Chapter 12

Federal agency that is responsible for administering and enforcing the internal revenue laws of the United States. The IRS is a bureau of the ... of the ....

The chief operating and chief executive officer of the IRS. Holds the ultimate responsibility for overall planning and for directing, coordinating, and controlling IRS policies and programs.

A division of the Department of the Treasury, the federal agency that is charged with the collection of federal taxes and the implementation of other responsibilities that are conveyed by the Internal Revenue Code.

An operating division of the IRS serving Form 1040 filers with only wage and investment income.

An operating division of the IRS serving large C corporations, S corporations, partnerships, and certain high-wealth individuals and handling international tax compliance efforts.

An operating division of the IRS serving self-employed taxpayers and small businesses.

An operating division of the IRS serving employee pension plans, exempt organizations, and governmental entities.

The chief legal officer of the IRS. Responsible for making litigation and acquiesce/nonacquiesce decisions and for developing the agency's interpretive materials, including rulings and memoranda.

An independent organization within the IRS whose job is to help taxpayers resolve problems with the IRS and to ensure that taxpayers are treated fairly and know and understand their rights.

Leads the Taxpayer Advocate Service (TAS) as the voice of the taxpayer before the IRS and Congress. The advocate reports directly to the commissioner and works through a system of approximately 2,000 local taxpayer advocates.

A method for a taxpayer to request to engage an IRS taxpayer advocate to delay the implementation of an IRS action, such as a collection or seizure activity, if it appears the taxpayer has received less than fair treatment through the agency's administrative procedures.

A group of at least nine individuals that acts as the board of directors of the IRS. They are responsible for overseeing the agency's operational and internal control functions, approving mission plans and strategies, reviewing the agency's budget, and ensuring the proper treatment of taxpayers.

A program that checks every return for mathematical errors, recomputes the tax due after properly applying the numbers that are included in the return, and assesses any additional tax that is due. The IRS need not send the taxpayer a formal notice of deficiency (i.e., a 90-day letter) before the additional tax is assessed.

A means by which, on the basis of probably return to the IRS in terms of collected delinquent tax liabilities, the IRS selects tax returns for examination.

A means by which the IRS develops its discriminant function formulae. The taxpayer's return is selected randomly for an extensive review, during which the government challenges every item of income, credit, deduction, and exclusion. The results of such reviews are used (other than to adjust the examined taxpayer's liability) to delineate criteria by which other taxpayers' returns are selected for examination.

An audit of one's tax return that is conducted largely by telephone or mail. Usually involves a request for substantiation or explanation of one or more items on a tax return, such as filing status, exemptions, and itemized deductions for medical expenses, interest, taxes paid, charitable contributions, or miscellaneous deductions.

An audit of one's tax return that is conducted at a local IRS office. These audits are typically more involved than correspondence audits and often deal with multiple issues that will require some analysis and exercise of judgment by the auditor.

An audit of the taxpayer's tax return that is conducted on the taxpayer's premise. These audits are usually more involved and comprehensive than correspondence or office audits.

A report prepared upon the completion of the examination of a tax return to explain to the taxpayer the sources of any adjustments to the reported tax liability. If the taxpayer agrees to this recomputation, the associated tax, penalty, and interest become due. Lacking such agreement, other aspects of the appeals process are undertaken.

A notice from the IRS formally notifying the taxpayer of the results of an examination of the return and requesting that the taxpayer agree to the proposed modifications to the tax liability. A taxpayer's failure to respond to the letter triggers the statutory notice of a tax deficiency, that is, the 90-day letter demanding the payment of the tax or a petition to the Tax Court.

A statutory notice from the IRS that the taxpayer has failed to pay an assessed tax. An issuance of such a letter usually indicates that the taxpayer has exhausted all of their appeal rights within the IRS and that the next forum for review will be a trial-level court. The taxpayer has 90 days to petition the Tax Court to be relieved of the deficiency assessment. If no such petition is filed, the IRS is empowered to collect the assessed tax.

The internal group of the IRS that has the greatest authority to come to a compromise solution with a taxpayer concerning a disputed tax liability. Can consider the "hazards of litigation" in its deliberations. Failure to reach an agreement at this level of the IRS means that the only subsequent appeal by either party to the dispute must be before a court of law.

The maximum amount of time within which one or both parties in the taxing process must perform an act, such as file a return, pay a tax, or examine a return. Various time limits apply relative to the Internal Revenue Code, although both parties can, by mutual agreement, extend one or more of these time limitations.

The process in which the IRS fixes the amount of a taxpayer's tax liability. Although the U.S. tax system exhibits some degree of self-assessment, the IRS has the ultimate authority to assess the liability of every taxpayer.

The process by which the IRS extracts an assessed tax liability from a taxpayer. Usually takes the form of the receipt of a check or other draft from the taxpayer but can include liens or other garnishments of taxpayer assets.

A form with which the taxpayer and the IRS finalize their computations of a disputed tax liability.

The means by which the govenrment offers to reduce the amount of an assessed tax, usually because of some doubt as to the collectability of the tax. A legally enforceable promise that cannot be rescinded, an offer in compromise relates to the entire liability of the taxpayer, and it conclusively settles all issues for which an agreement can be made.

I.R.C. §7430(g) allows taxpayers to make qualified offers to the IRS to settle the amount of the taxpayer's liability. If the IRS pursues a case to court and the amount awarded is equal to or less than the qualified offer, the taxpayer is entitled to receive litigation costs, including accounting and attorney fees incurred after the date of the offer.

Signed into law in 1996, it guarantees various rights to representation before the IRS, a recording of any proceedings, and an IRS explanation of its position relative to the pertinent disagreement. Specifically, the taxpayer has a right to know why the IRS is requesting information, exactly how the IRS will use the information it receives, and what might happen if the taxpayer does not submit the requested information.

I.R.C. §7525(a) provides authorized practitioners such as CPAs and enrolled agents a limited client confidentiality privilege. While the code provides that, with resect to tax advice, the same common law protections of confidentiality which apply to communications between a taxpayer and an attorney apply to communications between a taxpayer and an accountant, there are several exceptions.