RESEARCH & PLANNING Flashcards
Sources of Primary Authority
- legislative - constitution, IRC
- administrative - rev rulings, private letter rulings, rev proc
- judicial
IRC - tax code promulgated by Congress
List the type of Courts
US Tax Court - one court; only tax court cases
US District Court - many courts; jury trial; may pay deficiency first
US Court of Federal Claims - one court; must pay deficiency first
US Tax Court - small case division; $50k or less; no appeal
Levels of Legislative Authority
- US Constitution
- IRC
- Legislative regulations
Levels of Administrative Authority
- Other types of legislation
- Revenue rulings
- Private letter rulings
Levels of Judicial Authority
depends on
- level of court
- legal residence of t/p
- if IRS has already ruled decision
- date of decision
- if late decisions were made
Statute of Limitations for IRS audits
- can assess additional tax up to 3 years from the LATER of:
1. date return was file
2. due date of return (2 exceptions [6 yr limit if gross receipts are over 25% of gross receipts on tax return; fraud])
What happens when a “No Change” report is issued?
IRS may not re-open the examination unless fraud occurred
Rules for estimated tax payments for individuals
if the amount of tax owed is $1,000 after subtracting withholding/credits
No penalty if at least the lower of:
- 90% of current tax
- 100% of prior year tax
If AGI is over $150,000 - use safe harbor 110% of PY tax
or annualization
Rules for ETP for Corps
No penalty if lower of:
- 100% of current year tax
- 100% of prior year tax
When can refunds be claimed
filed by the later of:
- 3 years from the date the return was file
- 2 years of actual payment of tax
Levels of confidence for tax positions
Not frivolous - not patently improper
Reasonable Basis - at least one authority that has not been overruled
Substantial authority - more than reasonable basis
More likely than not - more than 50% chance of succeeding
How is late filing payment determined
Tax less withholdings/creidts
Marginal Tax Rate
Rate that should be used for decision making
Amount of tax that would be paid on the next dollar of income, or the amount saved on the next dollar of deduction
Tax Rate Planning Tips
If tax rates rates are rising, accelerate income and defer deductions
Tax Strategies
Avoid income by choosing fringe benefits over salary
Defer income such as like-kind exchange
Maximize contribution to retirement plans
Recognize capital gains if losses can offset them
Generate passive income to offset unused passive losses
Make sure that CF amounts are used before they expire
