REPRESENTATION - FORMS and TERMS

Question 1

VITA

Answer 1

Volunteer Income Tax Assistance

A program established by the IRS, but not part of the Tax Return Preparer definition.

Question 2

Fiduciary

Answer 2

A trustee.

Question 3

PTIN

Answer 3

Preparer Tax Identification Number. Required by people who prepare Tax Returns for compensation.

Question 4

ERO

Answer 4

Electronic Return Originator

The ERO must either have prepared the return OR collected it from the TP.

Unpaid preparers (like VITA or TCE) and Taxpayer Assistance Centers in IRS offices who e-file are also EROs.

Question 5

TCE

Answer 5

Tax Counseling for the Elderly

Question 6

Form 8453

Answer 6

U.S. Individual Income Tax Transmittal for an IRS e-file Return.

A copy needs to be kept

Question 7

Form 8453

Answer 7

U.S. Individual Income Tax Transmittal for an IRS e-file Return.

Used to mail certain paper documents that support data within a taxpayer’s e-file to the IRS.

Question 8

Form 8275

Answer 8

Disclosure Statement submitted by the TP to ensure the avoid certain penalties.

NOTE: Filing Form 8275 to disclose the following “misconducts” won’t avoid accuracy-related penalties for the TP.

1. Negligence
2. Disregard of Regulations
3. Substantial understatement of income on a tax shelter item
4. Substantial valuation misstatement under Ch. 1 of the IRC.
5. Substantial overstatement of pension liabilities
6. Substantial estate or gift tax valuation understatements

Question 9

Rev. Proc. 2008-14

Answer 9

Submitted by a TP to disclose items or positions that are NOT otherwise adequately disclosed on a Tax Return.

It is filed to AVOID the portions of the accuracy-related penalty due to disregard of rules or to a substantial understatement of income tax for non-shelter items it the return has a Reasonable Basis.

Question 10

Avoidance

Answer 10

Avoidance is NOT a criminal offense.

TPs have the right to reduce, avoid, or minimize their taxes by legitimate means.

Avoidance is not concealing, but shaping and pre-planning events to reduce or eliminate tax liability within the law.

Question 11

Evasion

Answer 11

Evasion involves some affirmative act to evade or defeat a tax, or payment of tax.

It includes deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.

Examples are:
1. Intentional understatement or omission of income

2. Claiming fictitious or improper deductions
3. False allocation of income
4. Improper claims, credits, or exemptions
5. Concealments of assets

Question 12

Negligence

Answer 12

Negligence is a failure to make a reasonable attempt to comply with the provisions of the tax code or a failure to exercise the ordinary and reasonable care that a reasonable person would exercise when completing a tax return.

Question 13

Fraud

Answer 13

Fraud is a willful attempt to evade or defeat a lawful tax.

Affirmative Acts Of Fraud are actions taken by the TP, Return Preparer, and/or Promoter to deceive or defraud.

Question 14

IRS Publication 552

Answer 14

Where the IRS posts information on record keeping for Individuals

Question 15

AFSP

Answer 15

Annual Filing Season Record

Beginning in 2016, the IRS will not discuss a tax return with an unenrolled preparer for any year the preparer does not receive an IRS Annual Filing Season Record of Completion.

Question 16

CP 2000

Answer 16

The IRS sends form CP 2000 to inform the recipient of changes the IRS is proposing to their tax return because information they reported on it doesn’t match what was reported to service by their employers, banks, and other payers.

The IRS sends a CP 2000 to provide detailed information about those differences, the changes proposed, and what to do if they agree or disagree with the proposal.

The CP 2000 reflects any corrections the IRS made to your original return, and considers those changes in a recalculation of the tax due. It is possible that these changes result in a decrease in tax due, but usually an increase is the result.

NOTE:
The CP 2000 is only a proposal that offers you an opportunity to disagree, partially agree, or agree with the proposed changes.

It’s important that you RESPOND to the CP 2000 by the due date shown on the notice. If you don’t, the IRS assumes the proposed changes are correct and will continue processing the proposal ultimately to an assessment.

EXTENSIONS
If you can’t respond by the due date on the notice because you need more time to research your records, you can call the IRS to request an extension. Generally, they will allow an extension 30 days beyond the response date shown on the notice. It’s important to remember that additional interest and any applicable penalties will accrue on the account during the period of the extension if the tax increase is correct.

Question 17

Notice 609 to the TP from the IRS

Answer 17

A Privacy Act Notice

Can be received along with a CP 2000.

Question 18

Publication 5 to the TP from the IRS

Answer 18

Details your Appeal Rights and How to Prepare a Protest if You Don’t Agree

Can be received along with a CP 2000.

Question 19

Publication 1 to the TP from the IRS

Answer 19

Details your Rights as a Taxpayer

Can be received along with a CP 2000.

Question 20

Publication 594 to the TP from the IRS

Answer 20

Details what You Should Know About The IRS Collection Process

Can be received along with a CP 2000.

Question 21

Deficiency Procedures

Answer 21

Deficiency Procedures are the required steps of notification when the IRS believes a deficiency is owed. If the taxpayer responds to the notices sent during this time, they may be able to appeal the proposed assessment of penalties prior to the penalties actually being assessed.

Question 22

IRS Examination Officer

Answer 22

An “IRS Examination Officer” may conduct correspondence examinations by MAIL.

Question 23

Internal Revenue Agent

Answer 23

A FIELD examination is one conducted by an “Internal Revenue Agent”, usually at the taxpayer’s place of business.

Question 24

Form 2848

Answer 24

Power of Attorney to allow someone to represent the TP in front of the IRS.

NOTE:
The filing of a new Form 2848 will revoke or terminate all prior powers of attorney the taxpayer for the same tax matters and years listed therein. If there are any existing powers of attorney that the taxpayer does not want to revoke, he must check the box to not revoke a prior power of attorney on Form 2848 and attach a copy of each power of attorney.

Question 25

Form 8821

Answer 25

Filing FORM 8821 will authorize an individual to receive a taxpayer’s confidential tax information BUT does NOT permit that authorized person to advocate on the taxpayer’s behalf.

Question 26

Return Period Defined:

Answer 26

The RETURN PERIOD, as defined by 26 U.S. Code § 6060:

For purposes of subsection (a), the term “return period” means the 12-month period beginning on July 1 of each year. So a return period BEGINS on July 1 and ENDS on June 30.

Question 27

Form 843

Answer 27

A TP submits Form 843 if the TP believes that the IRS assessed interest with respect to a period during which interest should have been suspended.

At the top of the form write “Section 6404(g) Notification” and submit the form with the IRS Service Center where the Return was filed.

Question 28

TAS

Answer 28

Taxpayer Advocate Service

NOTE:
A taxpayer can appeal a decision of the IRS to IRS Appeals and a taxpayer can request assistance from the TAXPAYER ADVOCATE SERVICE if the IRS has failed to timely act on a filed document and for other assistance

LEGAL RECOURSE:
If the IRS does not act on his claim within six months from the date he filed it, he can then file suit for a refund.

Question 29

CE (Continuing Education) Rules:

Answer 29

A minimum of 16 HOURS of continuing education credit, including 2 HOURS of ethics or professional conduct, must be completed during EACH enrollment year of an enrollment cycle.

Question 30

CAF Number

Answer 30

Centralized Authorization File (CAF) System is the computer file containing information regarding the authority of individuals appointed under powers of attorney or persons designated under the tax information authorization system.

A CAF number is assigned to a tax practitioner when a Form 2848 or Form 8821 is filed.

This system gives IRS personnel quicker access to authorization information.

Question 31

Section 6713

Answer 31

Section 6713 imposes a civil penalty of $250 on any Tax Preparer who discloses any information furnished for the preparation of any Tax Return, or uses any client information for purpose other than to prepare, or assist in preparing a Tax Return.

Keep it CONFIDENTIAL!

Question 32

Appeals Office

Answer 32

The APPEALS OFFICE is the ONLY level of appeal within the IRS. After an appeals conference, the TPs next recourse is to go to court.

Question 33

§1.6662-4(d)(3)(iii)

Answer 33

The Section of the IRC
discussing the Substantial Understatement of income tax

A §6662 accuracy-related penalty of 20% of unpaid tax may be due if the tax is underpaid due to:

Negligence or disregard of the rules or regulations, or
Substantial understatement of income tax.
The penalty is increased to 40% for a gross valuation misstatement. See §6662(h) for more information.

Question 34

EFIN

Answer 34

Electronic Filing Identification Number

Question 35

ERO

Answer 35

Electronic Return Originator

Question 36

Intermediate Service Provider

Answer 36

Assists with processing between ERO and transmitter

Question 37

Transmitter

Answer 37

Sends the electronic return data directly to the IRS

Question 38

Online Provider

Answer 38

Allows the TP to self-prepare returns by entering data directly on commercially available software.

Question 39

Reporting Agent

Answer 39

Originates the electronic submission of certain returns for its clients and/or transmits the returns to the IRS. A Reporting Agent must be an accounting service, franchiser, bank, or other approved entity.

Question 40

MeF

Answer 40

Modernized E-File - it now accepts e-files year round.

Even after October 15.

An E-Filed return is not considered files until the IRS acknowledges acceptance of the electronic portion of the Tax Return for processing.

The IRS ONLY accepts individual income tax returns electronically if the TP signs the return using a PIN (Personal ID Number)

Question 41

Form 8878

Answer 41

the IRS e-file Signature Authorization for Form 4868 (filing extension to 10/15) or Form 2350 (to help expats qualify for Foreign Earned Income Exclusion).

Question 42

CDP Hearing

Answer 42

Collection Due Process Hearing

Question 43

Form 433

Answer 43

Collection Information Statement - used to prove economic hardship when submitting an Offer in Compromise based on:

• Doubt as to collectability - there is doubt that the taxpayer could ever pay the full amount of the tax owed. In these cases, the total amount owed must be greater than the sum of the taxpayer’s assets and future income, or
• Promote effective tax administration - there is no doubt that the assessed tax is correct and no doubt that the amount owed could be collected, but the taxpayer has an economic hardship or other special circumstances which may allow the IRS to accept less than the total balance due.

NOTE:
When submitting an OIC based on doubt as to collectability or effective tax administration, taxpayers must file Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B (OIC), Collection Information Statement for Businesses.

A taxpayer submitting an OIC based on doubt as to liability must file Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).

So an offer in compromise based on doubt as to liability does not require filing Form 433, Collection Information Statement.

Question 44

Doubt as to Liability

Answer 44

Doubt as to liability exists when there is a genuine dispute as to the existence or amount of the correct tax liability under the law. Doubt as to liability does not exist where the liability has been established by a final court decision or judgment concerning the existence or amount of the tax liability.

Question 45

Grounds for Compromise in light of an OIC:

Answer 45

(1) Doubt as to liability. Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax liability under the law. Doubt as to liability does not exist where the liability has been established by a final court decision or judgment concerning the existence or amount of the liability.
(2) Doubt as to collectability. Doubt as to collectability exists in any case where the taxpayer’s assets and income are less than the full amount of the liability.
(3) Promote effective tax administration.
(i) A compromise may be entered into to promote effective tax administration when the Secretary determines that, although collection in full could be achieved, collection of the full liability would cause the taxpayer economic hardship within the meaning of § 301.6343-1.

Question 46

Form 4810

Answer 46

Form 4810 is used to request a prompt assessment after the original tax return is filed, but no later than three years from the original filing.

If accepted by the IRS, the tax shall be assessed, and any proceeding in court without assessment for the collection of such tax shall be begun, within 18 MONTHS after written request by the executor, administrator, or other fiduciary representing the estate of such decedent, or by the corporation.

Form 4810 is prepared by a fiduciary representing a dissolving corporation or a decedent’s estate to request a prompt assessment of tax. This is done to ensure back taxes are identified in a timely manner, which minimizes the risk of making distributions to shareholders or beneficiaries.

Question 47

Levy

Answer 47

A levy is a legal seizure of a taxpayer’s property to satisfy a tax debt.

Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.

The levy will be continuous until the IRS receives full payment of the tax debt, other arrangements are made to satisfy the debt, or in most instances, the time-period (usually 10 years) for collecting the tax expires.

Certain necessary clothing items (does not include mink coats or other luxury items) are not subject to levy.

Question 48

Form 3949A

Answer 48

Use Form 3949A to report to the IRS fraudulent or abusive returns, including those with questionable Forms W-2.

NOTE:
You should be on the lookout for Forms W-2, W-2G, 1099-R and other financial documents which appear suspicious, altered, forged, fraudulent, handwritten or typed. An alteration includes any pen-and-ink change. You must never alter the information after the taxpayer has provided a form to you.

Question 49

The CAF allows IRS employees to do the following (3 things)

Answer 49

1) Determine whether a recognized representative or appointee is authorized to discuss specific confidential tax information;
2) Determine the extent to which a recognized representative or appointee has been authorized to represent a taxpayer; and
3) Send copies of notices and other Internal Revenue Service communications to the person (individual or other entity) designated on the form.

Question 50

SFR

Answer 50

Substitute For Return

If you don’t file a tax return that you were supposed to, the IRS can file a return for you, called a substitute for return (SFR).

The IRS prepares the return based on information it has from your employers, banks, and other payers.

An SFR has a filing status of SINGLE or MARRIED FILING SEPARATELY.