Professional Responsibilities and Federal Tax Procedures

Question 1

Appeal process

Answer 1

Appeals conference: 30 day letter to request admin appeal with appeals officer.

Office of appeals: goal is to resolve without litigation, signed 870-AD. If not resolved a 90 day letter is sent.

90 day letter: pay deficiency or file petition with U.S. Tax Court. Must pay deficiency the sue for refund. *Losses cannot be appealed.

Question 2

Court Jurisdiction

Answer 2

The tax court, US district court, and US court of federal claims

Question 3

Private letter ruling (PLR)

Answer 3

IRS issues in response to a taxpayer’s request for guidance. Can be relied on by taxpayer.

Question 4

General counsel memorandum (GCM)

Answer 4

Internal advice issued by IRS chief counsel to provide guidance to IRS attorneys and agents..

Question 5

Technical advice memorandum (TAM)

Answer 5

IRS advice on completed tax situation during an audit

Question 6

Reportable transaction

Answer 6

Secretary of the US Treasury Department has determined as having potential for tax avoidance or tax evasion

Question 7

Defenses for taxpayers to avoid or reduce penalties

Answer 7

Reasonable basis - less than 20%
Substantial authority - more than 40%
More likely than not - greater than 50%

Question 8

Disclosure statements

Answer 8

Form 8275 - disclose tax position, does not provide penalty protection.

Form 8275-R - disclose tax position, can provide penalty protection.

Question 9

Authoritative hierarchy

Answer 9

IRC (tax code) - highest authority

Treasury Regulations - official interpretation

Revenue ruling/procedures - IRS interpretation

IRS Private Letter Rulings - written statements by IRS to taxpayers

US supreme Court Decisions - highest court, binding interpretation

Lower Federal Court Decision - decisions from US tax court, US district courts, and US court of Federal Claims. Can be overturned by higher courts.

IRS Publications, notices - practical guidance

Other sources - articles and tax journals

Question 10

CPA Disclosure Rules

Answer 10

Confidential Info Exceptions:
-Allowed by IRC provisions & pursuant to court order.
-Preparation of state and local tax returns and preparation of declaration of estimated tax.
-Permitted by US Treasury regulations for quality & peer review & administrative orders.
-Client consent

Work papers:
—With client permission or,
—Without client permission;
-Response to subpoena relevant court case.
-Prospective purchaser (review only)
-State CPA society voluntary quality control review panel.
-Defense of a lawsuit by a client.
-Defense of an official investigation by the AICPA/state trial board.
-GAAP required disclosure in FS.