Taxing, Briefly: The 2021 Child Tax Credit
Taxing, Briefly

Taxing, Briefly: The 2021 Child Tax Credit

I’m not saying that you had kids for the tax breaks, but no one at Briefly Taxing would judge you if this consideration didn’t play a small role in the decision to bring your dependents (children, rather) into the world. Congress Had Kids, Too (Apparently) Like a groundhog seeing its shadow in February, at some point in 1997, Congress chanced upon its collective parental conscience, and enacted what is now referred to as the Child Tax Credit.  The Child Tax Credit hearkens back to a chilly October day in 1976, when the Child and Dependent Care Tax Credit was established.  Only one year prior, Congress enacted the Earned Income Tax Credit. In bygone years, there was even a dependency exemption, but this exemption went the way of Old Yeller and itemized deductions with the tax reform in 2019.  Taken together, these credits reduce your tax, dollar-for-dollar, and they soften the…

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Barnes v. Commissioner (T.C. Memo. 2021-49)

On May 4, 2021, the Tax Court issued a Memorandum Opinion in the case of Barnes v. Commissioner (T.C. Memo. 2021-49). The primary issues presented in Barnes were whether the statute of limitations on collections had run with respect to the petitioners 2003 liability, whether their 2003 tax liability had been discharged in bankruptcy, whether the IRS abused its discretion in sustaining a Notice of Federal Tax Lien as to the 2003 liability. Background The petitioners’ trials and tribulations with the IRS began when they jointly filed an untimely Federal income tax return for 2003 reporting a tax liability of $31,000. The IRS sent them a timely notice of deficiency determining a tax deficiency of $55,000, an accuracy-related penalty of $11,000, and a late-filing addition to tax of $6,000.  They had their day in court in 2010, and a month after their Tax Court trial, whilst the parties were engaged…

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Haghnazarzadeh v. Commissioner (T.C. Memo. 2021-47)

On April 29, 2021, the Tax Court issued a Memorandum Opinion in the case of Haghnazarzadeh v. Commissioner (T.C. Memo. 2021-47). The primary issue presented in Haghnazarzadeh was whether certain deposits into the petitioners’ nine bank accounts are ordinary income or nontaxable deposits. A Bit of Context This is an unreported income case, and the opinion is all of six pages long.  One has expectations of a couple thousand dollars-worth of unreported income.  But not in this case.  In this case, the IRS determined that petitioners had unreported taxable income of $4,854,849 and $1,868,212 for 2011 and 2012, respectively. Wowza.  Those are two huge amounts of unreported income.  Surely the petitioners hired some hotshot tax counsel, and provided the IRS with EVERYTHING it asked for.  Nope, and nope. The petitioners appeared pro se, and they gave the IRS absolutely no substantiation whatsoever. The Bank Deposits Analysis IRC § 61(a) provides…

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Martin v. Commissioner (T.C. Memo. 2021-35)

On March 24, 2021, the Tax Court issued a Memorandum Opinion in the case of Martin v. Commissioner (T.C. Memo. 2021-35). The primary issues presented in Martin were whether the IRS abused its discretion in disallowing substantial (old and large) deductions and whether the petitioners were liable for penalties for filing (very) late and for being (very) negligent and for (very) substantially understating their liabilities. Background to NOLs The petitioner-husband was a racecar driver and mechanic.  His racing team lost $1.7 million when a sponsor “fell through.”  This loss drove (Judge Holmes strikes again) the petitioners into Chapter 7 bankruptcy.  They were discharged in the late 1990s, but the petitioners “remembered” these large NOLs and carried them into the years at issue (2009 and 2010). The Returns The petitioners disagree over who prepared their tax returns for the years at issue. Petitioner-husband claims that he prepared the 2009 return himself,…

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Siebert v. Commissioner (T.C. Memo. 2021-34)

On March 15, 2021, the Tax Court issued a Memorandum Opinion in the case of Siebert v. Commissioner (T.C. Memo. 2021-34). The primary issue presented in Siebert was whether the settlement officer abused her discretion in sustaining the proposed collection action A Note on Petitioner’s Appeal I am a big believer in karma.  The petitioners may or may not have had this decision coming.  Here’s a brief summary of why Appeals denied their request for an installment agreement: This decision was based on: (1) petitioners’ “egregious compliance history”; (2) petitioners’ high income and commensurate lifestyle; combined with (3) petitioners’ failure to turn over funds that would have been available to pay delinquent tax. Appeals repeated the observation that petitioners’ noncompliance spanned 15 years, including the last 8 consecutive years in which they had not paid Federal income tax. Appeals also noted that petitioners’ outstanding tax liability when they submitted their…

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Ward v. Commissioner (T.C. Memo. 2021-32)

On March 15, 2021, the Tax Court issued a Memorandum Opinion in the case of Ward v. Commissioner (T.C. Memo. 2021-32). The primary issues presented in Ward were whether the petitioner properly reported income, whether the petitioner was entitled to the insolvency exception to IRC § 108 to avoid income inclusion for discharge of indebtedness income, and whether the petitioner was just completely full of shit. She was. Personal Note I sympathize with the petitioner to a certain extent.  Attorneys of our generation have substantial debt. That is where my sympathy ends.  Outright fabrication of tax returns is not acceptable behavior, lady.  Get your ish together. Background The petitioner is an attorney.  She went to law school.  Whilst there, she failed to attend the course on ethics. (I’m just spitballing here.) She practiced in a firm, and then deciding that it wasn’t for her, started her own firm (an S…

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