Tuesday, October 30, 2018

IRS prevails in a tax collection case

On October 3, 2018, the Sixth Circuit released its opinion in United States v Estate of Albert Chicorel, in which it held that the United States, seeking to enforce a claim for unpaid taxes, may perfect its claim after timely submitting a notice of claim to the personal representative of the Estate by filing a collection proceeding in Federal Court, even though the Federal court proceeding was filed more than ten years after the assessment of the tax.

The tax was first assessed by the IRS in September 2005. Chicorel did not pay before he died in the fall of 2006. An estate was opened and the four-month notice to creditors was published in May 2007. The IRS was not notified, despite the fact that it was a known creditor. The United States filed a proof of claim in the probate court in January 2009. It later filed its collection action in March 2016.

26 USC 6502-a requires that any tax assessment may be collected "by levy or by a proceeding in court" if the proceeding is begun within ten years of assessment. The issue presented, given the fact that the lawsuit was filed more than ten years after the assessment, was whether the filing of the notice of claim was a "proceeding in court."

The court found that it was. The filing of a notice of claim requires action by the personal representative, and has significant legal consequences for the creditor and for the estate.

What the court did not tell us is what the personal representative did with the notice - it must be disallowed if the PR does not believe it is properly payable - or why the United States took another seven years to file the lawsuit against the estate. Under the Sixth Circuit's analysis, once the notice of claim was submitted to the personal representative within the ten-year period, the United States could wait as long as it wished to file the collection action.

United States v Estate of Albert Chicorel (PDF)

Saturday, October 20, 2018

The effects of this year's tax cut

Newsweek has published an article entitled "Trump's tax cuts benefit rich Americans, not middle-class families, voters say by two-to-one margin in new poll."

If that that is what most people believe, it is because they have accepted claims made by politicians, because the assertion is simply untrue. Doing a direct financial analysis of the effects of the Tax Cuts and Jobs Act of 2017 tells another story entirely.

We have done the calculations for two hypothetical taxpayers, a single person with one child earning $70,000 per year and another single person with one child making $135,000 per year. The result of our calculation, comparing the 2017 tax year to the 2018 tax year, the first year the cuts go into effect, shows:

The 70K worker will have a 22.3% lower tax bill for 2018
The 135K worker will have a 15% lower tax bill for 2018

We show our work. We have posted the calculation at https://is.gd/OAFWiW

So you can believe the fictions disseminated by politicians, or you can believe the result of an actual calculation and comparison.

You can argue about whether the country can "afford" a cut in personal income taxes. You can argue about whether the taxes paid by those taxpayers who earn more than you do should be higher than they are. But you cannot deny that most middle-income Americans will have a lower tax bill next spring as a result of the TCJA.

Saturday, October 6, 2018

Unexpected information from SSA

When you apply for Social Security benefits, the Social Security Administration will review the reports that it has received from former employers. If it finds information about a pension plan that you participated in during a period of employment, SSA will notify you of that plan and the fact that you might be entitled to benefits. One client of ours learned that she was entitled to $235 per month that she did not know about, in addition to her Social Security benefit.