Tax Coda Weekly Digest — October 26, 2025
1. Berry v. Commissioner — Who reports the S corp income
T.C. Memo. 2025-109 (Oct. 21, 2025)
The Tax Court said Andrew Berry owned half of his S corporation, Phoenix Construction & Remodeling, in 2016. Because of that ownership, he had to report half of the company’s unreported income on his return, even if he didn’t get the cash. The court also approved a 20 percent accuracy-related penalty for underreporting.
Why It Matters:
Reinforces that S corp income flows through to shareholders, whether or not money is distributed.
The IRS can rely on bank deposits and customer payments to reconstruct income.
Reminds taxpayers that late or incomplete evidence can be excluded under the court’s pretrial order.
Takeaway:
If you own part of an S corp, you’re taxed on your share of its earnings—not just what you take home.
2. Murrin v. Commissioner — When a preparer’s fraud keeps the clock open
No. 24-2037 (3d Cir. Oct. 17, 2025)
The Third Circuit said the IRS can assess tax at any time if a return is fraudulent—even when the fraud comes from the tax preparer, not the taxpayer. Murrin’s preparer inserted false numbers on 1990s returns, so the IRS’s 2019 notice wasn’t too late.
Why It Matters:
Clarifies that §6501(c)(1)’s unlimited assessment period applies when anyone files a fraudulent return.
Protects the IRS’s ability to correct old fraudulent filings without a statute-of-limitations defense.
Highlights the risk of relying blindly on preparers who manipulate figures.
Takeaway:
Fraud by your preparer can haunt you years later—the assessment clock never expires on a false return.
3. IRS Fact Sheet 2025-08 — Form 1099-K rules return to the old limits
Issued Oct. 2025
The IRS scrapped the $600 Form 1099-K rule that was supposed to start and returned to the old threshold: payment apps must issue a 1099-K only if a user tops $20,000 in payments and 200 transactions in a year. The guidance also covers fixing wrong forms and ignoring purely personal transfers.
Why It Matters:
Reduces confusion and paperwork for casual sellers and personal-use app payments.
Payment platforms like PayPal, Venmo, and eBay again apply the higher reporting threshold.
Taxpayers who still get an incorrect form can offset it on their return if the issuer won’t fix it.
Takeaway:
Only serious sellers will get 1099-Ks in 2025; most casual app users won’t.
4. Sullivan v. Commissioner — IRS levy upheld on unpaid tax
T.C. Memo. 2025-92 (Aug. 27, 2025)
A retired Air Force officer tried to block the IRS from collecting his 2016 taxes through a levy. The Tax Court ruled against him because he received a proper deficiency notice years ago and didn’t file a petition then. He couldn’t re-argue the same issue during the collection hearing.
Why It Matters:
Confirms taxpayers can’t reopen old tax years in Collection Due Process cases.
This reinforces that the IRS can proceed with levies when no alternative payment plan is offered.
This demonstrates that missing the 90-day petition window ends the chance of disputing liability.
Takeaway:
The IRS can collect once the deficiency notice window closes; CDP hearings aren’t do-overs.
5. Gonzales v. Commissioner — IRS notices to partners were on time
T.C. Memo. 2025-103 (Oct. 22, 2025)
Tom Gonzales argued that the IRS waited too long to issue notices of affected items tied to a partnership audit. The Tax Court disagreed, saying the notices were mailed within the allowed TEFRA timeframe and appropriately based on the final partnership adjustments.
Why It Matters:
Confirms how TEFRA deadlines apply when individual partner notices follow a partnership case.
It shows that the IRS met its timing obligations, preserving assessment rights for partners.
Reinforces that affected-items notices depend on the partnership’s final adjustment date.
Takeaway:
Under TEFRA, once the partnership case wraps up, the IRS still has time to issue follow-up notices to partners—and Gonzales’s came in on schedule.
Overall takeaway
Across these rulings and releases, the themes stay consistent:
Income attribution and timing rules remain strict.
Fraud suspends deadlines entirely.
The IRS is easing back on 1099-K paperwork but enforcing long-standing procedures everywhere else.
Efficient compliance now means understanding what you owe and when your chance to argue expires.