Chapter 5 Section 3: Federal, Legislative, and Judicial Processes; the IRS; and Taxpayer Penalties Flashcards
What is the federal legislative process? (8 steps)
- Begin in the House, with the Ways and Means Committee
- Bill is voted on and approved by the full House
- Goes to Senate Finance Committee
- Upon approval, the full Senate votes on it
- Differences between House and Senate version are resolved by the Joint Conference Committee
- Compromise Bill is approved by the House and Senate
- President signs it into law or vetoes it
- If vetoed, it can be overriden by 2/3 vote by House and Senate
What is the Discriminant Inventory Function System?
Selects returns that are the most likely to contain errors or yield much more tax revenue for audit
Who is more frequently subject to audits than most?
Individuals with gross income above $100,000
Self employed with significant income and deductions
Cash businesses
If deductions exceed the norm
What is the return immediately reviewed for?
Mathematical errors, signatures, socials
What if the return contains a mathematical error?
The taxpayer is sent a revised computation and brief explanation, with a bill or refund
What is the difference between a field audit and office audit?
Field is conducted by IRS rep at the taxpayer’s office or home
Office is conducted by IRS agent in the IRS office or by correspondence
What does the taxpayer sign if they agree with the conclusion of the audit?
Form 870
What if the revenue agent can’t settle an unresolved issue?
It goes to the appeals division.
The taxpayer will get a copy of the agent’s report and 30 days to appeal administratively
What is a notice of deficiency?
The IRS sends it upon request or if an admin appeal is not requested. It gives the taxpayer 90 days to file an appeal with the US Tax Court
What does the taxpayer sign if they agree with the appeals division decision?
Form 870-AD
Who can the taxpayer take it to if they don’t agree with the Appeals Division?
US Tax Court
US Court of Federal Claims
US District Court
Who usually has the burden of proof in tax litigation?
What is the standard?
What is the exception?
The party bringing the case
Preponderance of evidence, not beyond a reasonable doubt
It shifts to the IRS if the taxpayer has introduced credible evidence or has good books
What does the US Tax Court hear?
Is there a jury?
How many judges hear a case?
Other important facts…
Only federal tax cases
No
One
No pmt is required, Must receive notice of deficiency before court will hear the case
Do you have to pay the disputed tax before going before the US Tax Court
No
What if you want to appeal the US Tax Court Decision?
It goes to one of the various US Courts of Appeals, based on the Court of Appeals with direct jurisdiction over the taxpayer
