Penalty Relief for Partnerships That Filed Late in 2017

The IRS recently issued guidance providing penalty relief for certain partnerships that did not file the required returns in 2017 for the 2016 tax year.

Notice 2017-47 provides penalty abatement for these partnerships only if certain circumstances apply:

1. The partnership filed the returns with the IRS and furnished Schedule K1 to its partners (as appropriate) by the date that would have been timely, or
2. The partnership filed Form 7004 to request an extension by the date that would have been timely before the deadline change.

This is a great chance to clean up tax liability exposure.  

Filing a tax return after the assessment by the IRS will not be considered a “proper tax return” under Beard standard and would not make the tax debt dischargeable.

Filing a tax return after the assessment by the IRS will not be considered a “proper tax return” under Beard standard and would not make the tax debt dischargeable.

The 3^rd Circuit court has just decided a case regarding the dischargability of the tax debt, when a taxpayer files his “tax return” after the Service assesses the tax deficiency. The court held that under the long standing Beard v. Commissioned of Internal Revenue case, the tax payer failed the fourth requirement of the test to make “. . . a  honest and reasonable attempt to satisfy the requirements of the tax law.”  The court rejected the approach adopted by the Eighth Circuit in In re Colsen that the “reasonable attempt . . . focuses of the content of the form, not on the circumstances of its filing.” Therefore, the court concluded that the tax payer’s forms 1040 were not a return for 11 U.S.C. 523(a)(1)(B) purposes and could not be discharged. Following the same reasoning, the failed attempt to file a “return” would not start a Statue of Limitation for collections’ purposes of the tax debt and the Service could try to collect any time. IRC 6502.

Thomas Giacchi v. U.S. Department of the Treasury Internal Revenue Service.

NJ to allow lawyers without a true physical location to practice in the state.

NJ finally reconsidered its long-standing requirement ( Rule 1:21-1(a)) of a physical or, in the words of the rules, “bona fide” office location in the state. Effective February 1, 2017, the rule change allows a virtual office under a few conditions. 

First, the practitioner “must structure his or her practice in such a manner as to assure, as set forth in RPC 1.4, prompt and reliable communication with and accessibility by clients, other counsel, and judicial and administrative tribunals before which the attorney may practice.” 

Second, the practitioner must designate a physical location for the record keeping and document request purposes. 

Third, the practitioner must “designate the Clerk of the Supreme Court as agent upon whom service of process.” 

Forth, the attorney must employ [t]he system of prompt and reliable communication . . . [that may be] achieved through maintenance of telephone service staffed by individuals with whom the attorney is in regular contact during normal business hours." 

Finally, the attorney “shall be reasonably available for in-person consultations requested by clients at mutually convenient times and place.”

This is a big win for out of state providers, who could not afford or did not wish to maintain a burdensome physical location in the state. However, many serious practitioners would probably opt for an actual physical office in the state to impress their clients. I am sure that most clients will care.

Mortgage payments cannon be discharged in a bankruptcy, when deeply interconnected with family support obligations.

In my consumer bankruptcy practice, I often encounter questions regarding the dischargeability of financial obligations. A person on the phone or face-to-face, usually at the first meeting or case evaluation, wants me to draw a quick conclusion and tell from a simplified fact pattern, if the debt is dischargeable or not. I am often pressed to decline a quick answer, unless I am presented with a full set of all relevant fact.

Just like in the case below, I was asked to research, if a mortgage obligation could be discharged, when a couple specifically agreed in the preceding divorce to maintain a house, to make the mortgage payments, and to allow their teenage kids to live there and attend their school district. I came across the case from the Bankruptcy Court in the Western District of Pennsylvania that addressed my issue head-on. Obligations to make mortgage payments and to pay child support coupled with physical placement of child in mortgaged property make the payments of the mortgage a non-dischargeable domestic support obligations. In re Price, No 15-07012-JAD, 2015 WL 9957177 (Bankr. W.D. Pa. Oct. 5, 2015)

New 2017 PA Tax Amnesty April 21, 2017- June 19, 2017.

From April 21, 2017 to June 19, 2017 the Department of Revenue will waive all penalties and half of the interest on eligible tax delinquencies for anyone who participates in the 2017 Tax Amnesty Program. 

One must file all missed tax returns and/or extensions to take advantage of the program. This will be one of the best opportunities in a while to take care of the missed or never-filed returns.

More details, including a brief explanatory video at the Department’s web-site at:

http://www.revenue.pa.gov/taxamnesty/Pages/default.aspx#.WHWnmFMrLIU

3 Cir: may not reduce "the amount of a tax lien to the value of the collateral securing the claim.”

Geisler v. IRS, A Chapter 7 debtor appealed dismissal of his adversary proceeding against the IRS. 

In his proceedings, he argued that the Service only had a claim to the extent of his owned property and absent an additional ground, excess should be void. The Court disagreed. 

Based its opinion on Dewsnup v. Timm, 502 U.S. 410, 419 (1992), it held that it was precluded in a Chapter 7 case from “reducing the amount of a tax lien to the value of the collateral securing the claim.”

Geisler v. IRS, 2016 U.S. App. LEXIS 14669 (3rd Cir. Aug. 10, 2016)