In Uncategorized on 09/30/2016 at 17:05

I note the IRS announcement earlier this week that, due to lack of resources, their so-far-unimpeached IRS boss John (”Kosy”) Koskinen has contracted out collection of “older, overdue tax accounts” among others.

The collectors must follow the Federal Fair Debt Collection Practices Act, and be courteous and respect taxpayer rights, unlike the strip-miners and bottom-fishers of distressed debt who try strong-arm tactics to collect their own debts.

IRS is aware that, having trumpeted to the skies warnings of phony scammer phonecalls pretending to be from the IRS, they will have a lot of ‘splainin’ to do.

The new tax collectors, I fear, will be about as popular as their predecessors, who appear in far more exalted documents than IRS press releases. And markedly less effective.

Here’s the story:


In Uncategorized on 09/30/2016 at 16:49

Merrick Rayle, Docket No. 26253-14L, filed 9/30/16, is belting out the 1922 classic from the pen of Alfred Breitenbach. a/k/a Fred Fisher.

Merrick got a remand back to Appeals from Judge Paris, who told Appeals to give Merrick a supplemental hearing, after she bounced IRS’ summary J motion. The hearing was to take place at the Appeals office closest to Merrick’s abode, or such other place as agreed upon.

Merrick asked for Chicago. The assigned SO worked out of Holtsville, ignored Merrick’s written request, claimed he’d asked for a face-to-face (he didn’t), claimed he failed to send in a 433-A (not required for the supplemental CDP Judge Paris ordered) and sustained the collection action.

Judge Paris finds this less than amusing. “Petitioner requested, as the Court so ordered, that the supplemental CDP hearing be conducted at the Appeals Office located closest to his residence. SO S’s requirement that petitioner complete Form 433-A for a face-to-face hearing was premature, as he did not request a face-to-face hearing in his… letter, and her lack of acknowledging petitioner’s request for the location of the supplemental CDP hearing was a blatant disregard of the Court’s… Order. Additionally, SO S failed to follow the Court’s Order because she did not clarify for petitioner how she determined that his account for 2009 was not correctly in currently noncollectible (CNC) status.” Order, at pp. 2-3. (Name omitted).

This sounds bad, but Merrick (an attorney with a Big Firm background) is not necessarily faultless here. Take a look at the 6/16/16 order, referred to in Judge Paris’ order.

Anyway, Judge Paris orders a supplement to the supplement. “The Court finds that respondent failed to follow the Court’s… Order and, therefore, will again remand this case for a second supplemental CDP hearing. Upon remand an Appeals officer from respondent’s Chicago Appeals Office shall verify that all applicable laws and administrative procedures have been met—specifically as they pertain to the CNC status of petitioner’s account for 2009–and consider petitioner’s collection alternatives.” Order, at p. 3.

And Merrick, send in the 433-A this time.

BTW, Holtsville is a long way from Chicago. Holtsville is a hamlet in Suffolk  County, New York. Suffolk County is situated on the outlying island off the coast of North America, known as “Long Island.” The name thereof is pronounced hereabouts by anyone not wishing the oppobrious designation of “tourist” as “Lawn Guyland.”


In Uncategorized on 09/30/2016 at 10:01

Not If It Hasn’t Filed Form 8832

More of the blind-men-describe-elephant excursus around the limited liability company, the outfit with the invisible shield, is found in Heber E. Costello, LLC, Scott D. Costello, Single Member, 2016 T. C. Memo. 184, filed 9/29/16.

Leaving aside the puzzling joinder of member with LLC, more particularly bounded and described in my blogpost “An Answer You’ve All Been Waiting For,” 10/30/15, here we have unpaid FICA/FUTA.

The late Heber formed a C Corp, of which he was sole stockholder, and filed 1120s consistently. Scott D. inherited the stock, formed the LLC, merged the C Corp with the LLC, whereupon the C Corp disappeared.

This gives rise to some Section 368(a)(1)(F) reorg learning, whereby Scott D. claims the LLC is a C Corp, and therefore the LLC should pay the self-assessed but unpaid FICA/FUTA. And Scott D. kept on filing 1120s, with C Corp’s TIN, which IRS accepted every year, and never bounced. So Scott D. claims equitable estoppel.

OK, but all that misses the point.

Here’s Judge Nega to set Scott D. on the right path to liability.

“Regardless of whether the merger of [C Corp] and LLC qualified as a valid reorganization under section 368(a)(1)(F), LLC never filed Form 8832 electing its classification for Federal tax purposes as an association and thus is not a corporation but rather is disregarded as an entity separate from its owner.

“Second, an eligible entity may not elect its entity classification by filing any particular tax return it wishes; it must do so by filing Form 8832 and following the instructions within section 301.7701-3(c)(1)(i), Proced. & Admin. Regs. Thus, LLC could not elect to be treated as a corporation merely by filing corporate income tax returns.” 2016 T. C. Memo. 184, at p. 11.

Equitable estoppel against IRS is used with “utmost restraint.” And IRS needs to make a false statement of fact.

“Respondent [IRS] made no false statement to petitioner, and we do not agree that his lack of rejection of LLC’s filed Forms 1120 is a wrongful misleading silence. Moreover, Mr. Costello knew that LLC has never filed a Form 8832 to elect to be treated as anything other than a disregarded entity.” 2016 T. C. Memo. 184, at p. 12.

Now lest my ultra-sophisticated readers rise as one to shout that TFRPs are assessed and collected against LLCs as if they were corporations, Judge Nega points out that the TFRPs here involved are for tax years prior to 2009, when the current rules went into effect.

But the requirement to file Form 8832 didn’t change. And unless statute or reg otherwise provide, you don’t elect your form of business by your form of tax return.