign account  

BY Scott H. Novak, Esq.
CPAs often have clients with an interest in or signature authority over a foreign account. The IRS has emphasized compliance in reporting requirements for U.S. owners of foreign accounts, but many taxpayers may still not know their responsibilities and liabilities. This article outlines these responsibilities and liabilities and describes current enforcement efforts.DISCLOSURE RESPONSIBILITIESA taxpayer who has an interest in or signature authority over certain foreign accounts must inform the government of the existence of the account each year by checking the box in Part III, line 7a, on Schedule B, Interest and Ordinary Dividends, of the taxpayer’s

10. IRS bound to honor designation of voluntary payment by one taxpayer of another’s liability  

BY Janet A. Meade, CPA, Ph.D.
In a reviewed opinion, the Tax Court held that the IRS must follow a corporation’s designation of voluntary payments toward the income tax liabilities of its owners/employees. However, because the payments did not represent taxes withheld at the source, the IRS was allowed to levy on the assets of the owners/employees to collect applicable interest and penalties.
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