Federal Tax Administration Flashcards
What created the Internal Revenue Code?
The revenue act of 1913.
What are the three sources of tax law?
- Statutory sources: the IRC last codified by the tax reform act of 1986.
- Administrative sources:
- Regulations
- Revenue rulings
- Revenue procedures
- Private letter rulings
- Determination letters
- Technical advice memorandum
- Judicial sources
What are tax regulations? What are the three types?
Regulations are interpretations of the tax code issued by the treasury department.
They have the full force and effect of law.
There are 3 types: proposed, temporary, and final.
What are proposed regulations? Do they have the force of law?
Proposed regulations are a preview of final regulations, and don’t have legal precedence.
What are temporary regulations?
Temporary regulations are issued when guidance is needed quickly, and have the full force of law.
What are the three types of final regulations?
Procedural regulations - minor things like updating the mileage deduction.
Interpretive regulations - interpreting the intent of the IRC
Legislative regulations - determining the details of the tax law, congress must grant specific authority for this.
All of these have the force of law.
What are Revenue Rulings?
Do they have the force of law?
Rev rulings are interpretations of tax law provided in response to a tax payer request regarding something common to many tax payers.
They don’t have the force of law—taxpayers can either abide by them or challenge them in court.
Rev rulings are binding on IRS officials, and can be cited as precedent in court, but they aren’t binding on courts.
What are revenue procedures?
Internal practices within the IRS.
What is the difference between private letter rulings and determination letters.
Both apply to unique tax circumstances. Private letter rulings are requested by an individual BEFORE taxes are paid to determine how something should be approached.
Determination letters are only issued on completed transactions and on areas covered by another source of IRS law.
What are technical advice memorandums?
They are issued from the national office to auditors regarding specific cases only.
What are the statutes of limitations regarding tax returns?
If you don’t file, you have 3 years to claim any refund or it becomes IRS property.
The IRS has 3 years FROM THE TIME YOU FILE to audit you, and 10 years to collect any tax.
The IRS has 6 years if you underestimate your gross income by 25% or more.
There are no limitations for a fraudulent tax return.
What is the interest rate on overdue taxes?
ST federal rate + 3%, compounded daily, beginning on the original due date of the return.
What is the failure to file penalty?
What if it’s for a fraudulent return?
What is the minimum penalty if your return is > 60 days overdue?
5% per month, up to 25%.
If fraudulent return it’s 15% per month, up to 75%.
If a return is > 60 days late the minimum penalty is the lesser of $435 or 100% of tax due.
What is the failure to pay penalty?
What if you have to pay both failure to file and failure to pay together?
Failure to pay is .5% per month up to 25%.
If both, failure to file is reduced by failure to pay, but you still have to pay both.
Who pays estimated tax?
AGI above $150k MFJ.
Anyone with withholding + credits < 100% tax due.
