Study Unit 3 Flashcards
What are the three sources of federal tax law?
- Legislative law
- Administrative law
- Judicial law
What is the primary source of federal legislative tax law?
The Internal Revenue Code of 1986 (IRC)
Give examples of Federal administrative law.
Administrative law implemented and enforced by the Treasury Department includes
* Treasury regulations * Revenue rulings * Revenue procedures * Private Letter rulings (PLRs) * Technical Advice Memoranda (TAMs) * Internal Revenue Bulletins (IRBs) * IRS Publications
What is a writ of certiorari?
A writ if certiorari is a order by the Supreme Court to hear a case. A denial of such an order means the lower court’s opinion on the case stands.
What are the different courts in the federal tax court system?
Appellate Courts:
U.S. Supreme Court
U.S. Circuit Court of Appeals U.S. Court of Appeals for the Federal Circuit
Trial or courts of origin:
U.S. Tax Court U.S. District Court U.S. Court of Federal Claims
What are the due dates or estimated tax payments for a calendar-year taxpayer?
Estimated tax payments should be made in quarterly installments that are due by
* April 15 * June 15 * September 15 * January 15 of the next year
How is the amount of estimated tax payment of an individual taxpayer determined?
Each installment must be at least 25% of the lowest of
- 100% [110% of AGI > $150,000 ($75,000 for MFS)] of the prior year’s tax
- 90% of the current year’s tax
- 90% of the annualized current year’s tax (when income is uneven)
When is the penalty not imposed on underpaying the estimated tax payments?
The penalty is not imposed when
- Actual tax liability for the current year is less that’s $1,000
- No tax liability in the prior tax year
- The IRS waives it for reasonable causes
What are the penalties for (1) failing to file a return and (2) failing to pay tax?
Offense Penalty
Failing to file a tax return 5% per month of unpaid liability (up to 25%)
Failing to pay tax 0.5% per month of unpaid liability (up to 25%)
What are the original and extended tax return due dates for C corporations?
Tax Year Type Due dates through 2025 June 30 Fiscal year Original: 3rd Month (Sept 15) Extended: 10th month (April 15) Due dates beginning in 2026 Original: 4th month (Oct 15) Extended: 10th month (April 15)
Calendar/other fiscal year Original: 4th month after year end
Extended: 10th month after year end
What are the original and extended due dates for (1) S corporations, (2) partnerships, (3) individuals?
Return Type Original Due Date Extended Due Date
S corporation March 15 September 15
Partnership March 15 September 15
Individual April 15 October 15
What is the statute of limitations for a claim for refund?
Situation A claim for refund must be filed
Return filed By the later of
* 3 years for the due date (April 15, plus the filing extension time) * 2 years after the tax was paid
Return not filed Within 2 years from the time the tax was paid
What are 30-day letters and 90-day letters?
30 Day Letter A letter sent to a taxpayer proposing in addition to tax. Taxpayers have 30 days to decide whether to
- Accept and pay the deficiency or - Appeal the proposed adjustments.
90 day letter If taxpayer appeal the proposed adjustments in a 30 day letter, a 90-day letter is mailed. Tax payers
(Notice of deficiency) have 90 days to institute a petition to the U.S. Tax Court.
What is the statute of limitations for the assessment of a deficiency?
General Statute of limitations - 3 years from the date the return was filed
Omission of items of more than 25% of gross income - 6 years from the date the return was filed
Deficiency for fraud - No statute of limitations/unlimited assessment period
What are the three types of tax planning?
- Timing of income recognition
- Shifting of income among taxpayers and jurisdictions
- Conversion of income among high- and low-rate activities
Compare tax avoidance and tax evasion.
Legality Takes place
Tax Avoidance Legal Before incurring a lax liability
Tax Evasion Illegal After incurring a tax liability
Name the different filing statuses of individual taxpayers.
- Single
- Married filing a joint return (MFJ)
- Married filing a separate return (MFS)
- Head of household (HOH)
- Qualifying widow(er)/Surviving spouse
What are the criteria for a taxpayer to file as single?
- Not married and
- Does not quality for
* Qualifying widow(er)
* Head of household status.
What are the criteria for a taxpayer to file as married filing jointly?
Two individuals are considered married for the entire tax year if, on the last day of the tax year, they are
- Legally married and cohabiting as spouses - Legally married and living apart but not separated under a - Divorce decree - Separate maintenance agreement - Separated under a divorce decree that is not yet finalized
NOTE: An individual whose spouse dies during the year and who does not remarry before the end of the tax year may file a joint return.
What are the criteria for a taxpayer to file as married filing separately?
- The taxpayer must meet the qualifications to file as married filing jointly.
- If one spouse files separately, so must the other.
- Spouses who have different tax year ends must file separately.
What are the criteria for a taxpayers to file as a qualifying widow(er) or surviving spouse?
A taxpayer may file as a qualifying widow(er) or surviving spouse for 2 yers following the death of a spouse if
- The taxpayer did not remarry, - The widow(er) qualified (with the deal eased spouse) for the married filing jointly return status for the tax year of the death of the spouse, and - The taxpayer maintains a household (paying>50% of qualifying costs) for the entire taxable year that is the principal place of abode of a son, daughter, stepchild, or adopted child.
What are the criteria for a taxpayer to file as head of household?
An individual taxpayer
- Is not a qualifying widow(er) - Is not a nonresident alien - Meets the marital status test - Maintains a household (paying > 50% of qualifying costs) that is the principal place of abode for a qualifying child or dependent (related only) for at least half of the tax year
NOTE: Parents need not live with the taxpayer to qualify.
Compare the requirements for maintaining a household between the (1) head of household status and (2) qualifying widow(er) status.
Head of Household
- Paying for more than 50% of qualifying costs to maintain a household - For at least half of the tax year - Principal place of abode of dependent shield and/or dependent relative (must be related)
Qualifying Widow(er)
- Paying for more that 50% of qualifying costs to maintain a household - for the whole tax year - Principal place of abode of dependent child only
What are the criteria for qualifying as a dependent child?
Relationship - Child is taxpayer’s (1) descendant, (2) sibling, or (3) descendent of taxpayer’s sibling
Age * Younger than taxpayer and either
* Under 19
* A full-time student under 24
* Age requirement does not apply if permanently or totally disabled
Member of the household - Child lives with taxpayer for more that half of the year
Non-self-supporting - Child does not provide more that half of own support
Non-MFJ - Cild is not filing a joint return
Citizenship - A U.S. Citizen, resident, or national for any part of the year
What are the criteria for qualifying as a dependent relative?
Relationship * Immediate relationships: parents, children, siblings
* Extended relationships: grandparents and ancestors, grandchildren and dependents, uncles and aunts, Nephews and nieces (excludes cousins)
Members of the household - Unrelated person living with the taxpayer for the whole year
Income - Relatives’s gross taxable income less that the threshold (excludes Social Security benefits for low-income taxpayers)
Support - Taxpayer provides more than 50% of support for the relative (excludes scholarships received by children, taxes, and
life insurance premiums)
Non-MFJ - Relative is not filing a joint return
Citizenship - A U.S. citizen, resident, or national for any part of the year
Compare the support test for a qualifying child and qualifying relative.
Qualifying child - child does not provide more that 50% of qualifying costs
Qualifying relative - Taxpayer provides more that 50% of qualifying costs
What are the requirements for a multiple support agreement?
A taxpayer is eligible to claim a dependent deduction under a multiple support agreement if (s)he
- Provides, with other person(s), more that 50% of the support of an individual, but no one person provides more that 50% - Provides more that 10% of the support - Obtains written consent from other person(s) providing more that 10% of the support
