Ch 13 Homework Questions (Doesn’t required any reference please use your own words to answer it . Don’t give the reference it’s a study guide professor wants to see students explanation only.
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Federal tax Research
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Part 1
Answer the following. Use your own words, complete sentences, proper grammar, and co
ect spelling. Submit one doc, docx, or rtf file.
1. For each of the following (1) co
espondence examinations, (2) office examinations, and (3) field examinations: Discuss the reason for conducting each type of exam; basic procedures of each type of exam; scope of review; type of documentation that typically is required of the taxpayer; and the opportunity of IRS personnel to use professional judgment in resolving issues . Identify which type of IRS employee conducts the audit. Show that you understand these types of audits. Be organized, accurate, and thorough. This will require you to organize material. Paraphrase the material in the text into your own words. 9 pts
2. List ways in which a revenue agent may attempt to negotiate a settlement after the completion of an audit. If he taxpayer disagrees with the audit findings, list and discuss the options available to the taxpayer or his/her advisor. Note: This asks about the role of the revenue agent. 5 pts
3. Discuss the appeals process and appeals conference. 3 points
4. How should the tax professional advise a client whose charitable contributions are double that of the U.S. norm for his or her income level? 3 pts
5. Distinguish between a 30-day letter and a 90-day letter. 4 pts
Part 2
Q1. WhattechniquesotherthantherandomselectionofreturnsforauditdoestheIRSuseinitsenforcementfunction? (this question is on page 452)
Q2. Relate some of the “audit etiquette” tactics that you have heard taxpayers or tax professionals discuss.
Q3. 34. Indicate whether the following statements are true or false:
a. The statute of limitations for assessment of taxes never extends beyond three years from the filing of a return.
. There is no statute of limitations relative to a taxpayer’s claim for a refund.
Chapter 13-Working with the IRS
THE INTERNAL REVENUE SERVICE
1. The IRS is one of the largest of the federal agencies. Its organizational chart is summarized in Exhibit 13-1.
2. The IRS is
oken down into four primary operating divisions:
a. The Wage and Investment Division serves 1040 filers with only wage and investment income.
. The Large Business and International Division serves large C-corporations, S-corporations and partnerships with assets greater than $10 million.
c. The Small Business and Self-Employed Division serves small businesses and self-employed taxpayers.
d. The Tax Exempt and Government Entities Division serves employee plans, exempt organizations and government entities.
THE AUDIT PROCESS
1. A preliminary review of returns includes matching of the information recorded on the return with co
esponding data received from third parties, for example data from a W-2 received from an employer.
2. The IRS also conducts mathematical/clerical e
or and unallowable items program in which returns are checked for certain e
ors and tax due is automatically recalculated.
3. Tax returns are selected for review based upon their likely dollar return to the Treasury using a variety of tools including a discriminant function (DIF) formula which rates a return for its audit potential.
4. While the overall chance of an audit is low (see Exhibit 13-2), chances of audit increase significantly for certain types of taxpayers and for taxpayers with certain types of income.
EXAMINATIONS
1. Co
espondence examinations focus on simple documentation issues, while office examinations tend to review more sensitive items. Field audits are used to review the ove
iding nature of the taxpayer's operations.
2. The summary of audit etiquette enumerated in the text illustrates both a professional courtesy and an adversarial role in the examination. Issues should be identified and addressed throughout the process. The auditor should not be allowed free access to records or facilities. At some point, an "agree to disagree" resolution may be the best that is attainable.
3. At the conclusion of an examination the IRS auditor must explain any proposed adjustments in a Revenue Agent’s Report (RAR). The thirty-day letter summarizes the Revenue Agent's recomputation of the tax liability after a review. Failure to respond satisfactorily to that document triggers the ninety-day letter, to which the taxpayer must respond with either a payment of the proposed tax or a petition to the Tax Court.
THE APPEALS PROCESS
1. The IRS Appeals Division is the next step in the negotiations. The appeals process is illustrated in Exhibit 13-3. The taxpayer may wish to avoid this step if:
a. new issues could be raised by the government as the process is prolonged
. the taxpayer wishes to send a message of certainty in its argument to the government, o
c. an expedited conclusion to the issue is desired.
ENTERING THE JUDICIAL SYSTEM
1. Tax litigation is a costly, time-consuming process. Direct costs of attorney and accountant fees, document reconstruction, travel, and witness production can make this a difficult decision. As noted earlier, the district courts and the Court of Federal Claims require that a taxpayer pay the disputed tax first.
STATUTES OF LIMITATIONS
1. The general application of the statute of limitations in tax cases is three years from the later of the due date or the filing date of the return.
2. Extended dates apply in the case of worthless securities, understatements of gross income, and fraud.
3. The statute is suspended during administrative and judicial proceedings. It is extended when the taxpayer
ings a refund action within sixty days of the running of the statute.
STATUTORY AGREEMENTS
1. The government uses closing agreements and offers in compromise to
ing to a close a dispute with a taxpayer. An offer in compromise is perhaps most attractive when the taxpayer’s ability to pay the tax is in doubt, because of financial limitations.
TAXPAYER RIGHTS
1. The Internal Revenue Code as well as the Taxpayer Bill of Rights guarantee taxpayers certain rights including representation before the IRS, a recording of any proceeding, and an IRS explanation of its position relative to the pertinent disagreement.
2. Qualified Offers may be made by taxpayers in order to settle the amount of the taxpayer’s liability
3. The Internal Revenue Code provides authorized practitioners such as CPAs and enrolled agents a limited client confidentiality privilege.
SUMMARY
Understanding the IRS audit process and taxpayer rights is essential for tax professionals. In addition, understanding the statutes of limitations applying to assessments by the IRS as well as to claims for refunds is critical.
Chapter 6
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Chapter 13
Working with the IRS
Roby B. Sawyers
Steven L. Gill
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Chapter 13 - Overview
Learning Objectives
Describe the organizational structure of the IRS and administrative procedures relative to the audit and appeals process
Advise clients as to audit selection factors & probable litigation success
Develop decision guidelines as to audit etiquette, working through the appeals system, and constructing taxpayer defense
Explain the application & use of closing agreements and offers in compromise
Explain application of statutes of limitations as they relate to tax assessments by IRS and claims for refunds by taxpayers
Explain rights of taxpayers including client confidentiality privilege accorded to communications between non-attorney accountants and their clients
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Topics
The IRS
The Audit Process
Examinations
Appeals Process
Entering the Judicial System
Statutes of Limitations
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Organization of the
Internal Revenue Service
IRS is a bureau within the Department of the Treasury
Deputy commissioner is CEO of IRS
Appointed by President of the United States
Renewable 5-year term
Responsible for planning & directing IRS policies & programs
IRS mission statement
“Provide America’s taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying the tax law with integrity & fairness to all.”
IRS organization chart (slides #4-6)
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
IRS Organizational Chart (1 of 3)
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© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
IRS Organizational Chart (2 of 3)
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© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except