Administration of Income Tax Flashcards
(22 cards)
What is the primary statutory source of federal tax law?
The Internal Revenue Code (IRC), enacted by Congress
List the administrative sources of tax law in order of authority.
Treasury Regulations, Revenue Rulings, Revenue Procedures, Private Letter Rulings (PLRs), Determination Letters, Technical Advice Memorandums (TAMs)
What are Treasury Regulations?
Official interpretations of the IRC by the Treasury Department
What is a Revenue Ruling?
An IRS interpretation applied to specific factual situations, providing guidance for all taxpayers
What is a Revenue Procedure?
An IRS statement on internal practices and procedures
What is a Private Letter Ruling (PLR)?
Guidance issued to an individual taxpayer about a proposed transaction; binding only for that taxpayer
What is a Determination Letter?
Issued for completed transactions; binding only for the taxpayer requesting it
What is a Technical Advice Memorandum (TAM)?
Guidance for IRS officials in specific cases, usually during audits
What are judicial sources of tax law?
Federal court decisions interpreting tax law, providing precedent and clarification when statutory or administrative guidance is unclear
What is the general statute of limitations for IRS audits?
Typically 3 years from the date the return was filed, unless fraud or substantial understatement is involved
How is interest on unpaid taxes calculated?
Federal short-term rate plus 3%, compounded daily
What is the penalty for failure to file your tax return?
5% of unpaid tax per month, up to a maximum; for months both penalties apply, the failure to file penalty is reduced by the failure to pay penalty
What is the penalty for failure to pay your tax?
0.5% of unpaid tax per month, up to a maximum of 25%.
How do the failure to file and failure to pay penalties interact?
For months both apply, the failure to file penalty is reduced by the failure to pay penalty
What is the minimum failure to file penalty if your 2025 return is over 60 days late?
The smaller of $525 or 100% of the tax required.
What is the minimum failure to file penalty if your 2024 return is over 60 days late?
The smaller of $510 or 100% of the tax required
Give an example calculation for failure to file and failure to pay penalties.
If you owe $10,000 and file your return 2 months late, failure to file penalty is $1,000 (5% × 2 × $10,000); failure to pay penalty is $100 (0.5% × 2 × $10,000); for those two months, the failure to file penalty is reduced by the failure to pay penalty
Who can represent a client before the IRS?
Attorney, CPA, or Enrolled Agent
Can a CFP® professional represent clients during an IRS audit?
No, CFP® professionals may NOT represent clients during an IRS audit
What is the Small Case Division of Tax Court?
Handles disputes of $50,000 or less; no right of appeal
What is the role of District Courts in tax cases?
Bound by decisions of its Circuit Court of Appeals and the Supreme Court.
What does the Court of Federal Claims handle?
Claims for money damages against the U.S., including tax refunds.
