Income Tax: Administrative Flashcards
What is the primary source of tax law?
The Internal Revenue Code (IRC).
the tax reform act of 1986 created the current code,
what is the secondary primary source of tax law?
Administrative Law Sources are the secondary source of tax law:
- Regulations
- Revenue Rulings
- Revenue Procedures
- Private Letter Rulings
- Determination Letters
- Technical Advice Memorandums.
What are regulations?
- issued by the US Treasury department and are interpretations of the Internal Revenue Code.
- Have full force and effect of the law and are the second highest authority of the tax law.
- There are three types:
1. Proposed - Have no legal precedence.
2. Temporary - issued when guidance needed quickly and have same authoritative value as final regulations.
3. Final Regulations - Have Full force and effect of the law.
What are revenue rulings?
- Interpretations of the tax laws issues by the IRS.
- Do not have full force and effect of the law
- May be cited as precedent, courts are not bound to them.
What are revenue procedures?
Describe internal practices and procedures within the IRS.
What are Private Letter Rulings?
Issued by the IRS at the request of the tax payer.
With regard to that taxpayer, the IRS is bound to its determination in the ruling.
What are Determination Letters?
Issued by district directors for returns that will be filed in their respective districts.
only issued for transactions that have already been completed.
- same as private letter ruling but for completed transactions.
What is a Technical Advice Memorandum?
- Issued by the national IRS office
- issued in response to a request by an agent performing an audit on a taxpayer.
What is the third primary source of tax law?
Judicial Decisions are the third primary source.
Taxpayers may seek adjudication from the federal courts if they cannot get it from the IRS.
Court Decisions are official interpretations and applications of the IRC by the judicial branch of the government.
IRS and Secretary of Treasury?
IRS created by the secretary of treasury to carry out administer and enforce the internal revenue laws.
The Secretary of treasury has the power to enforce these laws as well.
What is the statute of limitations?
- Law provides taxpayers a three year window of opportunity to claim a refund when a return has not been filed.
If no return is filed after three years, money becomes property of US treasury.
- If no return has been filed there is no statue of limitations for the IRS to assess and collect taxes.
- If tax return has been filed, IRS has a 3 statute of limitations to audit a tax return and 10 year statute to collect any tax.
no statute of limitations for fradulent returns.
How is interest paid on refunds?
- IRS pays interest on refunds if not received within 45 days of the taxpayer filing a claim.
- Interest accrues from the original due date of the return, even if the taxpayer obtained an extension.
What is the Failure to File Penalty?
- Penalty assessed if you fail to file your tax return on time.
- 5% penalty per month up to 25%.
- If it is due to a fraudulent failure to file, then penalty is increased to 15% per month up to 75%.
- return is over 60days late, the minimum penalty is $450 or amount of tax due.
What is the failure to pay penalty?
- .5% per month up to 25%
- if you have both failure to file and failure to pay. failure to file amount reduced by failure to pay penalty paid.
Underpayment of Estimated Tax:
Due dates for estimated tax payments are: April 15th, June 15, September 15th, & January 15th.
How to calculate the penalty:
1. determine the amount of underpayment for each period and the number of days in that period.
- apply an appropriate interest rate factor
The Federal Judicial System
US tax courts chart
