Income Tax Procedure

Matters of income tax procedure at all stages are the focus of Eric’s practice, and his strongest area of expertise. Income tax procedure, apart from the substance of income tax law, is a maze of complex provisions: audits, statutes-of-limitations on assessment and collection, administrative appeals rights, court procedures, interaction with bankruptcy litigation, vicarious liability for tax debts.

U.S. Tax Court Litigation

Eric practices regularly in cases before the U.S. Tax Court, and has represented both the IRS and taxpayers. Many attorneys are registered to practice before the U.S. Tax Court. Initial registration is generally open to any attorney, but fewer attorneys have actually litigated (and won cases) before the U.S. Tax Court. The U.S. Tax Court is a peculiar institution, with its own procedures and is a forum very different from either the U.S. District Courts or state courts.

U.S. District Court Tax Litigation

Generally the last forum for refund litigation, which is often the last stage of litigation, and a useful tool for pursuing certain matters where the taxpayer has not acted timely to dispute assessment. For certain tax categories, U.S. Tax Court litigation through the Collection-Due-Process hearing route may be a less expensive alternative to U.S. District Court litigation.

Eighth, Ninth Circuit Tax Appeals

The Eighth Circuit Court of Appeals has jurisdiction over Minnesota, North and South Dakota, Iowa, Missouri, Nebraska, and Arkansas. The Ninth Circuit Court of Appeals has jurisdiction over California, Arizona, Nevada, Idaho, Montana, Oregon, Washington, Alaska, and Hawaii.
The Circuit Court jurisdiction also may matter in U.S. Tax Court litigation – the Tax Court follows the law of the Circuit with jurisdiction over the taxpayer.
Eric is authorized to practice before the Eighth and Ninth Circuits.

Audit Representation

A tax audit does not have to be a nightmare. Proper representation generally pays for itself, especially in complex situations or where the tax at issue is substantial. Many taxpayers do not realize that the examiner does not have their interest at heart, and that conclusions of an examiner are often more subjective than they appear. In routine audit situations, a good accountant is needed. In more complex situations, and with respect to legal as opposed to accounting issues, a good tax lawyer should also be considered.

IRS Appeals Representation

One of the best opportunities to reach a satisfactory result with the IRS is through the Appeals process. Appeals officers are highly trained IRS personnel empowered to ‘settle’ cases where necessary, and, because they have not participated in the underlying determination, they generally approach cases with an open mind. IRS Appeals is the best procedural opportunity to resolve a tax dispute informally and efficiently.

Income Tax Consulting

Eric advises on complex income tax issues prior to return filing where the issues are complex, e.g. with respect to international issues. Eric’s practice, however, is more heavily focused on tax controversy with respect to income tax, i.e. audit representation, IRS Appeals representation, U.S. Tax Court representation, and representation in other forums.

Employment Tax Consulting

It is not difficult to err in the maze of state and federal employment taxes, which is why for most companies, even smaller companies, it is simply easiest to ‘farm out’ this function to a (reputable) payroll service.
The penalties for non-compliance in this area can be particularly harsh (e.g. strict penalties for failing to deposit timely, at times up to 10% of gross payroll as the penalty for mis-filing of W-2s). And for owners of business entities (and even ‘key’ managerial employees), personal liability may survive the demise of the business, pursuant to the trust fund penalty provisions.

Promoter Penalties

Once upon a time, the consequences of poor tax reporting were borne almost exclusively by the taxpayer. The tax laws, however, in the last ten years have greatly increased the penalties and consequences for tax professionals who engage in overly aggressive income tax positions and tax shelters. Of course, a ‘tax shelter’ may be in the eye of the beholder – or it may be defined with some exactness in the IRS publications on ‘listed transactions’.

Tax Shelters

All federal and state tax agencies have in recent years clamped down on perceived ‘tax shelters’, and increased civil and criminal penalties for all participants. The difficulty is that one man’s honest tax avoidance is another’s dishonest tax evasion.

Criminal Tax Issues

Unfortunately, tax issues can become criminal tax issues. At both the federal and state levels, the criminal statutes often include vague language, leaving the imposition of charges largely at the discretion of federal and state tax officials. The best solution, of course, is to avoid the criminal referral for investigation through early professional representation.

Sales, Use, Income, and Employment Tax

Minnesota income tax generally follows federal income tax, but the interaction between these two independent sovereigns creates much complexity in tax procedure. For many medium-size businesses, Minnesota sales tax issues are often more important than income tax issues. Unlike the income tax provisions, which generally work harmoniously to ensure that income is taxed, sales tax provisions are often counter-intuitive, contradictory, and at times arbitrary. A slight distinction under the sales tax statutes may mean several hundred thousand dollars of tax and penalties to the uncounseled business.

Collection-Due-Process (CDP) Hearings

Collection Due Process hearings are an opportunity for the taxpayer at the federal level to receive Appeals review of liens or proposed levies. They are an important procedural device for taxpayers to avoid erroneous collection, or collection that creates a hardship. An unfavorable Collection Due Process hearing result may also trigger U.S. Tax Court review, in some circumstances even review of the ‘merits’ of the underlying tax.
Ignoring the Notice of Lien or Final Notice of Intent to Levy at the federal level, i.e. not filing a Collection Due Process hearing request, can have serious later procedural consequences on the case.

Tax Lien/Levy Removal

The IRS protects its position through liens, and enforces its position through levies. Lien issues are complex, because they are at the intersection of federal tax law and state property tax principles. Levies, issued generally only at the end of the assessment and collection process, are the ‘knock out’ blow for most taxpayers and business, and unless a release is properly obtained, generally will drive the individual taxpayer into bankruptcy and force the business taxpayer to end operations.

Tax Bankruptcy

Eric does not typically file general bankruptcy petitions. However, bankruptcy and tax for many petitioners are intertwined, and a good tax lawyer may be essential to determine the correct treatment of tax issues in a bankruptcy case.

Estate And Gift Tax Consulting

Eric does not offer routine tax-planning advice with respect to estate and gift taxes. However, Eric does handle complex estate and gift tax issues, does review estate and gift tax returns, and where necessary litigates estate and gift tax issues.

Offers-In-Compromise/Installment Arrangements

Because of the business actions of certain disreputable companies, offers-in-compromise often have a bad reputation. However, in the correct situation, an offer-in-compromise application offers both the taxpayer and the IRS an opportunity to reach a reasonable agreement to reduce the tax principal outside of the bankruptcy process. Given the limited ability to discharge taxes through bankruptcy in many situations, the offer-in-compromise program may be the taxpayer’s only option to reduce an unbearable tax load. The offer-in-compromise program is available at both the federal and Minnesota levels.

International Tax Issues

Eric handles international tax issues. He has worked on international tax issues of publicly traded companies and on the individual level. He has also personally lived and worked abroad and is fluent in German. International tax issues are complex and involve simultaneous analysis of state, federal and foreign rules, as well as any applicable international tax treaties.
Currently, international tax issues often arise in the context of increased reporting requirements for international money transfers, including FBAR reporting and reporting on inbound transfers. Failure to comply with these reporting requirements can lead to severe penalties and potential criminal charges.