B807 TOC 200542



Table of Contents

About This Book vii

How To Use This Book ix

Foreword xi

Acknowledgments xiii

Preface xv

Chapter 1 Initial Client Engagement 1

Topical Index 1

1.01 Nature of Federal Tax Law 5

1.02 Role of the Internal Revenue Service 7

1.02(a) Specific Functions of the Internal Revenue Service 7

1.03 Organization of the Internal Revenue Service 11

1.03(a) Examination Process 12

1.03(b) Collection Process 14

1.03(c) The Criminal Investigation Division (CID) 17

1.03(d) Appeals Branch 18

1.03(e) Area Counsel 18

1.04 Where Do Tax Clients Come From? 19

1.05 The Initial Consultation 20

1.06 Beginning the Engagement—Form 2848 23

1.07 Rules of Practice 25

Practice Points 28

Exhibit 1-1  IRS Organization Structure 10

Exhibit 1-2  Pre-Payment Appeal Process Examination 13

Exhibit 1-3  Post-Payment Appeal Process Examination/Claims 15

Exhibit 1-4  The Collection Process 16

Exhibit 1-5  The Criminal Process 17

Exhibit 1-6 Filing Form 2848 25

Exhibit 1-7 Practitioner Hotlines 34

Exhibit 1-8 IRS E Services 35

Exhibit 1-9  Initial Client Engagement Checklist 36

Exhibit 1-10 Ten Ways To Identifying The Problem Client 37

Exhibit 1-11 Initial Client Representation Letter 38

Exhibit 1-12  Retainer Agreement 38

Exhibit 1-13 Conflict Advisory to Client 40

Exhibit 1-14 Letter to IRS Advising of Representation 41

Exhibit 1-15 Representation Memorandum To File 41

Exhibit 1-16 Enforcement Activity by IRS Office of

Professional Responsibility 43

Exhibit 1-17 IRS Employees 44

Exhibit 1-18 Circular 230 Procedure 44

On CD-ROM Only:

Circular 230

Form 56 Notice Concerning Fiduciary Relationship

Form 2848, Power of Attorney and Declaration of Representative

Form 4506 Request for Copy of Tax Return

Form 4506-T Request for Transcript of Tax Return

Form 8821 Tax Information Authorization

Publication 1 Your Rights as a Taxpayer

Chapter 2 Examination of Returns 47

Topical Index 47

2.01 Audit Basics 51

2.02 Pre-Audit Action by Practitioner 60

2.03 Conducting the Audit Examination 63

2.04 Closing the Audit Examination 68

2.04(a) Statute of Limitations Extension Issues 71

2.05 Jeopardy and Termination Assessments 73

2.06 Coordinated Examination Program (CEP) 74

2.07 Partnership Audit Problems 75

Practice Points 77

Exhibit 2-1  Methods of IRS Audit Selection 55

Exhibit 2-2 Chance of Audit by Taxpayer Category 56

Exhibit 2-3 Typical DIF Factors Used in Return Selection 59

Exhibit 2-4 Examination of Returns Checklist 61

Exhibit 2-5 Types of IRS Agents 61

Exhibit 2-6  How To Recognize an Eggshell Audit 62

Exhibit 2-7  Initial Examination Conference Checklist 64

Exhibit 2-8 IRS Settlement Forms 68

Exhibit 2-9  Ten Negotiating Techniques that Work and Ten that Don’t 69

Exhibit 2-10 Settling Cases at the Examination Stage 69

Exhibit 2-11  Closing the Examination Checklist 71

Exhibit 2-12  IRS Audit Notice—Corporation 81

Exhibit 2-13  IRS Audit Notice—Individual 82

Exhibit 2-14  Thirty-Day Notice 84

Exhibit 2-15  Letter 3164—Notice of Third-Party Contact 87

Exhibit 2-16  IRS Market Segment Papers 87

Exhibit 2-17  IRS Industry Specialization Papers 89

Exhibit 2-18 Notice of Tax Due on Federal Tax Return—Individual 92

Exhibit 2-19 Notice of Tax Due on Federal Tax Return—Business 92

On CD-ROM Only

Audit Technique Guides (ATGs)

Automated Under Reporter Inventory Strategy Database (AUR-ISD)

Form 870 Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment

Form 1902-B Report of Individual Income Tax

Form 4089 Notice of Deficiency Waiver

Form 4549 Income Tax Examination Changes

Form 4549-CG Income Tax Examination Changes

Form 4549-E Income Tax Discrepancy Adjustments

Form 4564 Information Document Request

Form 5564 Notice of Deficiency

IRS Telephone Assistance

Letter 915 Cover Letter for Examination Report

Letter 937 Cover Letter Response to Power of Attorney

Letter 2205-A Notice of Return Selected for Examination

Letter 3254 (DO) Confirmation of Appointment to Begin Examination Process

Publication 3498 The Examination Process

Chapter 3 Statute of Limitations 95

Topical Index 95

3.01 The Statutes of Limitations in Tax Matters 99

3.02 Statute of Limitations on Assessment 102

3.02(a) Extensions of the Statute of Limitations on Assessment 104

3.03 Statute of Limitations on Collection 106

3.03(a) Effect of Offers in Compromise, Installment Agreements,

and Miscellaneous Actions 107

3.04 Statute of Limitations on Claims for Refund 109

3.05 Statute of Limitations on Assessment of Trust Fund Liability: §6672 112

3.06 Special Rules for Suspension of the Statute

of Limitations—Mitigation 113

3.07 Transferee Liability 114

3.08 Limitations Period for Criminal Prosecution 116

Practice Points 116

Exhibit 3-1  Major Statutes of Limitation 100

Exhibit 3-2  Statute of Limitations Checklist 123

Exhibit 3-3  Suspension of Statute of Limitation Due To Client Action 124

Exhibit 3-4  Letter to Client To Extend

Assessment Statute in Criminal Case 125

Exhibit 3-5  Letter to Client Regarding Trust Fund Penalty Extension 126

Exhibit 3-6  Letter to Client To Extend Assessment Statute in Civil Case 127

Exhibit 3-7  Letter to Client Confirming

No Extension of the Assessment Statute 127

Exhibit 3-8 Circumstances That Evidence Fraudulent Transfer 128

Exhibit 3-9 Things That Affect the Assessment Statute of Limitations 128

Exhibit 3-10 How To Determine the Collection

Statute of Limitations Expiration Date (CSED) 129

On CD-ROM Only

Form 843 Claim for Refund and Request for Abatement

Form 872 Consent To Extend the Time To Assess Tax

Form 872-A Special Consent To Extend the Time to Assess Tax

Form 872-T Notice of Termination of Special Consent To Extend the Time To Assess Tax

Form 900 Tax Collection Waiver

Form 1040X Amended U.S. Individual Income Tax Return

Form 2750 Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty

Letter 907(DO) IRS Request for Extension

Publication 1035—Extending the Tax Assessment Period

Chapter 4 Administrative Summons 131

Topical Index 131

4.01 Nature of Summons 133

4.02 Summons Enforcement 136

4.03 Compliance Considerations 141

4.04 Defenses to Summons and Right To Quash 143

Practice Points 146

Exhibit 4-1  Administrative Summons Checklist 149

Exhibit 4-2  Practitioner Objections to Summons 150

Exhibit 4-3  Request for Third-Party Contacts 151

Exhibit 4-4 Petition to Quash Summons 152

On CD-ROM Only

Employee Plans Continuing Professional Education (CPE) Technical Instruction Program for Fiscal Year 2003 Ch 12(c)—Summons Procedures

Form 2039 Client Summons—Examination Division

Form 2039 Criminal Division Summons

Form 2039 Summons for Handwriting Exemplar

Form 4564 Information Document Request

Form 6540 Handwriting Exemplars

Form 6637 Summons Collection Information Statement

Form 6638 Summons for Income

Form 6639 Financial Records Summons

Form 6863 Request for Expenses Incident to Summons

Form 6882 IDRS-Master File Information Request

Letter 3164: IRS Third Party Contact Letter

Chapter 5 Appeals Branch 155

Topical Index 155

5.01 Nature of Appeals Branch 157

5.02 Protest Filing 162

5.03 The Appeals Hearing 165

5.04 Settlement of Cases in Appeals 168

5.04(a) Alternative Dispute Resolution 169

5.04(b) Collection Due Process Hearings 172

Practice Points 176

Exhibit 5-1  Cases Handled By Appeals Office 159

Exhibit 5-2 Advantages/Disadvantages of Appeals Hearing 160

Exhibit 5-3  When Not To File a Protest to Appeals 165

Exhibit 5-4  ADR in Appeals 182

Exhibit 5-5 Appeals Branch Checklist 183

Exhibit 5-6 Protest: Income Tax 184

Exhibit 5-7  Protest: §6672 Trust Fund Recovery Penalty 185

Exhibit 5-8  Appeals Protest Transmittal Letter 188

On CD-ROM Only

Appeals Acknowledgment and Notice of Appeals Hearing

Appeals Office Notification to Taxpayer

Form 870-AD Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment

Form 906 Closing Agreement on Final Determination Covering Specific Matters

Form 906-c Closing Agreement on Final Determination Covering Specific Matters

Form 9423 Collection Appeal Request

Form 12153: Request for Post-Lien/Pre-Levy Collection Due Process Hearing

Form 12203 Request for Appeals Review

Form 12257-c Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy

IRS Letter 913 (RO): Appeals Approval of Settlement

IRS Response to Collection Due Process Hearing Request

IRS Thirty Day Letter

Letter to Client re Collection Due Process Hearing

Model Arbitration Agreement

Notice of Determination Concerning Collection Action(s) Under Section 6320 and-or 6330

Publication 5 Your Appeal Rights

Publication 4167 Introduction to Alternative Dispute Resolution

Request for Collection Due Process Hearing

Chapter 6 Collection Branch 189

Topical Index 189

6.01 Nature of Collection 195

6.02 Service Center Collection Activity 197

6.03 ACS 199

6.04 District Office 200

6.05 Notices and Forms Filing 204

6.06 Tax Liens 207

6.07 Tax Levies 212

6.08 The Taxpayer’s Advocate Service 217

6.09 Offers in Compromise 218

6.09(a) Effect of Offer 222

6.09(b) Acceptance or Rejection of the Offer 225

6.09(c) How Much To Offer? 226

6.09(d) So, Should You File? 227

6.09(e) Collateral Agreements and Post Submission Procedures 230

6.10 Bankruptcy 231

6.11 Principal Residence 237

6.12 Re-Audits 238

6.13 Installment Agreements 238

6.14 Actions To Enjoin IRS 241

6.15 Employment Tax Assessments 241

6.16 Innocent Spouse—Section 6915 243

6.17 Judicial Review of Collection Action 254

Practice Points 258

Exhibit 6-1  Getting the Offer in Compromise Accepted Checklist 228

Exhibit 6-2  Applying for Innocent Spouse Relief Checklist 245

Exhibit 6-3  Collection Due Process Hearing Requests 254

Exhibit 6-4  Collection Branch Checklist 270

Exhibit 6-5  The Collection Process 271

Exhibit 6-6  FAQs for New Offer in Compromise Rules 272

Exhibit 6-7 Offer in Compromise—Response from IRS 276

Exhibit 6-8  Application for Certificate of Subordination 277

Exhibit 6-9  Application for Certificate of Discharge 279

Exhibit 6-10 Installment Agreements Available 281

Exhibit 6-11 FAQs for Married Taxpayers 282

Exhibit 6-12 How To Pay Taxes Electronically 282

On CD-ROM Only

Form CVL PEN Overpaid Taxes Applied to Other Taxes You Owe

Form 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals

Form 433-B Collection Information Statement for Businesses

Form 433-D Installment Agreement

Form 433-F Collection Information Statement (Short Form)

Form 656 Offer in Compromise

Form 656-L Offer in Compromise (Doubt as to Liability)

Form 668(W) Notice of Levy on Wages, Salary, and Other Income

Form 668(Y) Notice of Federal Tax Lien

Form 668-A(c) Notice of Levy

Form 668-D Release of Levy/Release of Property from Levy

Form 668-Z Release of Federal Tax Lien

Form 669-A Certificate of Discharge of Property

Form 669-D Certificate of Subordination of Federal Tax Lien

Form 911 Request for Taxpayer Advocate Service Assistance

Form 2751 Proposed Assessment of Trust Fund Recovery Penalty

Form 4180 IRS Trust Fund Recovery Penalty Interview Form

Form 8857 Request for Innocent Spouse Relief

Form 8919 Uncollected Social Security and Medicare Tax on Wages

Form 12153 Request for a Collection Due Process Hearing

Form 12509 Statement of Disagreement

Letter 726 Notice of Amount Due on Tax Account

Letter 1058 Final Notice of Intent To Levy and Notice of Your Right to a Hearing

Letter 1058 Notice of Intent to Levy and Right to a Hearing

Letter 1153 (DO) Notice of Proposed Trust Fund Recovery Penalty

Letter 2850 Approval of Request To Pay Taxes in Installments

Letter 3172 Notice of Tax Lien Filing and Your Right to Hearing

Letter 3283(DO) IRS Innocent Spouse Determination Letter

Letter—Notice of Determination Concerning Collection Actions

Letter—Taxpayer Advocate Service Acknowledgment Letter

National Standards Food, Clothing and Other Items

Notice 746 Information About Your Notice, Penalty and Interest

Notice CP 89 Annual Installment Agreement Statement

Notice CP 91 Final Notice Before Levy on Social Security Benefits

Notice CP-504 Urgent Collection Notice

Notice CP-523 Notice of Intent To Levy

Notice of Collection Appeals Program

Online Payment Agreement Option (OPA)

Private Debt Collection Program

Publication 594 The IRS Collection Process

Publication 783 How To Apply for Certificate of Discharge of Property from Tax Lien

Publication 784 How To Prepare Application for Certificate of Subordination of Federal Tax Lien

Publication 1450 How To Request Certificate of Release of Federal Tax Lien

Publication 1660 Collection Appeal Rights

Publication 1854 How To Prepare a Collection Information Statement (433-A)

Publication 4165 Introduction to Collection Due Process Hearings

Chapter 7 Criminal Tax 283

Topical Index 283

7.01 Nature of Criminal Investigation Division 287

7.01(a) Voluntary Disclosure 289

7.02 Specific Procedure 291

7.03 Grand Jury Investigations—Alternative IRS Investigation 293

7.04 Dealing with Special Agents 294

7.05 Crimes Investigated by the IRS 297

7.06 Negotiating the Plea Agreement 300

7.07 Hearings in District Court for Criminal Violation—Plea Hearing 303

7.08 Sentencing Hearing 304

7.09 Defenses to Criminal Violations 306

7.10 SEP 307

Practice Points 307

Exhibit 7-1 Voluntary Disclosure Checklist 290

Exhibit 7-2  The Criminal Process 291

Exhibit 7-3  Ten Badges of Criminal Tax Fraud 296

Exhibit 7-4  Title 26 Criminal Penalties and Fines 300

Exhibit 7-5  Sentencing Options by Zone 305

Exhibit 7-6  Criminal Tax Checklist 317

Exhibit 7-7  Criminal Tax Appeals Checklist 318

Exhibit 7-8  Rule 11 Plea Hearing Checklist 319

Exhibit 7-9  Sentencing Hearing Checklist 319

Exhibit 7-10  Kovel-CPA Agreement 320

Exhibit 7-11 Federal Sentencing Guidelines—Offenses Involving Taxation 321

Exhibit 7-12 Request for Conference at U.S. Department of Justice 322

Exhibit 7-13 Memo to Client Regarding Rule 11 Proceeding 323

Exhibit 7-14 Memorandum to Client Regarding Sentencing Hearing 326

Exhibit 7-15 Defense Memorandum 327

Exhibit 7-16 Request for Conference at U.S. Attorney’s Office 330

Exhibit 7-17 Contents of Special Agent’s Report 331

Exhibit 7-18 Request for Conference at District Counsel 332

Exhibit 7-19 Application for Permission To Enter Plea of Guilty 332

Exhibit 7-20 Indications of Consideration of a Criminal Record 339

Exhibit 7-21 Criminal Division Focus 340

On CD-ROM Only

AUSA Letter to Judge Regarding Allocution Questions

District Court Order of Release

District Court Standing Order

District Court Waiver of Indictment

Explanation of the Pre-Sentence Report

Federal Criminal Guidelines Sentencing Table

Federal Criminal Guidelines Worksheets

Form 211 Application for Award for Original Information

Form 3949A Information Referral

Plea Agreement

Probation Report and Presentence Investigation Report

Referral Report for Potential Criminal Fraud Cases

Chapter 8 Tax Court Practice 341

Topical Index 341

8.01 Nature of Tax Court 345

8.02 Admission to Practice 349

8.03 Petition Filing 350

8.04 Trial Practice 353

8.05 Small Case Procedure 359

8.06 Motion Practice 361

8.07 Other Areas of Tax Court Jurisdiction 362

8.08 Burden of Proof 366

8.09 Claims for Litigation and Administrative Costs 368

8.10 Appeals 371

Practice Points 371

Exhibit 8-1  Advantages/Disadvantages of U.S. Tax Court 347

Exhibit 8-2  Cases Only 349

Exhibit 8-3 Emergency Petition—U.S. Tax Court 351

Exhibit 8-4  Format for Briefs—Tax Court (Rule 151) 357

Exhibit 8-5 Tax Forum Comparison 377

Exhibit 8-6 Selecting the Best Tax Forum 378

Exhibit 8-7  U.S. Tax Court Checklist 379

Exhibit 8-8  Entry of Appearance 380

Exhibit 8-9  Tax Court Petition 380

Exhibit 8-10 Settlement Agreement and Related Documents 382

Exhibit 8-11  Request for Production of Documents 386

Exhibit 8-12  Tax Court Cities 387

Exhibit 8-13  Answer of Respondent 388

Exhibit 8-14  Notice Setting Case for Trial 390

Exhibit 8-15  Standing Pre-Trial Order 391

Exhibit 8-15  Trial Memorandum 393

On CD-ROM Only

Form 5601 Statutory Notice

Letter 3219 (SC-CG) Notice of Deficiency

Notice of Receipt of Petition

Notice Setting Case for Trial

Tax Court Application for Order to Take Depositions Form 15

Tax Court Attorney Admission Form 18

Tax Court Decision Document

Tax Court Entry of Appearance Form 7

Tax Court Petition for Administrative Costs—Sample

Tax Court Petition Kit

Tax Court Request for Place of Trial

Tax Court Rule 23 Form and Style of Papers Filed in Court

Tax Court Subpoena Form 14

Trial Memorandum Sample

United States Tax Court Fees and Charges

United States Tax Court Telephone Numbers

Chapter 9 Claims Practice 395

Topical Index 395

9.01 Claims Basics 399

9.02 Statute of Limitations 383

9.03 The Full/Divisible Payment Rules 404

9.04 IRS Claims Procedure 404

9.05 Resort to Courts 406

9.06 Choice of Judicial Forum 407

9.07 Claim Look-Alikes 409

9.08 Tax Payments 410

Practice Points 410

Exhibit 9-1  Claims Procedure 398

Exhibit 9-2  Suspension of Claims Statute of Limitations

for Disability Under Section 6511(h) Checklist 401

Exhibit 9-3  Claim Elements Under the Informal Claims Doctrine 403

Exhibit 9-4  Claims Checklist 415

Exhibit 9-5  Thirty Day Notice 416

Exhibit 9-6  Memorandum in Support of Claim for Refund 418

Exhibit 9-7  Notice of Claim Disallowance 420

On CD-ROM Only

Form 1040X Amended US Individual Tax Return

Form 843 Claim for Refund and Request for Abatement

Form 870-AD Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency

Form 1045 Application for Tentative Refund

Form 1120-X Amended US Corporate Income Tax Return

Form 1139 Corporation Application for Tentative Refund

Form 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer

Form 2297 Waiver of Statutory Notification of Claim Disallowance

Chapter 10 Obtaining Information and Assistance from the IRS 423

Topical Index 423

10.01 Obtaining Background Information 425

10.02 Filing FOIA Requests 430

10.03 Obtaining IRS Information Online 432

10.04 Resolving Taxpayer Problems with the IRS 433

10.05 IRS Publications 434

10.06 Local IRS Offices 435

10.07 Obtaining Private Letter Rulings and Determination Letters 435

10.08 Tax and Legal Websites 439

Practice Points 440

Exhibit 10-1  Relative Importance of IRS Tax Authorities 426

Exhibit 10-2  Applying for IRS Rulings 436

Exhibit 10-3  Obtaining Information and Assistance from IRS Checklist 444

Exhibit 10-4  IRS Transaction Codes Used To Interpret IRS Transcripts 444

Exhibit 10-5  Schedule of Typical User Fees 448

Exhibit 10-6  Freedom of Information Act Request to

District Disclosure Officer 449

On CD-ROM Only

Form 4506 Request for Copy of Tax Return

Form 4505-T Request for Transcript of Tax Return

Form 8717 User Fee for Employee Plan Determination, Opinion, and Advisory Letter

Sample Format For a Letter Ruling Request

Chapter 11 Penalties and Interest 451

Topical Index 451

11.01 Accuracy-Related Penalty—Negligence Penalty 457

11.02 Civil Fraud Penalty 460

11.03 Innocent Spouse Defense to Penalties 462

11.04 Substantial Understatement of Tax—Section 6662(b)(2) 464

11.05 Substantial Valuation Misstatements 465

11.06 Substantial Estate or Gift Tax Valuation Understatement 466

11.07 Failure To File Returns 466

11.08 Failure To Pay Tax 467

11.09 Estimated Tax Penalty 469

11.10 Failure To Timely Deposit 470

11.11 Trust Fund Recovery Penalty 471

11.12 Defense of Reasonable Cause 477

11.13 The Penalty Appeal Procedure 482

11.14 Third Party Penalties 483

11.15 Interest 487

11.16 Abatement of Interest 489

11.17 Miscellaneous 490

Practice Points 493

Exhibit 11-1  Most Often Assessed Penalties 458

Exhibit 11-2  Obtaining Equitable Innocent Spouse Relief §6015(f) 463

Exhibit 11-3  Trust Fund Recovery Penalty Checklist 474

Exhibit 11-4  Does Reasonable Cause Exist? 478

Exhibit 11-5  Penalty Appeal Procedure

Checklist (Post Assessment Prepayment of Penalties) 483

Exhibit 11-6  Interest Abatement Procedure Checklist 492

Exhibit 11-7 Memorandum In Support Of Penalty Appeal Form 843 507

Exhibit 11-8 Penalties Assessed by IRS 510

Exhibit 11-9 Important Do’s and Don’ts of Circular 230 510

On CD-ROM Only

Appeals Denial of Request for Abatement of Penalties

FAQs Related to Tax Return Perparer Penalty Notices

Form 843 Claim for Refund and Request for Abatement

Form 843 Claim for Refund and Request for Abatement—Sample

Form 8275 Disclosure Statement

Form 8275-R Regulation Disclosure Statement

How To Apply for Zero Interest Netting

Letter 1153 (DO) Trust Fund Penalty Assessment Notice

Letter 1277 IRS Penalty Appeal Determination Letter

Notice 746 Information About Your Notice, Penalty and Interest

Procedures for Taxpayers To Make Remittances To Stop Running of Interest on Deficiencies

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