Tax Research and Practice Flashcards
Priamary Authority (the LAW itself; from all three branches of government)
Legislative
Administrative
Judicial
Secondary Authority (commentary on the law)
Journals, magazines, tax textbook, etc.
IRC
codification of all the tax laws that have been passed by Congress and currently enforced
How a Tax Law is Passed (Statutory Law Development)
- House Ways and Means Committee
- Senate Finance Committee
- Senate
- Joint Conference Committee
- Back to House and Senate
- President - sign or veto
Legislative Authority
- Begins with CONSTITUTION
- IRC - Internal Revenue Code
- Committee Reports (not a high weight of authority but does have intent of Congress)
* ***Barring certain exceptions, Congress has the last word on what the Fed tax law should be
Administrative Sources
- Treasury Regulations (**legislative, interpretative, procedural; proposed, temporary, final)
- legislative = high authority
- most = interprative
____________ - most = final
- proposed regs; issued by Congress for comment with no weight of law
- temporary - weight of law 3 years
- Revenue Rulings - specific facts scenario and IRS position
- Private Letter Rulings - taxpayer sends to IRS before filing
- Revenue Procedures - provide guidance
- Technical Advice Memoranda
Judicial Sources of Authority
Courts of ORIGINAL JURISDICTION:
- Tax Court (ONE court; ONLY tax cases)
- District Court (MANY; jury trial poss, PAY def 1st)
- Claims Court (ONE court in DC; PAY def. 1st)
+ small cases TAX COURT - 50k < ; NO appeal
Courts of APPEALS:
- Tax/District —-> Circuit Court of Appeals (11 + DC)
- Claims Court —-> Court of Appeals - Fed Circuit
APPEALS —-> Supreme Court
Claims - National - meets in DC
Tax/District - bound by precedent based on geo area taxpayer lives in
**TAX COURT - DO NOT NEED TO PAY THE DEFICIENCY FIRST**
Precedents
Courts MUST follow previous decisions for future cases with the same controlling set of facts (geo location; e.g. 5th circuit)
Weighting of Authority
- leg - The HIGHEST source of tax authority is the CONSTITUTION
- leg - Next is the IRC
- Legislative regulation; almost as much as IRC
- admin - Other types of regulations
- admin - Revenue Rulings
- admin - Private letter rulings (only to request-er)
judicial - factors
- level of court
- residence of taxpayer
- whether IRS has acquiesced to the decision (agree to follow decision in the future)
- date of decision
- whether later decsions have concurred with opinion
Audits
Statute of Limitations - 3 years from later of:
- date return was filed
- due date of return
Turns to 6 years if Gross Income omissions exceed 25% of income reported
NO LIMIT if FRAUD was committed
Revenue Agent’s Report
Signed by taxpayer and IRS if taxpayer agrees to audit changes prosed
Prohibits taxpayer through appeals process or tax court
but DOES NOT prohibit district or claims court
BINDS IRS also, only to items in agreement
30-day letter
If agreement is NOT reached through audit process
taxpayer gets a copy of agent’s report and a 3-day letter
taxpayer does not need to do anything; low importance
90-day letter
STATUTORY NOTICE OF DEFICIENCY -
cannot be ignores - 90 days from date to file petition with the tax court - IF petition is not filed must go to district or claims court and pay deficiency first
Estimated Payments - Individuals
If amount is 1,000 or more must make these 4 times a year, april june sept jan
NO UNDERPAYMENT is you pay in 90% current year or 100% or prior year (110% for agi over 150k)
penalty is interest rate - from date due until april 15th or tax is paid
Estimated Payments - Corporations
april, june, sept, dec
IF amount owed is $500 or more
100% of current of current years tax or prior years tax
Corp. with 1mil or more of TI in any of last 3 years….can use last years 100% for ONLY 1st INSTALLMENT (unless last year liab was 0)
