Individual Taxation: Recent Developments and Changes in Tax Law for Consumers

I came across an article called Individual Taxation: Digest of Recent Developments that summarizes recent changes and developments on individual taxation. The article goes into a good amount of detail to outline both last and this year’s tax regulation changes that will affect individual consumers. I highlighted some “best of’s” from the individual taxation article below. It is important to keep informed on tax law changes as most of these changes in taxation will affect the majority of consumers – that means you! You will also find information on changes in small business taxation, IRS cases and advice on filing.

Innocent Spouse – There are complexities behind joint tax returns and what the guidelines are for Innocent Spouse Relief if a consumer considers this as a tax relief option. There has been a good amount of recent debate and activity by the Tax Court, circuit court and the IRS regarding the two year rule, which states you must file for Innocent Spouse Relief within two years of when the IRS first began collection activity. Some circuit courts hold that the two year deadline is a valid limitation while others claim that the interpretation of the limitation renders it ineffective and inconsistent with the purpose of the statute itself. For examples of court cases analyzing this issue, read the full article at the American Institute of CPAs.

To summarize the court’s conclusions:

  • the statute of limitations needs consideration of 1) all facts, 2) circumstances and 3) those that existed during the tax year when the liability was incurred.
  • the limitation period is found to be inconsistent with the purpose of the statute.

The IRS, in noting the validity of the 2 year deadline, updated their policy as follows:

  • the IRS will not settle the two-year deadline issue in any docketed case
  • for consumers who are found eligible for relief (excepting if/when the request for relief under the two-year clause was filed late), the IRS will decide how to maintain the two-year deadline conflict
  • if and when an appeal has been filed regarding the two-year deadline conflict, the IRS will then request the Tax Court to hold the case “in abeyance pending the resolution of the issue on appeal, or the parties may stipulate to be bound by the case on appeal in that circuit” as stated in the article: Individual Taxation: Digest of Recent Developments

Compensation for Injuries or Sickness - Analysis of a case where a consumer received a settlement of $350,000 from his employer as ‘noneconomic sickness damange’ in addition to regular wages. This sum was not reported as taxable income.  The court concluded that half the sum was to compensate for a physical injury caused as a results of the workplace environment and is therefore not income, however the rest of the sum was for emotional distress, for which the consumer did not provide any medical care evidence  (burden of proof) and was therefore taxable.

Medical Expenses -  Analysis of a case between a mother and daughter in regards to their medical expenses.  The court ruling involved income tax, gift tax and the respective deductions. Consumers should be wary when covering a person’s (such as a family member) medical expenses as both income tax and gift tax issues can arise. In this case from 2010, a mother paid her adult daughter’s medical expenses of over $24,000. The daughter deducted them, however the IRS disallowed these deductions, arguing that the daughter had not paid anything herself and the mother had no legal obligation to pay the expense. The court case ruled in favor of the daughter, stating with respect to medical expenses (Individual Taxation: Digest of Recent Developments):

  • transferring funds to another consumer’s medical care provider is not considered a gift for gift tax purpose, therefore it is not tax deductible
  • when substance over form indicates that payment was actually made, for income tax purposes, a deduction is entitled

To find out further changes in tax regulation regarding adoption expenses, qualified scholarships, charitable contributions and an array of tax regulation topics, read the article in full at the American Institute of CPAs.

The world of tax and tax regulation can be very intricate. If you owe back taxes, have unfiled tax returns or are seeking tax relief, you need expert tax assistance. It’s best to seek out professional help to determine your specific situation and needs. Increase your chances of attaining the tax help you need – contact a Certified Tax Resolution Specialist or qualified tax attorney who can offer specific advise for tax relief options, including Innocent Spouse Relief.

More Tax Help, IRS News and Tax Relief Tips:

  1. How to Get IRS Tax Relief from Back Taxes or Unfiled Tax Returns
  2. IRS Tax Relief News: Tax Case Convictions on the Rise For Americans with IRS Problems
  3. Tax Help: How to Resolve Your Back Taxes & Prevent Tax Problems If You’re Short on Cash This Season
  4. Tax Help Tips for Filing Tax Returns: Reduce Debt, Pay Back Taxes and Avoid IRS Problems
  5. Tax Debt – 10 Tips for Those Who Owe Money to the IRS

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One Response to “Individual Taxation: Recent Developments and Changes in Tax Law for Consumers”

  1. Tax Help News Round Up – Innocent Spouse change in regulation, How to Chose a Tax Pro, Give to Charity, Avoid a Tax Scam and More! | Tax Attorney and Tax Resolution Services: IRS Help Blog Says:

    [...] spouse relief. Innocent Spouse regulation can be quite intricate. I recently mentioned this change in taxation for consumers. Read more of the details on my blog or check out Michelle’s [...]

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