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New tax reduction strategies carefully explained and exhaustively researched every two weeks. Receive breaking news updates on tax law changes. Members only monthly AMA with TOTTB.tax.
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Innocent Spouse Relief
"I knew he was a crook when I married him." Come again? And you still married him? That's what I said in my head as it took every muscle in my face to keep my forehead from scowling. But instead, I said, "What do you mean?" "We always had good money and nice things, but we never paid taxes. I always owed when I was single. But when we got married, I stopped working and we never owed." Let me take a moment to rewind and get you up to speed. This taxpayer, let's call her Mrs. Bonnie for the purposes of this story, reached out because she needed to file last year's tax return. She was recently widowed, and her husband typically handled the tax filing. So, she was already feeling overwhelmed and lost when it happened. She went to the mailbox and pulled out mail from the IRS. It was a CP3219A , notifying her that credits claimed on a previous tax return were being disallowed by the IRS. Not only did she owe taxes, but she also owed accuracy related penalties. She only had 90 days to respond if she disagreed and didn't know what to do. When she reached out to me, she inquired about whether I could review previous year returns. Mrs. Bonnie wanted to make sure that they were "done right". This isn't a strange request. I told her that I would review the prior year to have a baseline and if I saw anything fishy, I'd bring it to her attention and perhaps look at another year. I didn't even make it to the signatures before the fishiness leaped off the page. I set up a meeting with her via Zoom to review my findings. As I begin to ask about some of the credits claimed and her husband's business her answers did not match what was on the return. That's when she let me know that she knew her husband, Mr. Clyde, was a crook when she married him. Mrs. Bonnie didn't know much about taxes, but she did a bit of research. She read about something called Innocent Spouse Relief and thought she may be eligible. Let's look at what Innocent Spouse Relief is and why Mrs. Bonnie was not eligible, but your client may be.
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CURRENT EDITION
When Your Client’s World Is Bigger Than the U.S.
A lot of client meetings still start with the same assumptions: W-2 in a U.S. state, mortgage nearby, a 401(k), maybe some RSUs, and a college-savings plan. Yet many of those “simple” clients now own an apartment in another country, freelance for a foreign company, or have parents wiring money from overseas. The tax code does not see those details as background color; it treats them as organizing facts. This is where citizenship, residency, and domicile quietly step onto center stage. For planners, the challenge is not memorizing every cross-border rule. It is knowing when a client is no longer “just domestic” and shifting your planning framework before you stumble into penalties, double taxation, or blown opportunities.
Are You Committing Filing Status Malpractice?
Consider this article your periodic reminder that, for married taxpayers, filing jointly is an election and not the default (and certainly not the only) filing status option. It is important in a busy practice to remember to offer this option to clients who may benefit from filing separately, even if they don’t ask.
Syndicated Easements: Fresh IRS Offer and the Perils of Post-BBA Gamesmanship
The IRS has issued a statement about a new settlement offer that is going out for conservation and historic preservation easement disputes. It is similar to previous offers, but there is one big difference. The partnership will not have to make a payment at the time that it accepts the offer. Other than that, it is similar to the deal offered in 2020. Taxpayers get to deduct what they are out-of-pocket as an ordinary deduction and are subject to a 10% penalty. In general, the out-of-pocket donation might be around 20% to 25% of the claimed charitable deduction. The Tax Court, on average, has been allowing 6%, although results vary. There is usually a 40% penalty in the decided cases.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
