3rd Party Authorizations
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.
The IRS may require a represented taxpayer to provide evidence under oath _________
When the taxpayer's enrolled agent is unwilling to declare his/her own knowledge that the facts are true and correct.
The Internal Revenue Service may require a recognized representative to submit all evidence, except that of a supplementary or incidental character, over a declaration (signed under penalty of perjury) that the recognized representative prepared such submission and that the facts contained therein are true. In any case in which a recognized representative is unable or unwilling to declare his/her own knowledge that the facts are true and correct, the Internal Revenue Service may require the taxpayer to make such a declaration under penalty of perjury.
A lien is a legal claim to property as security or payment for a tax debt. Select the best answer regarding the filing of a Notice of Federal Tax Lien.
May be filed after a tax liability is assessed, billed and the debt is not paid within 10 days of notification.
The IRS cannot file a lien unless they assess the tax and send a bill to the taxpayer. The IRS must allow the taxpayer 10 days from the date of the bill (Notice and Demand for Payment) before filing a lien. The IRS generally may still file a Notice of Federal Tax Lien to secure the government's interest against other creditors. A notice of federal tax lien attaches to your personal or real property until final payment is made. The notice filing could have a negative impact on your credit rating.
What can prevent a taxpayer from shifting the burden of proof to the IRS?
The taxpayer does not cooperate with all reasonable requests for documents.
The IRS generally has the burden of proof for any factual issue if the taxpayer has met the following requirements:
Which of the following is not written by the IRS?
Judicial Decisions
Once a court arrives at a decision, a justice (or several justices) will write an opinion. This judicial decision may be cited as precedent, and any court lower in the pecking order must follow the decision as law. Lawyers and taxpayers often use these decisions to argue a position. The IRS, which is an agency within the U.S. Department of the Treasury, may disagree with a tax court determination when a ruling is against their position.
Which of the following refers to the authorization of a representative to act on a taxpayer's behalf even if the taxpayer becomes incapacitated or incompetent?
Durable power of attorney
Durable power of attorney does not expire if a taxpayer becomes incapacitated or incompetent. This is a condition that requires specific authorization on Form 2848. Other powers that require special authorization include signing a return or accepting a refund check on a taxpayer's behalf.
The Statutory Notice of Deficiency is also known as:
A 90-day letter because the taxpayer generally has 90 days from the date of the letter to file a petition with the Tax Court.
If the IRS does not receive a response to the 30-day letter, or if the taxpayer cannot reach an agreement with an Appeals Officer, the IRS will send a 90-day letter (notice of deficiency). The taxpayer will have 90 days (150 days if addressed outside the United States) from the date of this notice to file a petition with the Tax Court. The taxpayer cannot file a claim with the Tax Court prior to the notice date on the notice of deficiency. If the taxpayer does not act on the notice within 90 days, the IRS will assess the tax.
The Internal Revenue Service may accept an Offer in Compromise to settle unpaid tax accounts for less than the full amount due. A Collection Information Statement (financial statement) is not required with the offer when the reason for the offer is:
Doubt as to liability
Taxpayers use Form 433, Collection Information Statement, to prove economic hardship and submit Form 433 when submitting an Offer in Compromise based on:
An offer in compromise based on doubt as to liability does not require filing Form 433, Collection Information Statement.
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 of the following actions will not result in a revocation of a power of attorney?
Filing a new Form 8821.
Filing a Form 8821, Tax Information Authorization, will not revoke any Form 2848 that is in effect. A taxpayer can revoke a power of attorney without appointing a new representative by filing a copy of the previously filed Form 2848 with the word, REVOKE written across the top and the taxpayer's signature and date of revocation written on the page or by filing a written statement with the IRS. A taxpayer can revoke a power of attorney and appoint a new representative by filing a new Form 2848.
Sam is the sole shareholder in an S corporation. The S corporation was examined and the IRS proposed a $20,000 deficiency. What must Sam do to request an Appeals conference?
File a formal written protest.
Because the case involves an S corporation, the appeals request must be submitted under the 'written protest' rules. Small case rules do not apply to S corporations. He does not have to have a practitioner represent him, nor does he have to pay the deficiency (although it may save him money in the long-run to do so, in case he loses the appeal).
To collect outstanding tax liabilities, the IRS can do any of the following EXCEPT what?
The IRS can levy unemployment benefits
26 CFR 301.6334-1(a) - Property exempt from levy.
Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, of any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.
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 is NOT part of Federal Treasury Regulations?
Title 26, United States Code
Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 26 of the United States Code (26 U.S.C.). Treasury regulations (26 C.F.R.), which are commonly referred to as Federal tax regulations, continue where the IRC leaves off by providing the official interpretation of the IRC by the U.S. Department of the Treasury. Treasury Department Circular No. 230 is also a Treasury Regulation although it is contained in a different chapter of the Code of Federal Regulations. The definition of gross income is found in the Code of Federal Regulations at 26 CFR1.61-1. Federal Treasury Regulations do not include the Tax Code itself.
A taxpayer must use a power of attorney to do which of the following?
Authorize an individual to represent a taxpayer at a conference with the IRS.
A Power of Attorney is not required to prepare a return and or to allow another party to give information to the IRS. A Tax Information Authorization, not a POA, is the form used to authorize disclosure by the IRS (as well as certain check boxes on various tax forms). A power of attorney is most often required when to authorize another individual to perform at least one of the following acts on behalf of a taxpayer:
Richard's 2016 and 2017 returns were examined for charitable contributions and employee business expenses. Both examinations resulted in no change to the return as filed. In 2020, Richard is notified that his 2018 return has been selected for examination for claimed business bad debts. Is Richard eligible to have the examination discontinued?
No, because the repeat examination rule does not apply.
A taxpayer who has been audited for the same items in either of two preceding years, had no change proposed on his or her tax liability, and receives notice that his or her return has been selected for examination may contact the Internal Revenue Service and request that the examination be discontinued under the repeat examination rule. The facts of Richard's situation do not meet the requirements for this rule.
Jay Roberts, a sole proprietor of a restaurant, neglected to remit trust fund taxes for his employees. The IRS pursued collection and in January 2009 recorded a Notice of Federal Tax Lien in the public records of the county where Jay Roberts resides. In February 2009, 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.
If a taxpayer's case is determined pursuant to the small tax case procedure in Tax Court and the taxpayer is unhappy with the outcome, can he appeal the decision?
No
Decisions entered in Tax Court for cases brought pursuant to the small tax case procedure (i.e., a dispute of $50,000 or less for any one year) are not appealable.
Which of the following is the IRS not required to agree with?
Tax court decisions.
The IRS may disagree with a tax court determination when a ruling is against their position. The decision of the Tax Court will become final 90 days from the date the decision is entered unless either party files a timely notice of appeal. Tax Court Small tax (S) case decisions are nonreviewable.
IRS policy is to announce their acquiescence (acceptance) to follow a court ruling in future matters of an equivalent issue. The intention of the IRS to follow (or not) a court decision is published in the Internal Revenue Bulletin (IRB) and listed as acq. or nonacq. in the court citation.
The IRS is a bureau of the Department of the Treasury and must follow its own Regulations, Rulings, and Procedures.
Holden has been granted power of attorney to represent one of his clients in completing a tax return. In order to assist with the complex case, the client has also granted Holden the power to delegate authority on Form 2848. Holden delegates his authority to another representative. This arrangement results in which of the following?
The IRS recognizes both Holden and the delegate as the taxpayer's representative.
Substitution and delegation of authority are powers that can be granted to a representative by a taxpayer. These require specific authorization on Form 2848. When authority is substituted, the IRS only recognized the recipient of the authority. When authority is delegated, the IRS recognizes both the original representative and the recipient of the delegation as representatives for the taxpayer.
Julie, who lives in Washington, DC, operated a business without books and records. Her business income and expenses were reported on Schedule C (Form 1040). Julie's tax return for 20X5 was examined and substantial adjustments were proposed. Julie disagreed with the adjustments and wants to take her case directly to Tax Court. A Statutory Notice of Deficiency was issued to Julie by the IRS Area Director. Julie can file a petition for a Small Tax case before the U.S. Tax Court during which of the following periods beginning from the date of the issuance of the notice?
90 Days
The taxpayer will have 90 days (150 days if addressed outside the United States) from the date of this notice to file a petition with the Tax Court. The taxpayer may not file a claim with the Tax Court prior to the notice date.
A new client visits your office. The taxpayer believes that the U S tax system is purely voluntary and filed a return showing no income tax, requesting all withholding be refunded. The IRS assessed a $5,000 frivolous return penalty.
The taxpayer has received a Notice of Intent to Levy and Right to Collection Due Process (CDP) Hearing concerning the $5,000 penalty. The taxpayer wants you to present the previous arguments about the tax system.
Which of the following is a correct statement regarding the CDP hearing request raising arguments previously deemed frivolous?
If the appeal is deemed frivolous, the taxpayer will be given 30 days to withdraw or amend the CDP appeal.
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.
The penalty for filing a frivolous tax return is $5,000. The penalty applies to anyone (including the preparer) who submits a purported tax return or other specified submission, if any portion of the submission is based on a position the IRS identified as frivolous in Notice 2010-33, 2010-17 I.R.B. 609, or reflects a desire to delay or impede administration of the tax laws.
A practitioner who is aware the client has not complied with the rules and regulations of the IRS, or knows of any error or omission, must promptly advise the client concerning the existence of the error or omission and of the consequences of allowing them to remain uncorrected. If not corrected, the practitioner cannot sign the return. A practitioner may not advise a client to take a frivolous position on a return.
The "voluntary filing" position is specifically identified as a frivolous position.
If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed shall not apply with respect to such submission.
IRC Section 6702
For court proceedings resulting from examinations started after July 1998, the IRS has the burden of proof for any factual issue. As a result, do taxpayers need to maintain records to substantiate items claimed on tax returns?
Yes, the records retention rules have not been affected by this court procedural rule.
Paper records, such as receipts and invoices, support information summarized in a computer program or in a paper ledger or checkbook. An individual should keep each supporting document for as long as is necessary and the length necessary will vary depending on the item the record supports. Documents that support expenditures for capital improvements or capital assets, for example, should be kept until the asset is disposed of and the tax consequences of the disposition have been reported and are closed. Documents that support other shorter-lived expenditures or income items do not have to be kept for as long a period of time. A taxpayer should keep each supporting document for as long as it may be needed for the administration of any provision of the tax code. Generally this means that the record should be kept until the period of limitations for the relevant return has run. So, if a taxpayer files a return that is not fraudulent and does not constitute an under-reporting violation, the period of limitations for that return will have run after three years from the date the return was filed or due, whichever is later.
For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue and the IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws.
Who writes the tax laws found in the Internal Revenue Code (26 USC)?
Congress
Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 26 of the U.S. Code (26 USC.) Changes to tax law are proposed in the form of a “tax bill” and voted on in the U.S. Congress and Senate. If the legislature approves the tax bill and the president signs it into law, the code is amended to include the new law.