Unit 1: Legal Authority of the IRS

Question 1

The IRC is enacted by Congress and published as:

Answer 1

Title 26

Question 2

The U.S. Treasury Department is a port of which branch of Government?

Answer 2

Executive Branch

Question 3

The IRS produces several kinds of documents that provide guidance to taxpayers, including the following:

Answer 3

1. Treasury Regulations
2. Revenue Rulings
3. Revenue Procedures
4. Private Letter Rulings
5. Technical Advice Memoranda (also called TAMs)
6. IRS notices

Question 4

The primary authority for any tax position is the Internal Revenue Code. Other sources of tax law that factor into “substantial authority” include the following:

Answer 4

• Temporary and final Treasury Regulations
• Court cases
• Administrative pronouncements
• Tax treaties
• Congressional intent, as reflected in committee reports

Question 5

The three types of Treasury regulations are:

Answer 5

1. Legislative Regulations
2. Interpretive Regulations
3. Procedural Regulations

Question 6

A legislative regulation may be overturned if any of the following conflicts apply:

Answer 6

• It is outside the power delegated to the U.S. Treasury
• It conflicts with a specific statue
• It is deemed unreasonable or unconstitutional by the lower courts

Question 7

Proposed Regulations:

Answer 7

• Are open to commentary from the public
• Have a minimal practical effect
• Do not expire

Question 8

Temporary Regulations:

Answer 8

• Remain in effect for three years
• Provide immediate guidance to the public and IRS employees before publishing final regulations
• Are effective immediately upon publication in the Federal Register

Question 9

Final Regulations:

Answer 9

• Are issued when a regulation becomes an official Treasury decision
• Highest authority issued by the Treasury Department
• Final Regulations have the effect of law

Question 10

Technical advice memoranda are issued only on closed transactions and provide the interpretation of the proper application of:

Answer 10

Tax laws, tax treaties, regulations, revenue rulings, or other precedents.

Question 11

What is a PLR

Answer 11

Private Letter Ruling

• Is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s specific case. It is issued to communicate the tax consequences of a particular transaction before the transaction is completed or before the taxpayer’s return is filed.

Question 12

The minimum fee for a PLR?

Answer 12

$10,000 and up (per request)

Question 13

Information commonly published in IRS notices includes:

Answer 13

1. Weighted average interest rate updates
2. Inflation adjustment factors
3. Changes to IRS regulations
4. Tax provisions for public comments on changes to regulations, rulings, or procedures
5. Tax provisions related to presidentially declared disaster areas
6. Internal Revenue Bulletin items

Question 14

IRM

Answer 14

Internal Revenue Manual

• I the single official compilation of policies, delegated authorities, procedures, instructions, and guidelines relating to the organization functions, administration, and operations of the IRS. IRS employees primarily use it to guide them in all facets of operations

Question 15

Is the IRS bound to change its interpretation of the tax law due to a loss in court?

Answer 15

No, the only exception to the rule is if the ruling came from the U.S. Supreme Court

Question 16

The IRS has how many days to say whether it will comply with a FOIA request.

Answer 16

20 business days

Question 17

Taxpayer Bill of Rights (Points)

Answer 17

1. The right to Be Informed
2. The right to Quality Service
3. The right the Pay No More than the Correct Amount of Tax
4. The right to challenge the IRS’s Position and Be Heard
5. The right to appeal an IRS decision in an Independent Forum
6. The right to Finality
7. The right to privacy
8. The right to Confidentiality
9. The Right to retain representation
10. The right to a fair a just tax system

Question 18

The IRS has four main operating divisions. These are:

Answer 18

1. Large Business & Internation Division (LB&I): This division serves corporations, including S corporations, and partnerships, with assets over $10 million
2. Samm Business/SE Division (SB/SE): Serves small corporations and partnerships with assets less than $10 million, filers of gift, estate, excise, employment, and fiduciary returns, individuals filing an individual income tax return with accompanying Schedule C, E, F, and Form 2106
3. Wage and Investment Division: Serves individuals with wage and investment income only
4. Tax-exempt and Government Entities Division: Serves three distinct taxpayer segments: Employee plans, exempt organizations, and government entities

Question 19

TAS may be able to help a taxpayer who is experiencing a problem with the IRS and;

Answer 19

1. The problem with the IRS is causing financial difficulties for the taxpayer, his family, or his business
2. The taxpayer faces (or his business is facing) an immediate threat of adverse action
3. Te taxpayer has repeatedly tried to contact the IRS but no one has responded, or the IRS has not responded by the date promised