IRS Collection: Current Enforcement Updates and Trends

Since the pandemic began in March 2020, IRS Collection has taken efforts to assist taxpayers facing financial challenges, including holding off on taking enforcement action against many taxpayers. However, the gloves come off on June 15, 2021. Beginning June 15, the IRS will begin issuing Final Notices of Intent to Levy. Enforcement action, including levies on wages and bank accounts, will begin 45 days after issuance for taxpayers that have not resolved their accounts. In addition, you can expect federal tax liens to be filed in cases that meet certain criteria. Resolving your tax debt early in the process can help alleviate the burdens caused by these actions.

But that is not all that IRS Collection is doing. According to Darren Guillot, IRS Small Business/Self-Employed Deputy Commissioner for Collection, the IRS is continuing its collaboration with the IRS Office of Fraud Enforcement which stood up in March 2020. With this collaboration, the IRS has been able to effectively and efficiently refer cases to the IRS Criminal Investigation Division. Case referrals are taking half the time they did in the past, which has resulted in more cases being referred than before. In addition, historically, most of the referrals to Criminal Investigation from IRS Collection have been employment tax cases. However, IRS Collection is now referring high income non-filing cases as well. 

The IRS is responsible for collecting almost 95 percent of total federal revenue through its compliance and collection activities. Current enforcement activities and programs at the IRS include the following:

  • HiDeF/Operation Surround Sound. These enforcement efforts are geared towards high income non-filers. Taxpayers that fall within this program have income of $100,000 or more and have not filed federal income tax returns.   
  • Operation Liquidation. This effort involves the IRS Insolvency Unit. Insolvency is looking into taxpayers that file bankruptcy and matching taxpayer disclosures to FATCA information and other information obtained through data analytics.
  • Ghost Employer Project. A Ghost Employer is one who issues Forms W-2 to its employees, but who has not filed those forms with the Social Security Administration and has not filed employment tax returns, Form 941 and Form 940, with the IRS. Both the IRS Examination Division and IRS Collection are working these cases and making criminal referrals in these cases.
  • Repatriation Suits. IRS Collection is using FATCA and data analytics to locate foreign assets held by taxpayers. Once located, they are working with IRS Chief Counsel and the Department of Justice to pursue mutual collection assistance requests with U.S. Treaty Partners.
  • Cryptocurrency Projects. The message is clear from Darren Guillot. “The IRS knows if you have virtual currency…. Taxpayers need to tell the truth [about their virtual currency].” More information about IRS cryptocurrency enforcement efforts can be found here.

If you fall within any of the IRS’s current enforcement priorities, or if you have unpaid taxes or unfiled returns, you need an experienced tax attorney to represent you in your dealings with the IRS or the Department of Justice. An accountant or enrolled agent is not protected by the attorney/client privilege. Please contact Eric Nemeth of Varnum’s Tax Team with any questions.

New Federal Program Provides Discount on Internet Service for People With Disabilities

A new federal program will provide a $50 per month discount on internet service for many people with disabilities. A discount of $75 per month will be available to those on tribal lands who qualify. The discounts are available to any household with a person receiving Medicaid, Supplemental Social Security (SSI), SNAP (food stamps), or Federal Housing assistance, among other benefits.

Many people with disabilities receive these and thus qualify for the discount. The discount will be put on the customer’s bill, and the service provider (cable, phone, cell phone, etc.) will be reimbursed by the feds.

The program, administered through the Universal Service Administrative Company (USAC), is new, of limited duration and is slated to begin in late April. It will expire six months after the COVID pandemic ends or when the $3.2 billion Congress appropriated for the discounts runs out, whichever comes first. To get the maximum benefit, eligible participants should sign up as soon as possible.

How to Register for the Discount

People with disabilities (or others on Medicaid, SSI, etc.) are required to register to show that they qualify for the discount. To register, go to www.usac.org. Please note that USAC is in the process of creating the web page to register for this program and expects it to be completed by mid-April.

Once registered, participants should contact their cell phone, telephone company, cable company etc. to get the discount. Note that those who qualify for this discount due to Medicaid, SSI, etc. should also check out the USAC “Lifeline” web page as they may also qualify for an additional, permanent internet and phone discount.

The $50 or $75 discount is part of an “Emergency Broadband Benefit” program created by Congress to provide internet service to low-income families during the pandemic. The discount is also available to (1) people with a substantial loss of income since last year, (2) students who receive free or reduced cost meals, (3) Pell grant recipients, and (4) persons receiving certain Tribal benefits.

For more information:

MDHHS COVID-19 Order: Relaxed Restrictions on Restaurants and Other Gatherings Take Effect March 5

The Michigan Department of Health and Human Services (MDHHS) announced revisions to its Gatherings and Face Mask Order that relax restaurant capacity restrictions and loosen gathering requirements in other settings. Specifically, the revised Gatherings and Face Mask Order, which takes effect on Friday, March 5, permits increased capacity limitations at residential and nonresidential gatherings, as well as other entertainment and recreational facilities. A summary of the Order’s most notable changes can be found below.

Gatherings

  • Indoor gatherings of up to 15 individuals from three households are permitted at residential venues, and nonresidential venues may host gatherings of up to 25 individuals.
  • Outdoor gatherings of up to 50 individuals are permitted at residential venues, and nonresidential venues may host gatherings of up to 300 individuals.
  • As a condition of hosting a gathering, organizers and facilities must design the gathering to encourage and maintain social distancing and must ensure that persons not part of the same group maintain six feet of distance from one another to the extent possible. Additionally, all persons participating in the gathering are required to wear a face mask, unless an exemption applies.

Restaurants

  • Restaurants may operate at the lesser of (i) 50 percent of their normal seating capacity (up from 25 percent), or (ii) 100 persons. Restaurants also may remain open until 11 PM instead of 10 PM.
  • Groups of patrons must still be separated by six feet from other groups, and no more than six persons may be seated at a table.
  • Masks are still required to be worn by patrons, unless an individual is eating or drinking while seated.

Other Capacity Changes

  • Retail stores, libraries, and museums may operate at 50 percent capacity.
  • Exercise facilities and indoor pools may operate at 30 percent occupancy limits.
  • Indoor venues including stadiums and arenas may operate at 50 percent capacity, provided (i) no more than 375 patrons are permitted to be gathered at venues with seating capacities under 10,000, and (ii) no more than 750 patrons are permitted to be gathered at venues with seating capacities over 10,000.
  • Outdoor entertainment and recreation facilities may permit gatherings of up to 1,000 patrons.

While the Order generally relaxes restrictions as noted above, individuals remain required to wear masks and maintain social distancing while in these various settings. Similarly, exercise facilities, restaurants, and personal care service establishments must continue to abide by contract tracing requirements as set forth in the Order, which include keeping accurate records of a patron’s date and time of entry, name, and contact information. Should you have any questions related to how the Order will affect you and your business, Varnum’s attorneys stand ready to assist you.

Gray Divorces and Silver Separations Present Special Challenges

This column was originally published in the Grand Rapids Business Journal on August 5, 2016 and is republished with permission.

Let’s hear it one more time for those of us in the “Baby Boom” generation — Americans born between roughly 1946 and 1964.

Once again, we’ve come up with something new and all about us. It’s called “the Gray Divorce.”

Used to reference the series of noteworthy legal events occurring when couples end marriages after the age of 50, the term “Gray Divorce” denotes not only changes in marital status occurring later in life, but also the myriad of issues faced by the AARP generation that are not always faced by younger couples.

In other words, the so-called Gray Divorce involves much more than simply telling one’s spouse, “I shoulda left you way back when I was 40. . . .”

Truth be told, divorce ought seldom be the subject of kidding, regardless of the ages of divorcing couples. At the end of the day, every divorce involves the break up and resolution of the physical and economic partnership formed when a couple marries. Thus, each divorce involves an inventory of property, assets, and other things acquired and/or owned by a couple both prior to and during marriage, so that the court can decide the often complicated question of “who leaves with what” when a marriage is legally dissolved.

In bygone times — when couples who managed to stay together for 30 years would often remain married forever — issues that now regularly occur when couples divorce after age 50 were few and far between.

But times change. People live longer. Sometimes more familiarity breeds more contempt.

Today, one in four people currently experiencing divorce is over 50, which is double the rate of just 20 years ago. And while divorcing 55-year-olds may not have to battle over child custody in the way that 30-year-old couples might battle, there are many issues to be determined that were analyzed far less frequently back when “Silver Separations” were less common.

Dividing up Property

When considering divorce later in life, many people first ask, “Will I end up with enough to live comfortably?” While courts start at a roughly equal division, several factors influence the final division.

  • Prenup? The existence of a prenuptial agreement can alter how an estate gets divided. Many who had assets — or expected to inherit assets — utilized a prenup to spell out how property would be split. Even with a prenup, particularly one drafted years ago, the analysis continues. Courts may try to “invade” the otherwise separate property of one spouse to get to a division the judge prefers. The old saying that “the devil is in the details” squarely applies here.
  • Separate versus marital property. A judge’s first job in carving up property is to determine what is “marital” and what is “separate.” Separate property could include assets a party brought into the marriage or that a party received through gift or inheritance during the marriage. Conversely, property that comes to the marriage either by reason of the marriage or because it is earned during the marriage belongs to the marriage. Of course, in the murky waters of the law, it is simply not that clear. Property that one party says is “definitely mine” can, through the often unintended actions of the parties themselves, change to martial. Titling an inherited asset jointly, such as for estate planning, depositing funds into a joint account, or paying income taxes or insurance premiums from joint funds can all cause the once separate asset to be “comingled” with, and turned into, marital property. Similarly, parties can contribute to appreciation of the separate asset, even via labor, which could affect the category into which the court places the property. But let’s not stop there. Michigan courts have authority by statute to award one party’s separate property to the other. One statute deals with a party’s contribution to the asset as described above, and another allows invasion if the court simply feels the martial settlement to a party is “insufficient for suitable support”.
  • What can be divided? The universe of property to divide includes the usual suspects such as real estate, business interests, financial and retirement accounts and “stuff,” like household goods. Other less obvious things that could be divided include deferred comp plans, banked vacation time, frequent flyer miles, lifetime health benefits, workers comp benefits, escrow funds, pre-paid end-of-life arrangements, season tickets (ouch UofM fans), patents, voting rights, professional degrees, life estates, rights of first refusal, referral fees, and litigation rights. In short, people will argue about, and the court can consider, anything that has an ascertainable value. The court allocates debts as well.
  • What’s it worth? Valuation of property is another big issue. Many older folks have significant retirement benefits, vehicles and homes, antiques or artworks, and closely held business interests. All must be valued in a divorce, and the burden of establishing value rests on the shoulders of the party who wants it divided. Hiring a qualified valuation expert is an absolute must. Since these people don’t come cheap, this can significantly add to the case expense. The assumptions utilized in making value calculations, can also cause a significant difference in value. For example, is the business worth the $850,000 that one expert suggests, or $8,500,000 as indicated by the other? Predictably, bigger numbers mean bigger arguments.

Spousal Support

Another major issue often present in later life breakups is spousal support. Will I pay or receive support is a question many people ask. Here, Courts will look at several factors.

  • Need versus ability to pay. If one spouse was typically stay-at-home, and the other generated significant income, support is likely. If the breadwinner is now retired, but pulls in more money — such as SS benefits, retirement, and interest — than the other, support is probable.
  • Property each receives. In the larger estates of the older set, it is more likely that each party receives sizable property awards that may generate sizeable incomes. The court will see what income a party may receive to determine whether to award support.
  • Health. A party’s special health costs can also influence the court. The costs of prescriptions, treatments and care givers may be issues in later life divorce cases.

Divorce for the baby boomer generation, while excluding all the kid issues of younger couples, presents certain unique legal challenges. These can be more significant than “who gets the house?”

A lawyer with proper information, knowledge of the law, and an understanding of the attitudes of opposing counsel and the judge can advance a client’s cause so that a fair and equitable result occurs.

A divorcing person can help his or her own cause considerably by providing the lawyer with a complete, accurate, and current list of assets, liabilities, and income, supplemented by reliable documents. The lawyer is no better than the facts to be dealt with, and the sooner the lawyer has sufficient information the better the chances for a favorable result.