IRS Revisiting a Tax Court Decision


I

ira smilovitz

I have a client that is in an interesting situation. The IRS determined that there was substantial under-reported income in a back (but still open) year. Due to procrastination on the part of the taxpayer, the dispute ended up in Tax Court where I was not qualified to represent the taxpayer. The taxpayer (with legal counsel) and the IRS reached an agreement on the amount of unreported income, tax deficiency, and a reduced penalty assessment. The agreement was recently entered by the Tax Court. When I reviewed the agreement, I discovered that the IRS made a significant error in calculating the tax deficiency in the taxpayer's favor.

Can the IRS now come back and assess additional tax in the absence of any other change in the tax return?

Ira Smilovitz
 
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P

Pico Rico

ira smilovitz said:
I have a client that is in an interesting situation. The IRS determined
that there was substantial under-reported income in a back (but still open)
year. Due to procrastination on the part of the taxpayer, the dispute ended
up in Tax Court where I was not qualified to represent the taxpayer. The
taxpayer (with legal counsel) and the IRS reached an agreement on the
amount of unreported income, tax deficiency, and a reduced penalty
assessment. The agreement was recently entered by the Tax Court. When I
reviewed the agreement, I discovered that the IRS made a significant error
in calculating the tax deficiency in the taxpayer's favor.

Can the IRS now come back and assess additional tax in the absence of any
other change in the tax return?
was that an error, or an agreed upon number to get the matter settled?
 
S

Stuart A. Bronstein

ira smilovitz said:
I have a client that is in an interesting situation. The IRS
determined that there was substantial under-reported income in a
back (but still open) year. Due to procrastination on the part
of the taxpayer, the dispute ended up in Tax Court where I was
not qualified to represent the taxpayer. The taxpayer (with
legal counsel) and the IRS reached an agreement on the amount of
unreported income, tax deficiency, and a reduced penalty
assessment. The agreement was recently entered by the Tax Court.
When I reviewed the agreement, I discovered that the IRS made a
significant error in calculating the tax deficiency in the
taxpayer's favor.

Can the IRS now come back and assess additional tax in the
absence of any other change in the tax return?
It's very unlikely that the IRS can change what they have already
agreed to in this instance. The agreement was entered into in
court, and is presumably part of a judgment. To change it the IRS
would have to go to court and convince the court that, not only did
they make a mistake, but it was a mistake that was so unreasonable
as to undo a settlement.

By the way, I'm surprised that the lawyer didn't consult you and
keep you in the loop. You are a valuable resource, and should have
been treated that way.
 
I

ira smilovitz

was that an error, or an agreed upon number to get the matter settled?
It was an error in the original CP2000 which remained uncorrected throughout the process.

Ira Smilovitz
 
I

ira smilovitz

It's very unlikely that the IRS can change what they have already
agreed to in this instance. The agreement was entered into in
court, and is presumably part of a judgment. To change it the IRS
would have to go to court and convince the court that, not only did
they make a mistake, but it was a mistake that was so unreasonable
as to undo a settlement.

By the way, I'm surprised that the lawyer didn't consult you and
keep you in the loop. You are a valuable resource, and should have
been treated that way.
He did. I'm being a bit circumspect in my retelling of events.

Ira Smilovitz
 
A

Alan

I have a client that is in an interesting situation. The IRS determined that there was substantial under-reported income in a back (but still open) year. Due to procrastination on the part of the taxpayer, the dispute ended up in Tax Court where I was not qualified to represent the taxpayer. The taxpayer (with legal counsel) and the IRS reached an agreement on the amount of unreported income, tax deficiency, and a reduced penalty assessment. The agreement was recently entered by the Tax Court. When I reviewed the agreement, I discovered that the IRS made a significant error in calculating the tax deficiency in the taxpayer's favor.

Can the IRS now come back and assess additional tax in the absence of any other change in the tax return?

Ira Smilovitz
I don't see anything in the tax court rules that treats a Stipulated Tax
Court Decision any differently from a trial court decision when it comes
to the appeal process. As far as I can tell, once the decision is
entered, a 30 day clock started to run for the IRS to file a motion to
vacate or revise the stipulated decision. A 90 day clock also started
for the decision to become final. If no motion was filed or granted to
revise or change the decision within that 30 day window, then the 90 day
window continued to run for the IRS to appeal to the circuit court.
 
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A

Alan

If I understand this correctly... say the original decision was entered on September 15 (not the actual date), the IRS would have until October 15 to file a motion with the Tax Court and until December 14 (ignoring for now if 30 or 90 days fell on a weekend/holiday) to appeal to the Circuit Court for a change to the agreement.

Ira Smilovitz
Yes, assuming I was right to begin with.
 
A

Alan

Yes, assuming I was right to begin with.
I should have added that a timely filed motion to vacate or revise would
start a new 90 day period from the date of denial.
 
D

D. Stussy

"ira smilovitz" wrote in message
I have a client that is in an interesting situation. The IRS determined that
there was substantial under-reported income in a back (but still open) year.
Due to procrastination on the part of the taxpayer, the dispute ended up in
Tax Court where I was not qualified to represent the taxpayer. The taxpayer
(with legal counsel) and the IRS reached an agreement on the amount of
unreported income, tax deficiency, and a reduced penalty assessment. The
agreement was recently entered by the Tax Court. When I reviewed the
agreement, I discovered that the IRS made a significant error in calculating
the tax deficiency in the taxpayer's favor.

Can the IRS now come back and assess additional tax in the absence of any
other change in the tax return?
================

Basically, no. Once the correct tax has been entered into the record (TC
Rule 155 or otherwise), that's it.

The only way for the IRS to get around this would be to appeal the case to
the appropriate Circuit Court of Appeals. However, as it was not the Tax
Court's error, the IRS is SOL as to any appeal. If it's been beyond the
period to appeal, it's final, even if wrong. (Within the first 30 days, one
might move for reconsideration before the TC itself, but that usually is
denied.)
 
A

Alan

Basically, no. Once the correct tax has been entered into the record
(TC Rule 155 or otherwise), that's it.

The only way for the IRS to get around this would be to appeal the case
to the appropriate Circuit Court of Appeals. However, as it was not the
Tax Court's error, the IRS is SOL as to any appeal. If it's been beyond
the period to appeal, it's final, even if wrong. (Within the first 30
days, one might move for reconsideration before the TC itself, but that
usually is denied.)
I don't see how Rule 155 (including paragraph c) trumps the rules in
Title XVI Posttrial Proceedings (the 30 day period) and Title XIX
Appeals (the 90 day period). Rule 155 comes into play after a
dispositive order on the issues (an opinion but not yet a decision).
Having disposed of the issues, the parties have a 90 day window to
either agree or disagree on the amount owed or the amount to be
refunded). During this period, the parties are no longer allowed to
bring up any issues disposed of or any new issues n making the
determination of the amount. Once the Rule 155 period closes and there
is a stipulated amount, the court issues its decision. The whole appeal
process then starts. Either party can argue that an error was made in
the computation based on the court's opinion on the issues.
 
I

ira smilovitz

I don't see how Rule 155 (including paragraph c) trumps the rules in
Title XVI Posttrial Proceedings (the 30 day period) and Title XIX
Appeals (the 90 day period). Rule 155 comes into play after a
dispositive order on the issues (an opinion but not yet a decision).
Having disposed of the issues, the parties have a 90 day window to
either agree or disagree on the amount owed or the amount to be
refunded). During this period, the parties are no longer allowed to
bring up any issues disposed of or any new issues n making the
determination of the amount. Once the Rule 155 period closes and there
is a stipulated amount, the court issues its decision. The whole appeal
process then starts. Either party can argue that an error was made in
the computation based on the court's opinion on the issues.

--
In the situation I'm dealing with, the IRS proposed a tax liability and the taxpayer agreed. There was a negotiated reduction in the penalty. There is an error in the IRS's tax calculation which is in favor of the taxpayer. As far as I can tell from the documents, the Court has not inserted itself in the process other than to enter the agreement.

Ira Smilovitz
 
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D

D. Stussy

"Alan" wrote in message
Basically, no. Once the correct tax has been entered into the record
(TC Rule 155 or otherwise), that's it.

The only way for the IRS to get around this would be to appeal the case
to the appropriate Circuit Court of Appeals. However, as it was not the
Tax Court's error, the IRS is SOL as to any appeal. If it's been beyond
the period to appeal, it's final, even if wrong. (Within the first 30
days, one might move for reconsideration before the TC itself, but that
usually is denied.)
I don't see how Rule 155 (including paragraph c) trumps the rules in
Title XVI Posttrial Proceedings (the 30 day period) and Title XIX
Appeals (the 90 day period). Rule 155 comes into play after a
dispositive order on the issues (an opinion but not yet a decision).
Having disposed of the issues, the parties have a 90 day window to
either agree or disagree on the amount owed or the amount to be
refunded). During this period, the parties are no longer allowed to
bring up any issues disposed of or any new issues n making the
determination of the amount. Once the Rule 155 period closes and there
is a stipulated amount, the court issues its decision. The whole appeal
process then starts. Either party can argue that an error was made in
the computation based on the court's opinion on the issues.
=========

I didn't say it did. All Rule 155 does is it allows the Judge to decide the
merits of the case without reducing it to a dollar amount (and make the
parties do the math).
 

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