Term
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Definition
| amount of assets that a business must own to qualify for LMSB |
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Term
Wage and Investment Division (WI)
Small Business / Self Employed (SBSE)
Tax exempt / Govt Entities (TEGE)
Large and Midsized Businesses (LMSB) |
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Definition
| The four operating divisions of IRS |
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Term
| Criminal Investigations Unit |
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Definition
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Term
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Definition
| IRS officer that does Audits / Examinations |
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Term
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Definition
| IRS officer that performs collections |
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Term
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Definition
| IRS officer that works for the Criminal Investigations Unit |
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Term
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Definition
| The Act that changed a lot of things about the IRS in recent years |
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Term
| responsibilities of the Director of Practice |
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Definition
governs enrollment to practice before IRS
Investigates activities within Secretary of Treasury
Institutes Discliplinary proceedings
Disbar practitioners
Other duties as necessary and appropriate |
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Term
| persons who may practice before IRS, according to Circular 230 |
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Definition
Attorney
CPA
Enrolled Agent
Enrolled Actuary
Federal officers / employees
State officers / employees |
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Term
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Definition
| Practitioner must submit records to IRS, unless he has: |
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Term
| Reasonable grounds that can keep a taxpayer from submitting evidence are: |
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Definition
Attorney client privilege
5th Amendment
Evidence was already provided
Evidence no longer exists |
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Term
| How long should tax records be kept by a taxpayer (reasonably)? |
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Definition
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Term
| Requests of IRS must be: (what is the standard?) |
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Definition
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Term
| Practitioner may interefere with information request if: |
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Definition
practitioner believes in
good faith and reasonable grounds |
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Term
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Definition
can't knowingly submit false return
must advise client of consequences of omission
no affirmative obligation to disclose, unless asked on point (at which point he should withdraw) |
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Term
| standard by which a practitioner should prepare a return (duty to taxpayer) |
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Definition
highest quality representation
use due diligence
make reasonable inquiries if info seems incorrect
can rely on taxpayer's word if reasonable
communicate clearly
advise client of accuracy related penalties |
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Term
| standard by which a practitioner should prepare a return (duty to IRS) |
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Definition
realistic possibility of being sustained on the merits
1 in 3 likelihood of success
OR
position no frivolous, and
practitioner advises client of opportunity to avoid accuracy related penalties by disclosing; and
requirements of disclosure |
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Term
| Penalty for understatement of return |
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Definition
before May 7, 2007:
$500 / negligent, $1000 / reckless
after and including May 7, 2007:
$1000 or 50% of fee if negligent
$5000 or 50% of fee if reckless |
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Term
| return prepare must be ___% correct to avoid penalties |
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Definition
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Term
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Definition
IRC
Treasury Regulations
Private Letter Rulings (PLR)
Closing Agreements
Determination letters
Information letters
Revenue Rulings
Revenue Procedures
Technical Advice Memos (TAM)
Transfer Pricing Agreements
Pre-filing agreements
Action on Decisions (AOD)
Acquiscence / Non-Acquiescence |
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Term
| Ways in which returns are chosen for audit |
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Definition
matching with information return
random / lottery
Discriminate Function score (DiF)
Large Corp. entities
Targeted items
Targeted businesses / industries
Amended returns
Investors in listed transactions
Prior request for letter ruling
association with others who have been audited (partnership in which partner is audited)
informant
notoriety
unsusual transactions
prior productive audits
change in accounting method |
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Term
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Definition
correspondence audit
office audit
field audit
unallowable items program
research audit |
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Term
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Definition
audit is done via phone mail
focus on particular items
quick |
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Term
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Definition
request to come down to IRS office
focus on particular issues
quick |
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Term
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Definition
visit by IRS
examination of entire return
checking multiple issues
not quick |
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Term
| unallowable items program |
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Definition
matching with information returns
checking for specific items |
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Term
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Definition
random selection
thorough audit of entire return
2% of all audits |
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Term
| What are some indirect methods of proof used by IRS? |
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Definition
Bank deposits method (total deposits less interaccount transfers less deposits from non-taxable sources = taxable income)
Net worth method (net equity build up for year less purchase money debt = taxable income) |
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Term
BURDEN OF PROOF
Civil Tax deficiency |
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Definition
IRS must prove
by a preponderance of evidence
which is
more than 50% |
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Term
BURDEN OF PROOF
Civil Fraud |
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Definition
IRS must prove
by Clear and Convincing Evidence
which is
75% or more |
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Term
| if taxpayer doesn't like revenue agent, taxpayer should |
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Definition
speak with manager
contact taxpayer advocate
request that agent be removed
refuse to extend statute of limitations, or terminate extension |
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Term
| In order for court to enjoin the audit |
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Definition
Taxpayer must show irreparable harm to business and
no likelihood that IRS will prevail (95% chance or less)
EnXoch v. Williams |
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Term
| When auditing and requesting information, IRS must be: |
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Definition
Reasonable
(Time & Place & Circumstances) |
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Term
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Definition
| Accountants hired by attorneys for litigation purposes, and whose work product is protected by attorney client privilege |
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Term
| tax payer assistance form issued by taxpayer advocate |
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Definition
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Term
| Taxpayer Advocate works under the following concept |
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Definition
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Term
| private letter rulings are public information because: |
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Definition
| Taxpayer & Advocate Magazine sued under the Freedom of Information Act (FOIA) |
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Term
| Under the FOIA, what government documents are recoverable, and which are not? |
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Definition
documents that are EXPLANATORY are recoverable
documents that are DELIBERATIVE are not recoverable |
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Term
| How many days does a third party normally get to respond to an IRS summons? |
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Definition
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Term
| How many days notice does a taxpayer get before a third party is summoned? |
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Definition
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Term
| Where would a taxpayer go to, to request injunction of IRS's third party summons? |
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Definition
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Term
| The duties of a summoned third party are: |
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Definition
must begin assembling documents immediately
(should obtain certificate that says taxpayer does not object) |
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Term
| What is a John Doe summons? |
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Definition
request to third parties regarding lists that will identify who taxpayers are
(a powerful tool to identify users of listed transactions) |
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Term
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Definition
| consent extending statute of limitation to a fixed date |
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Term
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Definition
| consent that leaves statute of limitations open ended until a given event |
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Term
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Definition
| Form used to terminate an extension of a statute of limitation |
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Term
30 day letter (RAR)
What is it, and what are the options to the taxpayer who receives it? |
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Definition
Sent by IRS to explain basis of adjustment, the taxpayer can:
1) enter an 870 Waiver / Agreement and settle
2) protest within 30 days
3) do nothing
4) pay |
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Term
| If a taxapayer protests an RAR: |
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Definition
must be within 30 days
They can go to Administrative appeals if IRS grants this, and possibly settle |
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Term
| If a taxpayer signs a 870 waiver |
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Definition
| Taxpayer waives the right to get a notice of deficiency before they are assessed. |
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Term
| Notice of Deficiency is often called: |
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Definition
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Term
| Immediate assessment occurs when |
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Definition
1) computational mistake is found by IRS
2) Jeopardy / termination assessment (taxpayer is moving assets overseas, or transacted in cash)
3) In a partnership return, taxpayers were inconsistent with partnership return (except when disclosed) |
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Term
| Partnership audits were "unified" as a result of this act |
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Definition
| The TEFRA Partnership Act of 1984 |
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Term
| What happens after tax court litigation? |
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Definition
| Taxpayer pays assessment, but can file for Claim of refund and enter into refund litigation |
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Term
| Who must IRS notify in the case of a partnership audit? |
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Definition
| All partners, except minor partners (who own less than 1%) |
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Term
| Who is in charge of notifying other partners of an audit in a partnership? |
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Definition
The tax matters partner (TMP)
or
Direct partners must notify indirect partners |
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Term
| If assessment is made against a partnership, when must partners file an appeal with tax court? |
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Definition
TMP must file w/in 90 days
all other partners may file w/in 150 days |
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Term
| What is the statute of limitations for a partnership return to be audited? |
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Definition
| 3 years from when the return was filed, or when the return was due (whichever is later) |
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Term
| What is the statue of limitations for a fraud case? |
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Definition
| there is not statue of limitations on a fraud case |
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Term
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Definition
Items that are affected by partnership returns include gross income on the individual tax payer's tax return.
Ask Anne how this relates to statue of limitations |
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Term
| How is interest calculated by IRS today? |
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Definition
compounded daily
(before, it was simple interest)
interest rate is based on short term federal rate
interest is not deductible as Schedule C expense
Practitioner MUST advise client about interest costs |
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Term
| When does interest on underpayment start to accrue? |
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Definition
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Term
| When does interest on overpayment start to accrue (in favor of taxpayer)? |
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Definition
from date of payment, at market rate
overpayments from preceding year accrues starting when the return was filed or due |
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Term
| IRS's calculation of market rate for overpayment |
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Definition
Individuals:
Short Term Adjusted Fed rate + 3%
Corporations
Short Term Adjusted Fed rate + 2% |
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Term
| IRS's calculation of market rate for underpayment |
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Definition
Short Term Adjusted Fed rate + 3%
for both individuals and corporations |
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Term
| IRS's calculation of market rate for large companies |
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Definition
overpayment of $100,000 or more:
Short Term Adjusted Fed rate + 0.5%
Underpayment of $100,000 or more:
Short Term Adjusted Fed rate + 5% |
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Term
| What stops the accrual of interest? |
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Definition
| Signing the 870 waiver (30 days after, until IRS makes final assessment) |
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Term
| Difference in interest treatment between offer and compromise and installment agreements: |
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Definition
no interest if paid pursuant an offer and compromise
interest accrues for installment payments |
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Term
| After Audit, the 30 days before the RAR is sent, does the interest accrue? |
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Definition
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Term
| Ways to eliminate interest from accruing without eliminating rights to notice of deficiency by IRS |
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Definition
1) Rev Proc 84-58
Deposit or payment can be made during audit / appeals
refundable anytime
2) IRC 6003
3) Tax Reserve
charged as a "liability" in bookkeeping
$ is placed in interest bearing account, but the interest is taxable |
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Term
| IRS interest abatement can apply if: |
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Definition
IRS agent committed "unreasonable error" or "unreasonable delays for ministerial act"
Taxpayer must show error.
If IRS denies abatement, can goto tax court |
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Term
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Definition
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Term
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Definition
1) Reasonable cause
2) Good faith
or
Substantial authority by primary source
Reliance on counsel |
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Term
| Failure to pay penalty is |
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Definition
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Term
BURDEN OF PROOF
Criminal Fraud |
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Definition
| Beyond a reasonable doubt |
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Term
| Defense to the failure to pay penalty is |
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Definition
Reasonable cause
and it's not willful neglect |
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Term
| Accuracy related penalty is: |
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Definition
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Term
| The five causes for accuracy related penalties are: |
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Definition
understatement
omission
(fill in above) |
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Term
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Definition
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Term
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Definition
Filing of false return
cash transactions
concealment of assets
inadequate records
phony deductions
destruction of records
falsifying records
sham transactions
non-arms length transactions
illegal income
refusal to cooperate |
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Term
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Definition
Administrative Appeals settlement
Not binding
allows for later claims for refund
Waiver of Notice of Deficiency |
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Term
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Definition
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Term
| How does Appeals get involved? |
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Definition
Early referral
protest of RAR
protest of proposal of disallowance of
claim of refund
interest abatement
penalty abatement
innocent spouse relief
protest of
IRS collections
CDP (collection due process program) |
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Term
Attorneys fees can be recovered via
and what does taxpayer need to show to get attorney's fees? |
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Definition
EAJA (Equal Access to Justice Act)
must "substantially prevail" as to most significant issue
reasonable amount
went through administrative appeals
cost is attributable to govt actions |
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Term
Attorney fees are not recoverable if:
What is the one defense against the govt? |
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Definition
govt was "substantially justified"
or if individual has more than $2 million
or if company has more than $10 million
"Qualified offer" positions will make the govt's position unjustified.
Taxpayer must've offered a better settlement to IRS beforehand. |
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Term
| When dealing with statue of limitations, ask the following questions: |
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Definition
1) In whose favor does the SOL run?
2) Which SOL are we talking about?
3) The SOL starts when:
4) The period of the SOL is:
5) The SOL can be suspended by:
6) The SOL is satisfied when:
7) The end of this SOL triggers the next SOL, which is: |
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Term
| What events suspend the SOL of Assessment? |
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Definition
Taxpayer objecting to the IRS's summons of a third party
870 extension notice
Notice of Deficiency (90 days before + length of litigation + 60 days) |
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Term
| The Statue of limitations for assessment is |
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Definition
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Term
| The statute of limitations for assessment when there was a gross omission is |
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Definition
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Term
| The statue of limitations on collections is |
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Definition
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Term
| The statue of limitation for a claim of refund is |
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Definition
| the greater of 3 years form return, or 2 years from payment |
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Term
| The statue of limitation for a refund litigation is |
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Definition
| Six months after filing, can file suit |
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Term
| The statue of limitation for a Deficieny Tax court petition is |
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Definition
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Term
| The following factors will mitigate the fact that a statue of limitation has run |
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Definition
1) doubling up of an item
2) between related taxpayers
3) final determination (by court) of what correct treatment is
4) otherwise barred under SOL
5) party in case maintained inconsistent position
Result: tax payer is given one year to file claim of refund. |
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