Tag: Tax Liability

Taxpayer Attempts To Claim A Unilateral Settlement With IRS

In his letter enclosing his $1,396 check, taxpayer asserted unilaterally that “we are now concluded on this tax return issue” and that he would not “have any more issues with IRS” regarding 2006. But there can be no settlement unless there is mutual assent to its terms, which taxpayer has not shown. To demonstrate assent by the IRS, taxpayer must do more than show that the IRS cashed his check. No compromise was implied by “the government’s acceptance and cashing” of taxpayer’s check.

Once assessed, a disputed tax liability may be compromised by the IRS under Code section 7122. Taxpayer was free to propose an offer-in-compromise during the proceeding by submitting Form 656, Offer in Compromise, together with supporting financial information. But he declined to request a collection alternative of any sort, insisting instead that he had no liability for 2006 whatsoever.

Taxpayer’s argument is meritless. A disputed tax liability may be settled by agreement between taxpayer and the IRS. A settlement of a case pending in Court is a contract that “may be reached through offer and acceptance made by letter, or even in the absence of” a written instrument. Taxpayer did not settle his 2006 tax liability with IRS counsel. Rather, his case was tried in Court and he lost.

Even if the IRS employee were thought to have made a settlement offer, no settlement of any kind is binding on the IRS unless it is duly authorized and properly memorialized, as “This Court has repeatedly declined to enforce a settlement agreement when the person entering into the agreement on behalf of the Commissioner lacked the authority to bind the” IRS. Taxpayer has supplied no reason to believe that his IRS correspondent had the requisite settlement authority.

Taxpayer relied solely on its unilateral statement that the issues were all resolved. It did not follow any of the procedures available to it. In short, taxpayer had proffered no plausible evidence of a settlement. Thus, the court held for the IRS.

Morris R. Saunders, msaunders@lgattorneys.com.

The Illinois Independent Tax Tribunal: A New Forum for Certain Tax Protests

For years, Illinois taxpayers have been complaining about the Illinois Department of Revenue’s (the “Department”) handling of tax disputes. Complaints ranged from long delays in the Department’s administrative process to taxpayers not feeling like they were properly heard or their disputes fairly considered. Well, the Illinois General Assembly answered taxpayer’s calls in its creation of a new administrative forum, separate and apart from the Department, to handle certain types of tax disputes called the Illinois Independent Tax Tribunal (the “Tribunal”). The Tribunal’s self-proclaimed purpose is, among other things, “to increase public confidence in the fairness of the State tax system.” See 35 ILCS 1010/1-5(a).

In most cases, the Tribunal only has jurisdiction over protests filed after January 1, 2014. Any protests filed prior to January 1, 2014 continue with the Department. Typically, the Tribunal only has jurisdiction over protests if the amount of the tax liability exceeds $15,000, exclusive of penalty and interest. In situations where there is no additional tax liability assessed, but the total penalties or interest or both exceed $15,000, the Tribunal has jurisdiction.

Only certain types of tax protests may be heard by the Tribunal. These include tax liability under the:
• Illinois Income Tax Act
• Tobacco Products Tax Act of 1995
• Motor Fuel Tax Law
• Cigarette Tax Act
• Hotel Operators’ Occupation Tax Act

Other types of tax protests do not fall within the jurisdiction of the Tribunal. These include tax liability under the:
• Charitable Games Tax
• Cigarette Machine Operators’ Occupation Tax
• County Motor Fuel Tax
• Private Party Vehicle Use Tax
• Real Estate Transfer Tax

The Tribunal maintains its principal offices in both Sangamon County and Cook County, Illinois. A protest must be filed within the time permitted by statute and in the form prescribed by the Tribunal (which is similar to a complaint filed in state court). The Department is required to answer, in writing, within 30 days after a protest is filed. The Tribunal charges a $500 fee for the filing of a petition and the discovery process is governed by the Illinois Supreme Court Rules and the Illinois Code of Civil Procedure. Following the completion of discovery, a hearing will be held before an administrative law judge, independent of the Department, and the Tribunal will issue its decision in writing no later than 90 days after the completion of the hearing.

To discuss a tax dispute you have with the Illinois Department of Revenue, please contact:

Jonathan M. Weis at:

jweis@lgattorneys.com or 312-368-0100

or

Dean J. Tatooles at:

dtatooles@lgattorneys.com or 312-368-0100

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