Exam 1 | Special Topics in Taxation | Austin Community College

A tax regulation detailing the requirements and responsibilities of those who prepare federal tax returns for compensation. Includes educational, ethical, and procedural guidelines.

1. Specifies the standards for professional services that involve tax positions 2. Explains how a member should handle answering questions on a tax return 3. Describes the procedural aspects of preparing a tax return 4. Defines when a member can use an estimate in preparing a tax return 5. Explains what a member should do about items on a current return when similar items were audited on a PY return or were the subject of a judicial hearing 6. State what a member should do upon learning about an error in a PY tax return 7. Establishes standards for the fiving of tax advice to tax preparers

The care a reasonable person should take in preparing or assisting in the preparation of, approving and filing of tax returns, documents, and other papers relation to Internal Revenue Service matters.

Under Rule 101, a CPA ( or CPA firm ) in public practice must be independent of the enterprise for which professional services are being provided. Independence is required not only for opinions on financial statements, but also other reports and services for which a body of the AICPA has promulgated standards requiring independence. A CPA is not independent if one or more financial relationships exist with a client during the period of professional engagement or when the opinion is issued.

Rule 502: Advertising and Other Forms of Solicitation A CPA in public practice cannot seek clients through false, misleading, or deceptive advertising or other forms of solicitation. In addition, solicitation by the use of coercion, overreaching or harassing is not allowed. The AICPA has placed no restrictions as to the type, media, or frequency of a CPA's advertisements or on the artwork that is associated with them. Under Rule 502 an activity would be prohibited if it 1. Creates false or unjustified expectation of favorable results 2. Implies the ability to influence any court, tribunal, regulatory agency, or similar body or official 3. Contains a representation that specific professional series in current or future period will be performed for a state fee, estimated fee, or fee 4. Contains any other representative that would likely to cause a reasonable personal to misunderstand or be deceived.

1. To balance the need for efficiency against the need for thoroughness 2. To balance the client's tax goals with the client's nontax, personal considerations 3. To find defensible solution to a client's problem

Legal concept which bars re-litigation on the same facts or same issues

Law issues arise when the facts are well established, but it is not clear which portion of the tax law applies to the issue.

The constitution, tax treaties, and the Internal Revenue Code are the statutory sources of the federal tax law. They have the presumption of correctness, unless a court modifies or overturns a provision in response to a taxpayer challenge. In this regard, legislative intent and history can be important in supporting the taxpayer's case.

Federal tax law that is created by the appropriate use of power that is granted to the US Treasury Department by Congress. These sources of the law have a presumption of the authority of the statue, but they are subject to taxpayer challenge. Such sources include regulations, ruling, revenue procedures, and other opinions that are used by the Treasury Department or the IRS.

Certain federal court decision that have the force of the statue in constructing the federal tax law. The magnitude of this authority depends upon the level and location of the courts that issued the opinions.

Citator is a research resource that presents the judicial history of a court case and traces subsequent references to the case. When these references include the citing case's evaluations of the cited case's precedents, the researcher can obtain some measure of the efficacy and reliable of the original holding.

An official Internal Revenue Service publication, consolidating the material that first was published in the Internal Revenue Bulletin in a ( usually semiannual ) hardbound volume. Cumulative bulletins were discontinued after 2008 but older rulings will use the CB citation format instead of the more recent IRB format.

An element of the federal tax law that was issued by Congress, the Department of the Treasury, the IRS or a federal court.

An element of the federal tax law that was issued by a scholarly or professional writer, for example, in a textbook, journal article, or treatise, and thus carries less precedential weight than elements of the tax law issued by primary sources.

The chief legal officer of the IRS. Responsible for making litigation and acquiesce/no acquiesce decision and for developing the agency's interpretive materials, including rulings and memoranda.

Leads the Taxpayer Advocate Service (TAS) as the voice of the taxpayer before the IRS and Congress. The Advocate reports directly to the Commissioner and works through a system of approximately 2k local taxpayer advocates.

Interest on underpayments is payable at a federally specified rate, from the last date that is prescribed for the payment of the tax to the date on which the tax is actually paid.

The government is required to pay interest at the applicable federal rate to any tax payer who has made an overpayment of tax. Interest on an overpayment runs from the date of the overpayment to the date on which the overpayment is credited against another tax liability or in the case of a refund to a date that is not more than 30 days before the date of the refund check. However, the IRS is allowed a specific period in which it may refund and overpayment without incurring interest. This interest free period runs for 45 days after it is actually filed. If the refund is not made within this 45 day period interest begins to accrue from the later of the due date of the return or the date on which the return was actually filed.

The IRS conducts the Unallowable Items Program. Under this program, IRS personnel question items on individual income tax returns that appear to be unallowable by law. These items include such return elements as an overstatements of the standard deduction, a deduction of SS taxes paid, the claiming of an incorrect filing status, the deduction of federal income taxes, and the deduction of lost ( but not stolen) assets as a casualty loss. If a return is identified as included an unallowable item, the IRS computes the seemingly necessary adjustment in taxes and notifies the taxpayer by mail. Again, the IRS does not consider the contact that it makes with the taxpayer under the unallowable items program to be an examination. Consequently, it treats an adjustment in this circumstance as a correction of a mathematical error or clerical error and does not send the taxpayer a formal notice of deficiency. If a taxpayer is able to explain the questioned item adequately, the assessment is abated. However, the case will continued as correspondence or office audit if the taxpayers response is deem unsatisfactory

An audit of one's tax return that is conducted at a local IRS office. These audits are typically more involved than correspondence audits and often deal with multiple issues that will requires some analysis and exercise of judgement by the auditor.

An audit of the taxpayer's tax return that is conducted on the taxpayer's premises. These audits are usually more involved and comprehensive than correspondence or office audits.

A notice from the IRS formally notifying the taxpayer of the results of an examination of the return and requesting that the taxpayer agree to the proposed modification to the tax liability. A taxpayer's failure to respond to the letter triggers the statutory notice of a tax deficiency, that is, the 90 day letter demanding the payment of the tax or a petition to the Tax Court.

A statutory notice from the IRS that the taxpayer has failed to pay an assessed tax. An issuance of such a letter usually indicates that the taxpayer has exhausted all of his or her appeal rights within the IRS and that the next forum for review will be a trial level court. The taxpayer has 90 days to petition the Tax Court to be relieved of the deficiency assessment. If no such petition is filed, the IRS is empowered to collect the assessed tax.

A report prepared upon the completion of the examination of a tax return to explain to the taxpayer the sources of any adjustments to the reported tax liability. If the taxpayer agrees to this re-computation, the associated tax, penalty and interest become due. Lacking such agreement other aspects of the appeals process are undertaken.

1. Taxpayer summons 2. Third-party summons 3. John Doe summons 4. Church audit summons 5. Software summons 6. Tax accrual summons

(1) The summons has been issued to a legitimate statutorily authorized purpose. That purpose is to audit tax returns or to get sources to collect. (2) The information may be relevant. In summons, you have no idea what you are going to get, so long as you are searching in the right place (3) The information is not in the immediate possession of the IRS meaning that the government can already have it. But this also means that the information cannot be readily retrievable. The government has a right to check information that is already in its possession. (4) The government has to file all administrative steps in order to enforce the summons. This means that there are certain time frames and the way they serve the summons that they have to actually do.

The government wants to get information from a taxpayer, the government has to give the taxpayer 10 days to comply and provide the information. If the taxpayer does not comply, the government brings a summons enforcement before a district court.

If any part of an underpayment of tax is attributable to fraud, a substantial civil penalty is imposed. In addition, the taxpayer may be liable for a criminal penalty. The civil fraud penalty is 75 percent of the underpayment that is attributable to the fraud.

When a taxpayer fials to file a required tax return a penalty is imposed unless it is shown that the failure is a result of some reasonable cause and not the taxpayers's willful neglect. The failure to file penalty is 5% of the amount of the tax, less any prior payments and credits, for each month that the return is not filed. The maximum penalty that may be imposed is 25% A fraudulent failure to file is subject to a 15% monthly penalty to a 75% maximum.

Amounts to 20% of the portion of the tax underpayment that is attributable to one or more of the following: 1. Negligence or disregard for applicable federal tax rules and regulations 2. Substantial understatement of income tax 3. Substantial valuation overstatement 4. Substantial overstatement of pension liabilities 5. Disallowance of claimed tax benefits by reason of a transaction lacking economic substance 6. Any undisclosed foreign financial asset understatement

The maximum amount of time within which one or both parties in the taxing process must perform an act, such as file a return, pay a tax, or examine a return. Various time limits apply relative to the Internal Revenue Code, although both parties can, by mutual agreement extend one or more of these time limitations.

In most litigation, the party initiating the case has the burden of convincing the court that he or she is correct with respect to the issue. In most civil cases the Internal Revenue Code placed the burden of proof on the taxpayer whether or not he or she initiated the case except in cases of such items as hobby losses, fraud with intent to evade tax and the accumulated earning tax. The burden of proof shifts to the IRS in a few situations. The IRS assumes the burden of proof in any court proceeding on income gift estate or generation skipping tax liability with respect to factual issues.