Administrative (Lesson 3) Flashcards
What is the first primary source of tax law
- Internal Revenue Code
What are the second primary source of tax law
- Administrative sources
Who issues regulations
- US Treasury department
What is a regulation
- have the full force and effect of law and are the second highest authority of tax law after the IRC
What are the three types of regulations
- Proposed
- Temporary
- Final
What is proposed regulation
- a preview of final regulations and do not have legal precedence
What are temporary regulations
- are issued when guidance is needed quickly and have the same authoritative value as final regulations
What are final regulations
- have full force and effect of law
What are three types of final regulations
procedural regulations
- are essentially housekeeping instructions
interpretive regulations
- implement the intent of committee reports and the IRC
Legislative regulations
- allow the Treasury to determine the details of the law, but congress must specifically delegate this authority
What is a revenue ruling
- interpretations of the tax laws issued by the IRS
- usually provided in response to a taxpayer request and are based on facts common to many taxpayers
Do revenue rulings have the full force and effect of law
- no they do not have full force and effect of law but they are binding on officials of the IRS
Are courts bound by revenue rulings
- no but they can be cited as precedent
What are published weekly in the Internal revenue bulleten
- revenue rulings
- revenue procedures
What are revenue procedures
- describe internal practices and procedures within the IRS
- Published in Internal revenue bulletin
- state changes in techniques and administrative procedures used by the IRS
What is a private letter ruling
- PLRs are issued by the IRS at the request of the taxpayer
- IRS is only bound for that taxpayer
- cannot be relied on by other taxpayers as precedent
What are determination letters
- are issued by the District directors for returns that will be filed in their respective districts
- only issued with regard to completed transactions
Determination letters are only issued if the answer is specifically covered by
- statute
- treasury decision or regulation or
- ruling opinion or court decision published in the internal revenue bulletin
What is a technical advice memorandum
- are issued by the national IRS office
- usually issued in response to a request by an agent performing an audit
- provide clarification that cannot be provided by the local IRS office
- deal with completed transactions
- only apply to the taxpayers involved
What are the third primary source of tax law
- Judicial sources
What must taxpayers do if they cannot resolve disputes with the IRS
- seek adjudication from the federal courts
What are court decisions considered
- official interpretations and applications of the IRC by the judicial branch of the government
- can carry the full force for the statute itself
What is the role of the IRS
- organized to carry out the responsibilities of the secretary of the treasury
How long does a taxpayer have to file a return for a claim of refund
- 3 year window from the due date of the return or then the money becomes property of the US treasury
If no return has been filed what is the statute of limitations if the individual owes
- statute does not start until a return is filed
If a return how long does the IRS have to audit the return
- 3 years from the due date of the return and 10 year statute of limitations for the IRS collecting tax
If the taxpayer omits additional gross income in excess of ___% of the amount of gross income stated in the tax return filed with the IRS the statute of limitations is _______
-25% and 6 years
What is the statute of limitations in the case of a false tax return or fraudulent tax return filed with the IRS with intent to evade any tax
- statute does not apply
How is interest assessed on tax due
- accrues from the original due date even if an extension is obtained
- interest is compounded daily
- rate is the federal ST rate plus 3 percent
When is interest paid on refunds
if not received within 45 days of the taxpayer filing a claim for a refund
How much is the failure to file penalty
- accrues on a monthly basis at the rate of 5% per month up to 25%
What is the failure to file penalty if it relates to a fraudulent failure to file
- the penalty is increased to 15% per month up to 75%
If a tax return is filed more than 60 days late what is the penalty
- the minimum failure to file penalty is $435 or
- the amount of the tax due
How much is the failure to pay penalty
- accrues at a rate of .5% per month up to 25%
What happens if there is a failure to file penalty and a failure to pay penalty
- the failure to file penalty is reduced by the failure to pay penalty
What is an accuracy related penalty
- 20% applies to any underpayment due to negligence or disregard of rules or regulations, or substantial understatement of income tax
- not applied if there is reasonable cause accompanied by good faith
How much is the tax have to be understated for the 20% penalty to apply
- understatement of tax exceeds the greater of 10% of the correct tax or $5,000
How much is a fraud penalty
- 75% of the tax underpayment attributed to fraud
What can the taxpayer do after an examination and more tax is assessed
- taxpayer can either agree with those changes and pay any additional tax or
- taxpayer can disagree with the changes and appeal the decision
What is the discriminant inventory function (DIF) system
- computer scoring system that assigns a numeric score to each individual and some corporate returns
- higher score triggers an audit
Can an attorney represent a client during an audit by the IRS
Yes
Can an CPA represent a client during an audit by the IRS
Yes
Can an enrolled agent represent a client during an audit by the IRS
Yes
Can an CFP represent a client during an audit by the IRS
No
Which courts are appellate courts
- US Supreme Court
- US Court of Appeals (Reginal Circuit)
- US Court of Appeals (Federal Circuit)
Who handles deficiencies under $50,000 at the taxpayer request
- Small Tax Case Division of the US Tax Court
What is the US Tax Court
- No payment of tax is necessary in order to bring a claim before the US tax court
- Trial by jury is not available
- decisions do not bind the IRS with respect to other taxpayers
- appeals to the US court of appeals
Where does the US Tax Court appeal to
- US court of appeals
Are trials by jury available in the US Tax Court
No
Do you have to pay the tax in order to bring a claim before the US tax court
No
What is the US Court of Federal Claims
- Sits only in Washington, DC
- only hears claims against the United states
- Tax deficiencies must be paid to proceed in this forum
- appeals to the US Court of Appeals for the Federal Circuit
Where does the US Court of Federal Claims sit
- Washington, DC
What does the US Court of Federal Claims hear
- claims against the United States
Do tax deficiencies have to be paid in order to hear a case before the US Court of Federal Claims
Yes
Where does the US Court of Federal Claims appeal to
- US Court of Appeals for the Federal Circuit
What is the US District Court
- Tax deficiencies must be paid to proceed in this forum
- US District court is the only forum which allows a Jury trial
- District Court is bound by decision of its Appeals Court and the US Supreme Court
Do you have to pay the tax in order to bring a claim before the US District Court
Yes
Does the US District Court allow a jury
Yes
What is the US Court of Appeals
- there are 12 Circuit Courts located throughout the United States
- US Court of Appeals handles appeals from Tax Court and District Court
- Court of Appeals of one region is not bound to follow the decisions of the court of apples in another region
How many US Court of Appeals are there
- 12 Circuit Courts throughout the United States
What does the US Court of Appeals handle
- Appeals from Tax Court and District Court
Who is bound by the US Supreme Court decisions
- Decisions of the US Supreme Court are binding on taxpayers and the IRS
When does the US Supreme Court review tax cases
- there is a conflict between the circuit courts
- an important and recurring problem in tax law administration is involved
- many taxpayers are involved or if
- the decision of a lower court conflicts with long standing practice or the regulations
