Tax Practice and Procedures Flashcards
The audit process:
We don’t know how returns are selected for audit. Some are selected at random or there are errors that appear.
Three people who can represent someone before the IRS
1) CPA
2) Attorney
3) Enrolled agent
What is the Revenue Agent Report?
The revenue agent may present a report that may reduce the initial amount due or have additional facts provided on why the taxpayer owes more money, once the taxpayer signs that report, they cannot pursue the IRS in the tax court. They could go through the US District court OR Claims court
What is the 30-Day Letter
if agreement is not reached through the audit, a 30-day letter will be extended. The taxpayer is NOT required to respond!!
It’s not advisable to ignore it, you should probably request the appellate conference.
What is the 90-Day Letter:
Statutory notice of deficiency. 90-Days starts running on when you have to file a petition with the tax court.
IRS is not required to grant an appeal in all cases.
T/F: The IRS can raise new issues during the appeals process.
False- they cannot raise new issues.
What is the form 870-AD?
If the case is settled, a 870-AD is signed, which means the case will not be re-opened.
What is a no-change report?
If the tax payer is successful, the IRS cannot reopen the case for any reason unless there is fraud.
What if you don’t complete the 90-Day Letter?
Only option is through US District Court or Claims Court, both of which require the deficiency to be paid before the judicial process can begin.
What is the statue of limitations?
3 years, but the IRS will request you sign an extension.
Define and Explain: Privileged Communication between authorized people to practice before the IRS and client
This privilege does not apply to criminal tax matters NOR to corporate tax shelters.
if it is criminal, then an attorney NEEDS to get involved not the CPA.
Signing a Return, what does it indicate and what are liabilities. What could occur if the taxpayer knowingly submits false statements?
A taxpayer must sign a tax return for it to be complete. This creates joint and several liability for each individual and the spouse.
if the taxpayer knowing files false statements, that could be both civil and criminal liability.
What is circular 230?
IRS rules of practice.
Who can practice before the IRS?
Attorney
CPA
Enrolled agents
T/F: Any individual who prepares tax returns for compensation has to be registered with the IRS and pay a registration fee?
TRUE!
