Table of Contents. About This Book How To Use This Book Foreword Acknowledgments Preface

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1 Table of Contents About This Book How To Use This Book Foreword Acknowledgments Preface vii ix xi xiii xv Chapter 1 Initial Client Engagement 1 Topical Index Nature of Federal Tax Law Role of the Internal Revenue Service (a) Specific Functions of the Internal Revenue Service Organization of the Internal Revenue Service (a) Examination Process (b) Collection Process (c) The Criminal Investigation Division (CID) (d) Appeals Branch (e) Area Counsel Where Do Tax Clients Come From? The Initial Consultation Beginning the Engagement Form Rules of Practice 25 Practice Points 28 Exhibit 1-1 IRS Organization Structure 10 Exhibit 1-2 Pre-Payment Appeal Process Examination 13 Exhibit 1-3 Post-Payment Appeal Process Examination/Claims 15 Exhibit 1-4 The Collection Process 16 Exhibit 1-5 The Criminal Process 17 Exhibit 1-6 Filing Form Exhibit 1-7 Practitioner Hotlines 34 Exhibit 1-8 IRS E Services 35 Exhibit 1-9 Initial Client Engagement Checklist 36 Exhibit 1-10 Ten Ways To Identifying The Problem Client 37 Exhibit 1-11 Initial Client Representation Letter 38 xvii

2 xviii Dealing with the IRS Exhibit 1-12 Retainer Agreement 38 Exhibit 1-13 Conflict Advisory to Client 40 Exhibit 1-14 Letter to IRS Advising of Representation 41 Exhibit 1-15 Representation Memorandum To File 41 Exhibit 1-16 Enforcement Activity by IRS Office of Professional Responsibility 43 Exhibit 1-17 IRS Employees 44 Exhibit 1-18 Circular 230 Procedure 44 : Circular 230 Form 56 Notice Concerning Fiduciary Relationship Form 2848, Power of Attorney and Declaration of Representative Form 4506 Request for Copy of Tax Return Form 4506-T Request for Transcript of Tax Return Form 8821 Tax Information Authorization Publication 1 Your Rights as a Taxpayer Chapter 2 Examination of Returns 47 Topical Index Audit Basics Pre-Audit Action by Practitioner Conducting the Audit Examination Closing the Audit Examination (a) Statute of Limitations Extension Issues Jeopardy and Termination Assessments Coordinated Examination Program (CEP) Partnership Audit Problems 75 Practice Points 77 Exhibit 2-1 Methods of IRS Audit Selection 55 Exhibit 2-2 Chance of Audit by Taxpayer Category 56 Exhibit 2-3 Typical DIF Factors Used in Return Selection 59 Exhibit 2-4 Examination of Returns Checklist 61 Exhibit 2-5 Types of IRS Agents 61 Exhibit 2-6 How To Recognize an Eggshell Audit 62 Exhibit 2-7 Initial Examination Conference Checklist 64 Exhibit 2-8 IRS Settlement Forms 68 Exhibit 2-9 Ten Negotiating Techniques that Work and Ten that Don t 69 Exhibit 2-10 Settling Cases at the Examination Stage 69 Exhibit 2-11 Closing the Examination Checklist 71 Exhibit 2-12 IRS Audit Notice Corporation 81 Exhibit 2-13 IRS Audit Notice Individual 82

3 Table of Contents xix Exhibit 2-14 Thirty-Day Notice 84 Exhibit 2-15 Letter 3164 Notice of Third-Party Contact 87 Exhibit 2-16 IRS Market Segment Papers 87 Exhibit 2-17 IRS Industry Specialization Papers 89 Exhibit 2-18 Notice of Tax Due on Federal Tax Return Individual 92 Exhibit 2-19 Notice of Tax Due on Federal Tax Return Business 92 Audit Technique Guides (ATGs) Automated Under Reporter Inventory Strategy Database (AUR-ISD) Form 870 Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment Form 1902-B Report of Individual Income Tax Form 4089 Notice of Deficiency Waiver Form 4549 Income Tax Examination Changes Form 4549-CG Income Tax Examination Changes Form 4549-E Income Tax Discrepancy Adjustments Form 4564 Information Document Request Form 5564 Notice of Deficiency IRS Telephone Assistance Letter 915 Cover Letter for Examination Report Letter 937 Cover Letter Response to Power of Attorney Letter 2205-A Notice of Return Selected for Examination Letter 3254 (DO) Confirmation of Appointment to Begin Examination Process Publication 3498 The Examination Process Chapter 3 Statute of Limitations 95 Topical Index The Statutes of Limitations in Tax Matters Statute of Limitations on Assessment (a) Extensions of the Statute of Limitations on Assessment Statute of Limitations on Collection (a) Effect of Offers in Compromise, Installment Agreements, and Miscellaneous Actions Statute of Limitations on Claims for Refund Statute of Limitations on Assessment of Trust Fund Liability: Special Rules for Suspension of the Statute of Limitations Mitigation Transferee Liability Limitations Period for Criminal Prosecution 116 Practice Points 116 Exhibit 3-1 Major Statutes of Limitation 100

4 xx Dealing with the IRS Exhibit 3-2 Statute of Limitations Checklist 123 Exhibit 3-3 Suspension of Statute of Limitation Due To Client Action 124 Exhibit 3-4 Letter to Client To Extend Assessment Statute in Criminal Case 125 Exhibit 3-5 Letter to Client Regarding Trust Fund Penalty Extension 126 Exhibit 3-6 Letter to Client To Extend Assessment Statute in Civil Case 127 Exhibit 3-7 Letter to Client Confirming No Extension of the Assessment Statute 127 Exhibit 3-8 Circumstances That Evidence Fraudulent Transfer 128 Exhibit 3-9 Things That Affect the Assessment Statute of Limitations 128 Exhibit 3-10 How To Determine the Collection Statute of Limitations Expiration Date (CSED) 129 Form 843 Claim for Refund and Request for Abatement Form 872 Consent To Extend the Time To Assess Tax Form 872-A Special Consent To Extend the Time to Assess Tax Form 872-T Notice of Termination of Special Consent To Extend the Time To Assess Tax Form 900 Tax Collection Waiver Form 1040X Amended U.S. Individual Income Tax Return Form 2750 Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty Letter 907(DO) IRS Request for Extension Publication 1035 Extending the Tax Assessment Period Chapter 4 Administrative Summons 131 Topical Index Nature of Summons Summons Enforcement Compliance Considerations Defenses to Summons and Right To Quash 143 Practice Points 146 Exhibit 4-1 Administrative Summons Checklist 149 Exhibit 4-2 Practitioner Objections to Summons 150 Exhibit 4-3 Request for Third-Party Contacts 151 Exhibit 4-4 Petition to Quash Summons 152 Employee Plans Continuing Professional Education (CPE) Technical Instruction Program for Fiscal Year 2003 Ch 12(c) Summons Procedures Form 2039 Client Summons Examination Division Form 2039 Criminal Division Summons

5 Form 2039 Summons for Handwriting Exemplar Form 4564 Information Document Request Form 6540 Handwriting Exemplars Form 6637 Summons Collection Information Statement Form 6638 Summons for Income Form 6639 Financial Records Summons Form 6863 Request for Expenses Incident to Summons Form 6882 IDRS-Master File Information Request Letter 3164: IRS Third Party Contact Letter Table of Contents xxi Chapter 5 Appeals Branch 155 Topical Index Nature of Appeals Branch Protest Filing The Appeals Hearing Settlement of Cases in Appeals (a) Alternative Dispute Resolution (b) Collection Due Process Hearings 172 Practice Points 176 Exhibit 5-1 Cases Handled By Appeals Office 159 Exhibit 5-2 Advantages/Disadvantages of Appeals Hearing 160 Exhibit 5-3 When Not To File a Protest to Appeals 165 Exhibit 5-4 ADR in Appeals 182 Exhibit 5-5 Appeals Branch Checklist 183 Exhibit 5-6 Protest: Income Tax 184 Exhibit 5-7 Protest: 6672 Trust Fund Recovery Penalty 185 Exhibit 5-8 Appeals Protest Transmittal Letter 188 Appeals Acknowledgment and Notice of Appeals Hearing Appeals Office Notification to Taxpayer Form 870-AD Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment Form 906 Closing Agreement on Final Determination Covering Specific Matters Form 906-c Closing Agreement on Final Determination Covering Specific Matters Form 9423 Collection Appeal Request Form 12153: Request for Post-Lien/Pre-Levy Collection Due Process Hearing Form Request for Appeals Review Form c Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy

6 xxii Dealing with the IRS IRS Letter 913 (RO): Appeals Approval of Settlement IRS Response to Collection Due Process Hearing Request IRS Thirty Day Letter Letter to Client re Collection Due Process Hearing Model Arbitration Agreement Notice of Determination Concerning Collection Action(s) Under Section 6320 and-or 6330 Publication 5 Your Appeal Rights Publication 4167 Introduction to Alternative Dispute Resolution Request for Collection Due Process Hearing Chapter 6 Collection Branch 189 Topical Index Nature of Collection Service Center Collection Activity ACS District Office Notices and Forms Filing Tax Liens Tax Levies The Taxpayer s Advocate Service Offers in Compromise (a) Effect of Offer (b) Acceptance or Rejection of the Offer (c) How Much To Offer? (d) So, Should You File? (e) Collateral Agreements and Post Submission Procedures Bankruptcy Principal Residence Re-Audits Installment Agreements Actions To Enjoin IRS Employment Tax Assessments Innocent Spouse Section Judicial Review of Collection Action 254 Practice Points 258 Exhibit 6-1 Getting the Offer in Compromise Accepted Checklist 228 Exhibit 6-2 Applying for Innocent Spouse Relief Checklist 245 Exhibit 6-3 Collection Due Process Hearing Requests 254 Exhibit 6-4 Collection Branch Checklist 270 Exhibit 6-5 The Collection Process 271

7 Table of Contents xxiii Exhibit 6-6 FAQs for New Offer in Compromise Rules 272 Exhibit 6-7 Offer in Compromise Response from IRS 276 Exhibit 6-8 Application for Certificate of Subordination 277 Exhibit 6-9 Application for Certificate of Discharge 279 Exhibit 6-10 Installment Agreements Available 281 Exhibit 6-11 FAQs for Married Taxpayers 282 Exhibit 6-12 How To Pay Taxes Electronically 282 Form CVL PEN Overpaid Taxes Applied to Other Taxes You Owe Form 433-A Collection Information Statement for Wage Earners and Self- Employed Individuals Form 433-B Collection Information Statement for Businesses Form 433-D Installment Agreement Form 433-F Collection Information Statement (Short Form) Form 656 Offer in Compromise Form 656-L Offer in Compromise (Doubt as to Liability) Form 668(W) Notice of Levy on Wages, Salary, and Other Income Form 668(Y) Notice of Federal Tax Lien Form 668-A(c) Notice of Levy Form 668-D Release of Levy/Release of Property from Levy Form 668-Z Release of Federal Tax Lien Form 669-A Certificate of Discharge of Property Form 669-D Certificate of Subordination of Federal Tax Lien Form 911 Request for Taxpayer Advocate Service Assistance Form 2751 Proposed Assessment of Trust Fund Recovery Penalty Form 4180 IRS Trust Fund Recovery Penalty Interview Form Form 8857 Request for Innocent Spouse Relief Form 8919 Uncollected Social Security and Medicare Tax on Wages Form Request for a Collection Due Process Hearing Form Statement of Disagreement Letter 726 Notice of Amount Due on Tax Account Letter 1058 Final Notice of Intent To Levy and Notice of Your Right to a Hearing Letter 1058 Notice of Intent to Levy and Right to a Hearing Letter 1153 (DO) Notice of Proposed Trust Fund Recovery Penalty Letter 2850 Approval of Request To Pay Taxes in Installments Letter 3172 Notice of Tax Lien Filing and Your Right to Hearing Letter 3283(DO) IRS Innocent Spouse Determination Letter Letter Notice of Determination Concerning Collection Actions Letter Taxpayer Advocate Service Acknowledgment Letter National Standards Food, Clothing and Other Items Notice 746 Information About Your Notice, Penalty and Interest

8 xxiv Dealing with the IRS Notice CP 89 Annual Installment Agreement Statement Notice CP 91 Final Notice Before Levy on Social Security Benefits Notice CP-504 Urgent Collection Notice Notice CP-523 Notice of Intent To Levy Notice of Collection Appeals Program Online Payment Agreement Option (OPA) Private Debt Collection Program Publication 594 The IRS Collection Process Publication 783 How To Apply for Certificate of Discharge of Property from Tax Lien Publication 784 How To Prepare Application for Certificate of Subordination of Federal Tax Lien Publication 1450 How To Request Certificate of Release of Federal Tax Lien Publication 1660 Collection Appeal Rights Publication 1854 How To Prepare a Collection Information Statement (433-A) Publication 4165 Introduction to Collection Due Process Hearings Chapter 7 Criminal Tax 283 Topical Index Nature of Criminal Investigation Division (a) Voluntary Disclosure Specific Procedure Grand Jury Investigations Alternative IRS Investigation Dealing with Special Agents Crimes Investigated by the IRS Negotiating the Plea Agreement Hearings in District Court for Criminal Violation Plea Hearing Sentencing Hearing Defenses to Criminal Violations SEP 307 Practice Points 307 Exhibit 7-1 Voluntary Disclosure Checklist 290 Exhibit 7-2 The Criminal Process 291 Exhibit 7-3 Ten Badges of Criminal Tax Fraud 296 Exhibit 7-4 Title 26 Criminal Penalties and Fines 300 Exhibit 7-5 Sentencing Options by Zone 305 Exhibit 7-6 Criminal Tax Checklist 317 Exhibit 7-7 Criminal Tax Appeals Checklist 318 Exhibit 7-8 Rule 11 Plea Hearing Checklist 319 Exhibit 7-9 Sentencing Hearing Checklist 319 Exhibit 7-10 Kovel-CPA Agreement 320

9 Table of Contents xxv Exhibit 7-11 Federal Sentencing Guidelines Offenses Involving Taxation 321 Exhibit 7-12 Request for Conference at U.S. Department of Justice 322 Exhibit 7-13 Memo to Client Regarding Rule 11 Proceeding 323 Exhibit 7-14 Memorandum to Client Regarding Sentencing Hearing 326 Exhibit 7-15 Defense Memorandum 327 Exhibit 7-16 Request for Conference at U.S. Attorney s Office 330 Exhibit 7-17 Contents of Special Agent s Report 331 Exhibit 7-18 Request for Conference at District Counsel 332 Exhibit 7-19 Application for Permission To Enter Plea of Guilty 332 Exhibit 7-20 Indications of Consideration of a Criminal Record 339 Exhibit 7-21 Criminal Division Focus 340 AUSA Letter to Judge Regarding Allocution Questions District Court Order of Release District Court Standing Order District Court Waiver of Indictment Explanation of the Pre-Sentence Report Federal Criminal Guidelines Sentencing Table Federal Criminal Guidelines Worksheets Form 211 Application for Award for Original Information Form 3949A Information Referral Plea Agreement Probation Report and Presentence Investigation Report Referral Report for Potential Criminal Fraud Cases Chapter 8 Tax Court Practice 341 Topical Index Nature of Tax Court Admission to Practice Petition Filing Trial Practice Small Case Procedure Motion Practice Other Areas of Tax Court Jurisdiction Burden of Proof Claims for Litigation and Administrative Costs Appeals 371 Practice Points 371 Exhibit 8-1 Advantages/Disadvantages of U.S. Tax Court 347 Exhibit 8-2 Cases Only 349 Exhibit 8-3 Emergency Petition U.S. Tax Court 351

10 xxvi Dealing with the IRS Exhibit 8-4 Format for Briefs Tax Court (Rule 151) 357 Exhibit 8-5 Tax Forum Comparison 377 Exhibit 8-6 Selecting the Best Tax Forum 378 Exhibit 8-7 U.S. Tax Court Checklist 379 Exhibit 8-8 Entry of Appearance 380 Exhibit 8-9 Tax Court Petition 380 Exhibit 8-10 Settlement Agreement and Related Documents 382 Exhibit 8-11 Request for Production of Documents 386 Exhibit 8-12 Tax Court Cities 387 Exhibit 8-13 Answer of Respondent 388 Exhibit 8-14 Notice Setting Case for Trial 390 Exhibit 8-15 Standing Pre-Trial Order 391 Exhibit 8-16 Trial Memorandum 393 Form 5601 Statutory Notice Letter 3219 (SC-CG) Notice of Deficiency Notice of Receipt of Petition Notice Setting Case for Trial Tax Court Application for Order to Take Depositions Form 15 Tax Court Attorney Admission Form 18 Tax Court Decision Document Tax Court Entry of Appearance Form 7 Tax Court Petition for Administrative Costs Sample Tax Court Petition Kit Tax Court Request for Place of Trial Tax Court Rule 23 Form and Style of Papers Filed in Court Tax Court Subpoena Form 14 Trial Memorandum Sample United States Tax Court Fees and Charges United States Tax Court Telephone Numbers Chapter 9 Claims Practice 395 Topical Index Claims Basics Statute of Limitations The Full/Divisible Payment Rules IRS Claims Procedure Resort to Courts Choice of Judicial Forum Claim Look-Alikes Tax Payments 410

11 Table of Contents xxvii Practice Points 410 Exhibit 9-1 Claims Procedure 398 Exhibit 9-2 Suspension of Claims Statute of Limitations for Disability Under Section 6511(h) Checklist 401 Exhibit 9-3 Claim Elements Under the Informal Claims Doctrine 403 Exhibit 9-4 Claims Checklist 415 Exhibit 9-5 Thirty Day Notice 416 Exhibit 9-6 Memorandum in Support of Claim for Refund 418 Exhibit 9-7 Notice of Claim Disallowance 420 Form 1040X Amended US Individual Tax Return Form 843 Claim for Refund and Request for Abatement Form 870-AD Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency Form 1045 Application for Tentative Refund Form 1120-X Amended US Corporate Income Tax Return Form 1139 Corporation Application for Tentative Refund Form 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer Form 2297 Waiver of Statutory Notification of Claim Disallowance Chapter 10 Obtaining Information and Assistance from the IRS 423 Topical Index Obtaining Background Information Filing FOIA Requests Obtaining IRS Information Online Resolving Taxpayer Problems with the IRS IRS Publications Local IRS Offices Obtaining Private Letter Rulings and Determination Letters Tax and Legal Websites 439 Practice Points 440 Exhibit 10-1 Relative Importance of IRS Tax Authorities 426 Exhibit 10-2 Applying for IRS Rulings 436 Exhibit 10-3 Obtaining Information and Assistance from IRS Checklist 444 Exhibit 10-4 IRS Transaction Codes Used To Interpret IRS Transcripts 444 Exhibit 10-5 Schedule of Typical User Fees 448 Exhibit 10-6 Freedom of Information Act Request to District Disclosure Officer 449 Form 4506 Request for Copy of Tax Return

12 xxviii Dealing with the IRS Form 4505-T Request for Transcript of Tax Return Form 8717 User Fee for Employee Plan Determination, Opinion, and Advisory Letter Sample Format For a Letter Ruling Request Chapter 11 Penalties and Interest 451 Topical Index Accuracy-Related Penalty Negligence Penalty Civil Fraud Penalty Innocent Spouse Defense to Penalties Substantial Understatement of Tax Section 6662(b)(2) Substantial Valuation Misstatements Substantial Estate or Gift Tax Valuation Understatement Failure To File Returns Failure To Pay Tax Estimated Tax Penalty Failure To Timely Deposit Trust Fund Recovery Penalty Defense of Reasonable Cause The Penalty Appeal Procedure Third Party Penalties Interest Abatement of Interest Miscellaneous 490 Practice Points 493 Exhibit 11-1 Most Often Assessed Penalties 458 Exhibit 11-2 Obtaining Equitable Innocent Spouse Relief 6015(f) 463 Exhibit 11-3 Trust Fund Recovery Penalty Checklist 474 Exhibit 11-4 Does Reasonable Cause Exist? 478 Exhibit 11-5 Penalty Appeal Procedure Checklist (Post Assessment Prepayment of Penalties) 483 Exhibit 11-6 Interest Abatement Procedure Checklist 492 Exhibit 11-7 Memorandum In Support Of Penalty Appeal Form Exhibit 11-8 Penalties Assessed by IRS 510 Exhibit 11-9 Important Do s and Don ts of Circular Appeals Denial of Request for Abatement of Penalties FAQs Related to Tax Return Perparer Penalty Notices Form 843 Claim for Refund and Request for Abatement Form 843 Claim for Refund and Request for Abatement Sample Form 8275 Disclosure Statement

13 Table of Contents xxix Form 8275-R Regulation Disclosure Statement How To Apply for Zero Interest Netting Letter 1153 (DO) Trust Fund Penalty Assessment Notice Letter 1277 IRS Penalty Appeal Determination Letter Notice 746 Information About Your Notice, Penalty and Interest Procedures for Taxpayers To Make Remittances To Stop Running of Interest on Deficiencies

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