IRS continues to bemoan the repercussions of Covid-19, and wants you to know you may still encounter delays backed up from July 15th in processing paper filed returns, answering (or opening mail), reviewing returns (even electronically filed returns) and cashing your checks. Current guideline from the IRS Mission Critical operations page notes approximately 40 day delay in opening mail after arrival and about 60 day delay in processing letters and checks from the mail (many of our clients have had far longer delays). The IRS indicates it is your choice whether to cancel a stale check and notes you should make sure there are funds to cover it. The IRS warns if you cancel the check you may get a dishonored check penalty, late payment penalties or interest if the new payment isn’t considered timely.
Of course they will freely remove many penalties relating to Covid-19 issues, however, good luck trying to call in to get those penalties removed. You may need to file a form 8546 to get those bank charges removed, but again who knows when that would be processed. Our Tax Controversy team makes calls to the IRS every day and this time of year is always a challenge. It would be better to be patient and let that check get processed by the IRS than to cancel it and deal with the time it would take to prove that your original payment was timely. The IRS has started offering a call back option to avoid waiting on hold, but it is not available for every call so you won’t know when it will be offered. The Taxpayer and Practitioner priority lines are currently of limited help until early January as the IRS systems are down for their year-end system updates. In lieu of the typical telephone assistance the IRS is offering a new suite of online assistance tools and a new dedicated Economic Impact Payment hotline 800-919-9835. However, we have found most of these of limited use.
It is a good time for a reminder of some of the Covid-19 tax collection benefits. Starting in March 2020 (which some IRS representatives are still not aware of), the IRS offers installment agreements (full pay non streamlined installment agreement, NSIA) for balances under $250,000 with no or limited financials if the balance is paid within the collection statute date. This option is not available if the case is assigned to a Revenue Officer, but because of limited IRS resources many more cases are falling into this category. If a taxpayer cannot make their final tax payments (January 15 or April 15) they can request this benefit which could reduce the failure to pay penalty by 50%.
The IRS has proposed a new user fee for estate tax closing letters in the amount of $67 dollars.
President Elect Biden’s promises to increase taxes may be limited under a razor thin minority or majority in the Senate which would push his administration’s actions to regulatory enforcement. Jonathan Curry in Tax Notes today reminds us that the IRS may return to its regulatory crack down on section 2704 valuation discounts for gifts and estates (started under the Obama Administration) which was killed under the Trump Administration. This would cause significant changes in enforcement in the Estate and Gift tax world.
The fight over conservation easement regulatory requirements and previously common language in deeds is ongoing. Kristen A. Parillo discusses in Tax Notes two cases appealing Tax Court rulings upholding Treasury Regulation 1.170-14(g)(6). Those cases struck down easements (in perpetuity requirement) where the deed subtracted the value of post-easement improvements made by the donor if an easement was judicially extinguished and the property was sold. There are difficult rulings since they ruined contributions over a provision in a deed that rarely if ever would be applied.
Also related to Conservation Easements, the Department of Justice announced on December 21, 2020 that two individuals plead guilty for their part in promoting a fraudulent syndicated easement. These represent the first criminal convictions for such a scheme. Commissioner Charles Rettig of the IRS said, “It should be considered the next step in the IRS’ battle against abusive SCEs . . . Once again, the IRS recommends that anyone who participated in an abusive SCE consult independent counsel about coming into compliance.” The IRS considers syndicated easements to be abusive if they provide a deduction 2.5 times the amount of the investment in the related partnership.
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