Chapter 5 Section 3: Federal, Legislative, and Judicial Processes; the IRS; and Taxpayer Penalties Flashcards Preview

CPA: REG > Chapter 5 Section 3: Federal, Legislative, and Judicial Processes; the IRS; and Taxpayer Penalties > Flashcards

Flashcards in Chapter 5 Section 3: Federal, Legislative, and Judicial Processes; the IRS; and Taxpayer Penalties Deck (31):
1

What is the federal legislative process? (8 steps)

1. Begin in the House, with the Ways and Means Committee
2. Bill is voted on and approved by the full House
3. Goes to Senate Finance Committee
4. Upon approval, the full Senate votes on it
5. Differences between House and Senate version are resolved by the Joint Conference Committee
6. Compromise Bill is approved by the House and Senate
7. President signs it into law or vetoes it
8. If vetoed, it can be overriden by 2/3 vote by House and Senate

2

What is the Discriminant Inventory Function System?

Selects returns that are the most likely to contain errors or yield much more tax revenue for audit

3

Who is more frequently subject to audits than most?

Individuals with gross income above $100,000
Self employed with significant income and deductions
Cash businesses
If deductions exceed the norm

4

What is the return immediately reviewed for?

Mathematical errors, signatures, socials

5

What if the return contains a mathematical error?

The taxpayer is sent a revised computation and brief explanation, with a bill or refund

6

What is the difference between a field audit and office audit?

Field is conducted by IRS rep at the taxpayer's office or home
Office is conducted by IRS agent in the IRS office or by correspondence

7

What does the taxpayer sign if they agree with the conclusion of the audit?

Form 870

8

What if the revenue agent can't settle an unresolved issue?

It goes to the appeals division.
The taxpayer will get a copy of the agent's report and 30 days to appeal administratively

9

What is a notice of deficiency?

The IRS sends it upon request or if an admin appeal is not requested. It gives the taxpayer 90 days to file an appeal with the US Tax Court

10

What does the taxpayer sign if they agree with the appeals division decision?

Form 870-AD

11

Who can the taxpayer take it to if they don't agree with the Appeals Division?

US Tax Court
US Court of Federal Claims
US District Court

12

Who usually has the burden of proof in tax litigation?
What is the standard?
What is the exception?

The party bringing the case
Preponderance of evidence, not beyond a reasonable doubt
It shifts to the IRS if the taxpayer has introduced credible evidence or has good books

13

What does the US Tax Court hear?
Is there a jury?
How many judges hear a case?

Only federal tax cases
No
One

14

Do you have to pay the disputed tax before going before the US Tax Court

No

15

What if you want to appeal the US Tax Court Decision?

It goes to one of the various US Courts of Appeals, based on the Court of Appeals with direct jurisdiction over the taxpayer

16

What does the US District Court hear?
Is there a jury?
How many judges hear a case?

Civil and criminal cases
Yes, if you want one
One judge

17

Do you have to pay the disputed tax before going before a US District Court?

Yes

18

What does the US Court of Federal Claims hear?
Is there a jury?
How many judges?

Claims for money damages against the US
No
16

19

How many judges hear a case in the US Courts of Appeals?
How are jurisdictions divided out?

Three
Geographically

20

What do you need to go before the Supreme Court?

Writ of Certiorari

21

What is the failure-to-file penalty?

5% per month

22

What is the failure-to-pay penalty?

1/2 of 1% per month

23

What is the best defense for a negligence penalty with regard to an understatement of tax?

Reasonable basis

24

What is the penalty for negligence with respect to an understatement of tax?

20%

25

What is the penalty for substantial understatement of tax?

20%

26

What is the civil penalty to fraud?

At least 75%

27

What is the standard for civil penalties in fraud cases?

Preponderance of the evidence

28

Define frivolous position

Patently improper

29

What is the reasonable basis standard?

At least 20% chance

30

What is the substantial authority standard?

Between 33% and 50%

31

What is the more likely than not standard?

Greater than 50%

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