Author: mullarke

There is no such thing as an IRS nominee lien or an IRS alter ego lien.

by mullarke

There is no such thing as an IRS nominee Lien or an IRS alter ego lien. The only tax lien provided for under the Internal Revenue Code is the statutory lien against all property and rights to property of the taxpayer which arises as a result of an assessment, along with notice and demand. Nevertheless, the IRS sometimes files a document which it calls a “notice of nominee lien”or “notice of alter ego lien.” The document should really be titled as a “nominee notice of lien”because it’s function is to give notice that the IRS contends that the statutory lien against the taxpayer attaches to the property, even though the property is titled in the name of someone or some entity other than the name of the taxpayer against whom there is a notice of lien on file.

Despite the fact that the documents are misnamed they are usually effective to tie up the property. Where the IRS can have problems is if a Revenue Officer actually acts on the notion that a separate lien has been created. If, upon being paid the value of the property or concluding that the property is worthless, or that the taxpayer had no interest in the property, the Revenue Officer releases the lien or if the notice has a self-release legend and the notice is not refilled, the consequence is that the statutory lien is released, not just the so-called nominee or alter-ego lien. This can be especially problematic where the affected property is in a jurisdiction other than the jurisdiction of the taxpayer’s residence. The property must be discharged from the statutory lien or the notice must be withdrawn in order to preserve the statutory lien. Also, since the only notice that actually relates to the statutory loan is the notice against the taxpayer, that notice must be filed and refilled in the jurisdiction where the property is located as well as in the jurisdiction of the taxpayer’s residence.

Checking the presidential fund box on your 1040 might reduce the chances of an IRS audit

by mullarke

Does checking the box on your 1040 to contribute to the presidential fund audit proof your return? I have a theory that it helps. The vast majority of audits are based on the DIF score of the return. The DIF score is derived from sample audits of thousands of returns to derive a pattern that is most likely to result in a deficiency. Because it is based on real returns it can be counter intuitive and it takes everything or almost everything into account. For instance, if people from the sample audits who filed on extension using a tax return preparer and claiming very little in charitable deductions tended to underreport their income, your return will get a high DIF score if you also filed on extension using a tax return preparer and claiming very little in charitable deductions.

I have a theory that one of the things that is looked at in determining the DIF score is whether the taxpayer checked the box. It is possible that people in the sample group who checked the box cheated, so checking the box would increase the chance of an audit, but I doubt it. It seems to me that human nature is such that a cheater is not likely to do something designed to promote good government. That supposition is fortified by the fact that in over 50 years of looking at returns, many of which had been audited, I never saw a return that had been subject to audit and on which the taxpayer checked the box. It is true that on most returns the box isn’t checked, so my observation might prove nothing, but combined with my take on human nature I thinking checking the box makes sense.