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REG
Tax Research and Practice
38
Accounting
Undergraduate 4
02/04/2012

Additional Accounting Flashcards

 


 

Cards

Term
3 types of primary tax authority
Definition
  1. legislative
  2. administrative
  3. judicial
Term
legislative authority
Definition
  • authority from congress
  • ex: statutory (constitution, IRC, treaties, Committee Reports)
Term
8 Step Process to make a tax law (IRC)
Definition
  1. House Ways and Means Committee
  2. House of Reps
  3. Senate Finance Committee (can do whatever they want to it)
  4. Senate
  5. Joint Conference Committee (compromise house and senate versions)
  6. House and Senate again
  7. President (sign or veto)
  8. Congress (override veto with 2/3 vote)
Term
Administrative Authority
Definition
  • authority from the Treasury Department and the IRS
  • ex: treasury regs, revenue rulings, private letter rulings, revenue procedures, technical advice memoranda)
Term
6 classifications for reguations
Definition
  1. legislative, interpretive, or procedural
  2. propsed (for atleast 30 days), temporary (effect of law but only for 3 years), final
Term
revenue rulings
Definition
  • do not have as much weight as regulations
  • limited to a given set of facts
  • deal with more specific issues then regs
Term
private letter rulings
Definition
  • request from TP for IRS to provide tax consequences on a specific set of facts
  • can be for completed transactions
  • precedent applies only to TP making request
  • IRS doesn't have to respond
Term
Revenue procedures
Definition
provides internal managemtn practices of IRS
Term
Techincal advice memoranda
Definition
  • requested by IRS field agents during an audit
  • applies only to affected TP
Term
4 courts of original jurisdiction
Definition
  1. U.S. Tax Court
  2. U.S. District court
  3. U.S. Court of Federal Claims
  4. U.S. Tax Court - Small Cases Division
Term
U.S. Tax court
Definition
  • hears only tax cases
  • one court, but 19 judges travel in smaller groups throughout country to hear cases
  • TP doesn't have to pay deficiency before trial
  • Jury trial not an option
Term
U.S. District Court
Definition
  • jurial trial if wanted
  • must pay deficiency prior to going
  • judges are not specialists in tax
  • many courts across the country
Term
U.S. Court of Federal Claims
Definition
  • one court (D.C.)
  • must pay first
  • 16 judges (not specialists in tax)
  • no jury trials
Term

U.S. Tax Court - Small Cases Division

Definition
  • $50,000 or less
  • no appeal
Term
2 appellate courts
Definition
  1. U.S. Supreme Court
  2. U.S. Court of appeals
Term
U.S. Court of Appeals
Definition
  • hears all appeals from tax and district court
  • 11 circuits plus D.C. circuit
  • must follow precedent of Circuit Court of Appeals for the circuit in which the District Court is located
  • Tax Court will follow previous decisions in the Circuit that will have jurisdiction on appeal
Term
legislative weighting of authority
Definition
constitution, IRC, treaty
Term
administrative weighting of authority
Definition
legislative regs, other regs, rev rulings, private letter rulings
Term
judicial weighting of authority
Definition
depends on level of court, legal residence of TP, and more
Term
Discriminate Function System (DIF)
Definition
produces a score for each return to determine which returns to revies for possible audit
Term
IRS Statute of Limitaions
Definition
can assess aditional returns up to 3 years from the later of the date the return was filed or the due date for the return 
Term
2 exceptions for statute of limitaions
Definition
  1. 6 years if gross income omissions exceed 25% of the gross income stated on the return
  2. no statue if TP willfully evaded tax in a fraudulent manner
Term
30-day letter
Definition
  • received by TP with Revenue Agent's Report (RAR) if agreement not reached between IRS and TP on tax to be paid
  • IRS encourages agreement to the RAR or request of an appellate conference
  • TP not required to respond
Term
90 day letter (if no response to 30 day letter and no agreement)
Definition
significant because this is the time the TP has to file a petition with the Tax Court
Term
Circular 230
Definition
 describes the rules that one must meet to be eligible to practice before the IRS (represent a client before IRS)
Term
eligible to practice
Definition
generally only CPAs, attorneys, and enrolled agents (exception: employees or officers of an entity)
Term
filing requirements 
Definition
  1. individuals whose gross income exceeds the individual's automatic deductions 
  2. if net self-employment income exceeds $400 during the tax year
Term
nonfiling penalty
Definition
  • 5% per month of the tax due with the return
  • max of 25% penalty and min is lesser of $135 or amount of tax due
  • not imposed if reasonable cause for filing late
Term
tax underpayment
Definition
difference between tax due and tax paid plus credits
Term
required payments for individuals
Definition
  • 15th day of April, June, September, and January if the amount of tax owed is atleast $1,000
  • no penalty if tax is less than $1,000
  • no penalty if tax payments during year were lower of 90% of current year taxes or 100% of last year's taxes (If AGI > $150,000, then tax payments during year must be at least 110% of last years)
Term
required corporate tax payments  
Definition
  • estimated payments (at leat $500) due on 4/15, 6/15, 9/15, 12/15
  • no estimated underpayment penalty if payments are at least equal to the lower of 100% of current year's tax or 100% of preceding year's tax or if annualization exception is met
  • corporation with $1 million or more of taxable income in any of its three preceding tax years can use prceding year's tax exceptions only for first installment
Term
nonpayment penalties
Definition
  • .5% per month (max of 25%)
  • if nonpayment and nonfiling are imposed, total max is 25%
  • not imposed if reasonable cause for filing late
Term
accuracy penalties
Definition

occur when TP disregards the tax rules without reasonable cause

  1. penalty of 20% of the tax due to inaccuracy if reason is negligence
  2. 20% of tax due to inaccuracy if "substantial" understatement
  3. 20% of tax understatement for substantial misvaluation of property
  4. 40% for gross misvaluation of property
  5. 75% of underpayment for fraud and an additon of 50% of inderest due on underpayment
Term
substantial understatement
Definition

individuals: when additional tax due exceeds the greater of $5000 or 10% of total tax on the return

corporations: understatement exceeds the lesser of 10% of tax required to be shown on return (or $10,000 if that is greater) or $10 million

Term
substantial misvaluation
Definition
occurs if property is stated at 150 percent or more of correct amount
Term
gross misvaluation
Definition
occurs if property is stated at 400% or more of correct amount
Term
Statute of limitation for filing a claim for refund
Definition
later of (a) 2 years from payment of tax or (b) 3 years from the date the return was filed
Term
preparer penalties
Definition
  • if an unreasonable position (no substantial authority to it) is part of the return or refund claim, they must pay the greater of $1000 or 50% of the income derived by the preparer for preparing the return
  • if unreasonable position included, and preparer willfully attempts to understate tax liability or recklessly or intentionally disregards rules or regs, penalty is greater of $5,000 or 50% of the income earned by the tax preparer
  • additional penatlies: not signing returns, not providing a copy to TP, not keeping list of records, endorsing or negotiating a refund check, disclosing info (unless for quality peer review or under an administrative order by an agency), and $100 for not exercising due dilligence
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