Third Party Authorization
How can a taxpayer terminate a filed power of attorney?
By filing a new Form 2848.
The filing of Form 8821, Tax Information Authorization, will not revoke any Form 2848, Power of Attorney and Declaration of Representative, that is in effect. The filing of a new Form 2848 will revoke or terminate all prior powers of attorney the taxpayer for the same tax matters and years listed therein. If there are any existing powers of attorney that the taxpayer does not want to revoke, he must check the box on Form 2848 and attach a copy of each power of attorney.
If the IRS disallows, rejects, or fails to address within six months a taxpayer's timely filed claim for a refund, what can the taxpayer do?
He can take any of these actions.
A taxpayer can appeal a decision of the IRS to IRS Appeals and a taxpayer can request assistance from the Taxpayer Advocate Service if the IRS has failed to timely act on a filed document and for other assistance. Generally, the District Court and the Court of Federal Claims hear tax cases only after a taxpayer has paid the tax and filed a claim for a credit or refund. A taxpayer can file a claim with the IRS for a credit or refund if he thinks that the tax he paid is incorrect or excessive. If his claim is totally or partially disallowed by the IRS, he should receive a notice of claim disallowance. If the IRS does not act on his claim within six months from the date he filed it, he can then file suit for a refund.
In some cases, a spouse will be relieved of the tax, interest, and penalties on a joint return. Which of the following types of relief is not relief from a joint tax liability?
Injured spouse relief.
You are an injured spouse if you file a joint return and all or part of your share of the refund was, or will be, applied against the separate past-due Federal tax, state tax, child support, or Federal non-tax debt (such as a student loan) of your spouse with whom you filed the joint return. In other words, in cases where you file a joint return with a spouse and they have a liability that is not yours.
In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return. Three types of relief are available to married persons who filed joint returns, and are jointly liable for the tax:
When a taxpayer disagrees with the result of an Appeals conference, can he appeal the result?
Yes, he can appeal to Federal District Court or to Federal Claims Court or to Tax Court.
If a taxpayer disagrees with the IRS after the Appeals conference, he can take his case to the United States Tax Court, the United States District Court, or the United States Court of Federal Claims, depending on the issue in dispute.
What is another name for title 26 of the U.S. Code (26 USC)?
Internal Revenue Code.
Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 26 of the U.S. Code (26 USC.) The Internal Revenue Code is the basis for all tax law.
A married couple can appoint a tax preparer as a representative regarding a return they filed MFJ by
Having both husband and wife execute separate Forms 2848.
If you, your spouse, or former spouse are submitting powers of attorney in connection with a joint return that you filed, you must each submit separate Forms 2848 even if you are authorizing the same representative(s) to represent you.
A client is an individual taxpayer who is requesting assistance with a proposed penalty. All of the following are methods of addressing the penalty, EXCEPT:
Prior to assessment, the representative can request binding arbitration to reconsider the penalty.
Taxpayers have the right to challenge the assertion or assessment of a penalty, and generally may do so at any stage in the penalty process. Taxpayers may request the following:
Arbitration is not an option prior to assessment. The permanent arbitration procedure may be used to resolve issues while a case is in Appeals, after settlement discussions are unsuccessful and, generally, when all other issues are resolved except specific factual issues for which arbitration is being requested.
Methods of Appealing Penalties, IRM 20.1.1.4
If a taxpayer has both an outstanding tax liability and a pending bankruptcy case what should he do?
Advise the IRS of the bankruptcy case.
Although both the bankruptcy court and the IRS are parts of the federal government, it is the taxpayer's responsibility to inform the IRS of the pending bankruptcy case. The IRS will likely not discharge or otherwise eliminate the debt, the IRS may cease collection activity until the bankruptcy case is disposed.
Can a taxpayer appeal the decision of the Tax Court for a case resolved pursuant to the small tax case procedures?
No.
A taxpayer whose case is worth $50,000 or less for any one tax year is permitted to use the simplified small tax case procedure in Tax Court. A taxpayer cannot appeal a decision reached in small tax case proceeding.
Who writes Treasury Regulations (26 CFR)?
Internal Revenue Service.
In its role in administering the tax laws enacted by the U.S. Congress, the IRS must take the specifics of these laws and translate them into detailed regulations, rules, and procedures. Treasury regulations (26 CFR)—commonly referred to as federal tax regulations—pick up where the Internal Revenue Code leaves off by providing the official interpretation of the IRC by the U.S. Department of the Treasury.
Does Form 2848 have a provision that allows a taxpayer to authorize his attorney, CPA, or enrolled agent to receive and endorse refund checks on his behalf?
No.
Neither Form 2848, Power of Attorney and Declaration of Representative, nor Form 8821, Tax Information Authorization, contain a provision for authorizing a representative to endorse a taxpayer's refund check.
What consequences does a taxpayer face if he agrees with changes made during an audit and signs an agreement but fails to promptly pay the taxes due?
He will be charged interest on the additional taxes from the due date of the return until the payment date.
If a taxpayer agrees with changes proposed at an examination, he can sign an agreement form and pay any additional tax owed. The IRS is required by law to charge interest on unpaid tax from the date the tax return was due to the date the tax is paid in full. The interest is charged as long as there is an unpaid amount due, including penalties, if applicable (Internal Revenue Code section 6601). If he pays when he signs the agreement, the interest is generally figured from the due date of the return to the date of the payment. If he does not pay the additional tax when he signs the agreement, he will receive a bill that includes interest. If he pays the amount due within ten business days of the billing date, he will not have to pay more interest or penalties. This period is extended to twenty-one calendar days if the amount due is less than $100,000.
There are two different types of failure to pay additions to tax (penalties) contained in section 6651 of the Code: subsections 6651(a)(2) and 6651(a)(3):
The failure to pay addition to tax under section 6651(a)(3) applies to amounts subsequently assessed while the failure to pay addition to tax under section 6651(a)(2) applies to unpaid amounts showing due on the return as originally filed. Accordingly, a section 6651(a)(2) addition to tax is calculated from the payment due date, which is generally the same as the due date for filing the return without regard to extensions of time for filing. The "payment date" for purposes of calculating the failure to pay addition to tax under section 6651(a)(3) is the last date specified on the notice and demand for payment, not the original due date of the return.
The installment agreement is one of the acceptable methods of paying off a tax debt to the United States Treasury. Financial information on a Collection Information Statement may be required as a condition of the installment agreement. An installment agreement will be accepted without this statement if the dollar amount is:
$25,000 or less.
If a taxpayer's assessed balance owed is $50,000 or less, they may qualify for a streamlined installment agreement. The streamlined installment agreement criteria are divided into two tiers, a balance due of $25,000 or less and a balance due of $25,001 to $50,000.
If the total amount the taxpayer owes (tax liability, including penalties and interest) is $25,000 or less, the taxpayer does not have to complete a financial statement.
If the total amount the taxpayer owes (tax liability, including penalties and interest) is greater than $25,000 but not more than $50,000, the taxpayer must agree to make automatic monthly payments or must complete a financial statement (Form 433-F, Collection Information Statement). The automatic monthly payments must be established as a Direct Debit Installment Agreement (DDIA) or a Payroll Deduction Installment Agreement (PDIA). DDIAs require Form 433-D, Installment Agreement, and PDIAs require Form 2159, Payroll Deduction Agreement.
Mary Ellen Leahy received a Notice of Deficiency. In order to stop interest from accruing she paid the tax assessed while she prepared her petition for Tax Court. Is this permissible?
Yes, although it is not required.
Generally, the Tax Court hears cases before any tax has been assessed and paid; however, a taxpayer can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review.
Which of the following is an administrative interpretation of the Internal Revenue Code?
All of these are administrative interpretations.
Tax laws are not always clear and may not provide a definitive answer or guidance to all issues. Title 26 is further interpreted administratively by Treasury Regulations, Revenue Rulings, and Revenue Procedures. Many consider these interpretations and decisions to be “tax law.”
Which statement is NOT correct with regard to Form 2848?
Only an attorney, certified public accountant, or enrolled agent can be appointed via Form 2848.
The question asks for the statement that is NOT correct. The first choice indicates that the ONLY individuals that can be appointed are an attorney, certified public accountant, or enrolled agent. This is incorrect, as other individuals may be appointed using Form 2848.
A taxpayer can use Form 2848, Power of Attorney and Declaration of Representative, to appoint any of the following individuals to represent him before the IRS: attorney, certified public accountant, enrolled agent, officer, full-time employee, family member, enrolled actuary, unenrolled return preparer, student attorney, student CPA, enrolled retirement agent. Some of the individuals permitted to be appointed may only be able to represent the taxpayer on a very limited basis; others are permitted to conduct more comprehensive representation.
A revenue agent is examining Susanna Birken's tax return. During the middle of the examination, the agent is sent to an extended training course. The agent's supervisor decides not to reassign Ms. Birken's case, so the work is not completed until the agent returns. As a result, interest accrued on Ms. Birken's tax liability while the agent was away. Does Ms. Birken have any rights with regard to this interest?
Yes, if a portion of the interest accrued due to an unreasonable delay.
he IRS may abate or reduce the amount of interest a taxpayer owes if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act. Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. Transferring a case from one IRS office to another under the circumstances described is a ministerial act. The IRS can abate or reduce the amount of interest a taxpayer owes if it accrued as a result of an unreasonable delay or error caused by an IRS employee in performing a ministerial act.
Tom Smith has been doing very well playing cards in a regularly held illegal poker game. He has won nearly $50,000. Because he knows his wife disapproves of gambling, he has not told her about any of this and has kept the money he's won in a box in their attic. The IRS found out about the card game and sought to recover taxes due from Tom and his wife, who have always filed MFJ. What should his wife do to protect herself from liability?
Promptly file an innocent spouse form.
A spouse who reasonably did not know about income her spouse did not report should file Form 8857, Request for Innocent Spouse Relief, as soon as she becomes aware of a tax liability for which she believes only her spouse or former spouse should be held responsible. Without filing for relief, if the Smiths divorced, Mrs. Smith would still be liable for the tax on the unreported gambling income because it was income during their marriage. Spouses who file MFJ are jointly and severally liable for tax liability that arises during their marriage.
The IRS selected Brittany's return for an examination and requested that she support her claimed business expenses. Brittany refused to provide the IRS with any of the requested information because she thought that the examination was an unwarranted invasion of her privacy. The IRS issued a Notice of Deficiency and Brittany filed a petition with the Tax Court. Which party has the burden of proof in the Tax Court proceedings?
The taxpayer has the burden of proof because she did not cooperate with reasonable IRS requests for information.
For court proceedings the IRS has the burden of proof for any factual issue if the taxpayer has cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on his tax return. Brittany's failure to provide the IRS with the business expense information, and the reason for her failure, serve to keep the burden of proof with her.
Which of the following cannot be cited as precedent in a tax case?
Private Letter Rulings.
Both judicial (court) and administrative interpretations of the code may be cited as precedent for future arguments in similar cases. Only rules of law may be cited as precedent for the purposes of defending a tax position or action.
The IRS issues a Private Letter Ruling (PLR) in response to a written request submitted by a taxpayer and binds the IRS if the taxpayer fully and accurately described the proposed transaction in the request and carries out the transaction as described. Other taxpayers or IRS personnel may not rely on a PLR as precedent.
IRS personnel who access the Centralized Authorization File (CAF) system will be able to take which of the following actions?
All of the above.
Entry onto the Centralized Authorization File (CAF) system enables Internal Revenue Service employees who do not have access to the actual power of attorney or tax information authorization to do all of the following: 1) Determine whether a recognized representative or appointee is authorized to discuss specific confidential tax information; 2) Determine the extent to which a recognized representative or appointee has been authorized to represent a taxpayer; and 3) Send copies of notices and other Internal Revenue Service communications to the person (individual or other entity) designated on the form.
Caroline received an audit notification letter scheduling an appointment for July 1, 20X8 for the examination of her tax year 20X6 Form 1040 return. The week before the scheduled appointment, she received a telephone call from the Internal Revenue Service office canceling the appointment. She was told that she would be contacted at a later date to reschedule the appointment. She was not contacted until July 1, 20X9, when she was advised of a new appointment date. Errors identified in the examination resulted in her owing an additional tax of $4,000 plus accrued interest of $600. Caroline does not believe that she should have to pay interest for the period that she was waiting for her appointment to be rescheduled. How should she proceed?
Request an abatement of the interest by filing a Form 843 with the Internal Revenue Service center where she filed her 20X6 return.
A taxpayer may seek relief if the IRS assesses interest for periods during which interest should have been suspended because the IRS did not mail a notice in a timely manner. If the taxpayer believes that the IRS assessed interest with respect to a period during which interest should have been suspended, submit Form 843, writing "Section 6404(g) Notification" at the top of the form, with the IRS Service Center where the return was filed.
Jay Roberts, a sole proprietor of a restaurant, neglected to remit trust fund taxes for his employees. The IRS pursued collection and in January 20X9 recorded a Notice of Federal Tax Lien in the public records of the county where Jay Roberts resides. In February 20X9, Jay Roberts inherited his mother's house which is also in the county where he resides. Does the federal tax lien encumber the inherited real property?
Yes.
A Notice of Federal Tax Lien attaches to property acquired after the lien filing date.
Karl Robinson had his income tax return examined, which resulted in adjustments. Karl administratively appealed the adjustments. Some of the adjustments were sustained, and this left Karl with an income tax deficiency of $45,000. Can Karl appeal his case pursuant to the small tax case procedure?
Yes, his appeal will be made to U.S. Tax Court pursuant to the small tax case procedure.
If the amount in a case is $50,000 or less for any one tax year or period, a taxpayer can request that his case be handled under the small tax case procedure in Tax Court. Decisions entered in Tax Court for cases brought pursuant to the small tax case procedure are not appealable.
Is Circular 230 part of the Code of Federal Regulations?
Yes, it is in title 31.
The regulations in Circular 230 governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries and appraisers before the IRS are found in the Code of Federal Regulations at 31 CFR 10.