...Running Head: THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 1 The Process and Preventing the Risk of a Tax Audit By Marivic Engquist National American University August 12, 2012 THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 2 Abstract This paper illustrates how an Internal Revenue Service (IRS) audit strikes fears in individuals, small businesses and large corporations. By understanding the process of a tax audit and reporting information that is understandable, people can lesson some of the risk. According to Sidney Weisman, an attorney and senior editor with the Research Institute of America, publisher of tax materials for professionals, “the easiest way to survive a tax examination is to prepare for one at the time you fill out the tax return” (Rankin, 1981, p. 2.29). THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 3 The Process of Lessoning the Risk of a Tax Audit The tax audit have been feared by many and embraced by the few. Even though there are ways to reduce the likelihood of an audit, one must understand how the audit process works. If selected, a tax audit usually means corresponding with the IRS, searching through files, and producing records. It can also mean paying additional taxes, interest, or a penalty. Reducing the likelihood of an audit...
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...Chapter C:1 Tax Research Learning Objectives After studying this chapter, the student should be able to: 1. Distinguish between closed fact and open fact tax situations. 2. Describe the steps in the tax research process. 3. Explain how the facts influence tax consequences. 4. Identify the sources of tax law and assess the authoritative value of each. 5. Consult tax services to research an issue. 6. Apply the basics of Internet-based tax research. 7. Use the citator to assess authorities. 8. Describe professional guidelines that CPAs in tax practice should follow. 9. Prepare work papers and communicate to clients. Areas of Greater Significance Since this will usually be a student’s first exposure to tax research, the importance of the facts to the tax results, federal tax services and the citator should be discussed. The widespread use of Internet-based databases for tax research makes this means of tax research much more important. An effort should be made to introduce Internet-based searches to the students if at all possible. The text discusses two types of professional guidelines for CPAs in tax practice. Areas of Lesser Significance In the interest of time, the following areas may be omitted: Sample work papers and client letter (Appendix A). Problem Areas for Students The following areas may prove especially difficult to students: ...
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...Letters Accountants write letters of variety of people, different types of accountant writes different letters to different types of people. There are some principles of good letter writing that are introduced in this chapter such as: organization, style, tone, and format. Before we start with the letter, we need to have a clear understanding of what the letter should cover so that we won’t forget something important. The length of the letter doesn’t matter although many letters are no longer than a page. We also need to analyze the purpose of the letter before we start writing it. It’s also important to think about the reader that we are writing to, the reader’s knowledge and experience should determine how much detail we should use in our business letters. Sometimes we much explain complex accounting procedures in the words that a non-accountant can understand. Our letter is organized into an introduction, a body, and a conclusion. The introduction of the letter should address the main idea that we are trying to express and the purpose of the letter that we are writing. The body of the letter is divided into different discussions of each topic. Arrange the topics in descending order of importance from the reader’s point of view, this is really important. The conclusion may be a conventional courteous closing: thank you very much for your help. The conclusion is also a good place to tell the reader what we want him or her to do, or what we will do to follow up on the subjects...
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...Deter Tax Avoidance? RES 351 July 14, 2014 r Research is done for many reasons. It can be used to solve problems or issues that a business is having. Research can be used by business to determine if making certain changes will yield the results the company desires. Many businesses use research when developing new products to determine what consumers think of the product. They are trying to determine if consumers will purchase the product if they continue with development. This particular essay is focusing on the IRS auditing of business and how they may or may not take aggressive approaches in order to avoid those audits. Three different universities compiled the research article used for this paper. It focuses on corporate tax avoidance and whether strict IRS monitoring deters corporate tax avoidance. When reviewing this article, it is apparent that they used the reporting study method for their research. This method uses previous data and data sources to reiterate the data for a better understanding. This article uses data from the TRAC (Transactional Records Clearinghouse), that the IRS provides data directly too. Next we will be discussing how the research is providing insight into the research question. There are many factors that the researchers took into consideration. Some factors include the perception of management; whether stricter IRS monitoring constrains some business' aggressive tax planning, and management's role in exploiting tax planning...
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...software and click on the "UPDATE" - Good for the Tax Return Problem · Print lecture notes online and bring them to the class · Take Home Quizzes · Assignments are not turned in - reinforce lectures; solutions are online Lecture Notes: Chapter 1 · Tax is the exaction for the support of the government; · Tax laws: to help economy; social considerations (old people get credits; blind people; etc.) · four characteristics of the tax: no direct relationship between the tax you pay and the benefits you get. e.g. think about income tax and sales tax, you pay them but it does not mean you get direct benefit from it. taxes are levied on the basis of predetermined criteria; (how do you determine your tax base? how to minimize your sales tax?). taxes are levied on a recurring or predictable basis; (tax planning). Taxes do not give you privileges; are not a penalty or fine. If you are caught of speed, there is a penalty or fine but it is not a tax · Any direct of tax has to be a portion of state tax · Income tax is the tax on the income which direct t that person · 1913, now it is a 100 year of income tax. Page 3. The Congress shall have the power ... · Exhibit 1.1 page 5, sources of revenue for the federal government. It is not a balance budget; a deficit; huge debt; Individual income tax is the number one portion of government revenue; social security and medicare (35% of the revenue); 13% are from corporation tax; excise taxes (alcohol, gasoline, etc.); Number...
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...CHAPTER 1 INTRODUCTION TO PROFESSIONAL RESEARCH Discussion Questions 1. Research in general involves the investigation and analysis of an issue in question. The researcher usually applies reasonable and reflective thinking to develop an answer to the issue or problem at hand. Research requires a clear definition of the problem, using professional databases to search the authoritative literature, reviewing and evaluating the data collected, drawing conclusions and communicating your results. 2. Accounting, auditing, or tax research involve a systematic and logical investigation of an issue or problem using the accountant’s professional judgment. Furthermore, accountants approach this problem using critical-thinking skills to obtain and document evidence underlying a conclusion relating to an issue or problem currently confronting the accountant or auditor. 3. Accounting, auditing, or tax research are necessary in order to determine the proper recording, classification, and disclosure of economic events; to determine compliance with authoritative pronouncements; or to determine the preferability of alternative accounting procedures. 4. The objective of accounting, auditing, or tax research is a systematic investigation of an issue or problem utilizing the researcher’s professional judgment to arrive at appropriate and timely conclusions regarding the issues at hand. 5. Research plays an important role within an accounting firm or department. It is critical...
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...RESEARCH PAPER ACCOUNTING 483 - FEDERAL TAX Section 01 1st Research Paper Fall 2011 Due Wednesday, October 26, 2011 Speedy Karr is the used car sales manager of Fast Talking Ed's Car Sales, a local new and used car dealership in Moscow, Idaho. Speedy Karr’s income is about $80,000 a year from his salary and bonus (his bonus is a percentage of the net income of the dealership). In addition to his income from Fast Talking Ed's, Speedy also has income from rentals of about $15,000 a year. Speedy's wife, Holiday, is employed, earning about $65,000 a year. Several years ago, Speedy became interested in auto car racing. In 2008, Speedy purchased a used car, which he converted into a racing stock car. The cost of the car, and the modifications made to it, cost Speedy about $75,000, which is being depreciated over a fiveyear life (using I.R.C. § 168). Speedy incurred additional expenses for the purchase of small tools, racing supplies, travel costs, etc. In 2008, Speedy begin entering the Spokane auto races. Because his job at Fast Talking Ed's required him to work at least one Saturday every month, Speedy was not able to enter all of the races held in Spokane, but did enter as many as possible. Spokane holds races every weekend from the first part of April through the end of September. Speedy had some success in winning races, but because of the limited number of races Speedy could enter and the limited purse, his gross income was only about $50 the first year, $125 the second year...
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...Research Problem 3. Millie owns a large home on the East Coast. Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In August 2014, a hurricane damaged many of the trees surrounding her home. In September 2014, Millie engaged a local arborist to evaluate and treat the trees, but five of the largest trees were seriously weakened by the storm. These trees died from disease in 2015. Millie has ascertained that the amount of the casualty loss from the death of the five trees is $25,000; however, she is uncertain in which year to deduct this loss. Prepare a Tax File memo and a client letter to discuss whether the casualty loss should be deducted in the calculation of Millie’s 2014 or 2015 taxable income. Partial list of research aids: Reg. § 1.165–1. Oregon Mesabi Corporation, 39 B.T.A. 1033 (1939). Dear Millie, This letter provides you with our firm’s opinion regarding the tax consequences of the casualty loss from withstanding the severe hurricane damage as determined by the Internal Revenue Service. More specifically, does the casualty loss entitle Millie a deduction for the five oak trees in 2014 or 2015? In my research, I found that Millie is entitled to claim a deduction for the casualty loss resulting from hurricane damage (2014) in 2015. I found a case that had circumstances that were almost identical to your situation. In that case the casualty loss was deductible throughout each year it was ascertain there was...
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...9.9 Tax Investigation Framework What is Tax Investigation Tax investigation is an inspection of taxpayer's business and / or individual books, records and documents. This inspection is to ensure the right amount of reported income and paid taxes required under laws and tax provisions. The investigation will be carried out only in cases where is suspected on the basis of precise and clear evidence that the tax payer is deliberately trying to avoid paying taxes or having committed an act of willful deceit under the Act, such as real property gains Tax Act ITA and 1976, the Petroleum(Income Tax) Act 1967, Promotion of Investment Act 1986, the Stamp Act 1949 and the Labuan Offshore Business Activity Tax Act 1990. There are two categories as follows: 1. Civil Tax Investigation Civil tax investigation activity involves detection of tax evasion. The primary concern being recovery of tax loss and imposition of heavy penalties. 2. Criminal Tax Investigation Functions and work procedures involving criminal tax investigation are similar to that of civil investigation. However with criminal investigation, it more focus on gathering admissible evidence with a view towards prosecution and conviction of the tax evader for commission of offences pursuant to ITA, Penal Code (Act 574), Criminal Procedure Code (Act 593), Evidence Act 1950 (Act 56) and other relevant Acts.(Hasil, 2007). How A Tax Investigation is carried out 1. The Visit Tax investigations conducted by the...
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...S c h o o l of Ac c ount a nc y Faculty of Business Writing F O R A C C O U N TA N T S Edited by Di Lewis i This book is copyright. Apart from any fair dealing for the purposes of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. © School of Accountancy, QUT 2003 Produced by QUT Publications 232975 8437 ISBN: 1 74107 014 7 ii Contents Preface Accountancy writing and preparation of documents Writing and accountants Determining the Purpose (aim) Investigating Planning the document Writing the document Revising the document Style of professional documents Good and poor writing Audience Tone Language Overwriting (padding) Overgeneralisation Spelling, punctuation and grammar Abbreviations Expressing numbers Paragraphing Headings and sub-headings Quantitative information Recommendations Letter writing for accountants Claim letter Letter of advice Letter of engagement Letter of enquiry Letter of refusal Management letter Memos E-mails Research Essays, Reports and Resumés Research essays Reports Resumés References and Bibliographies iii v 1 1 2 2 7 8 8 9 9 10 10 10 11 11 11 12 12 12 12 12 13 14 16 17 19 21 22 23 24 26 27 27 31 40 41 iv Preface Writing for Accountants is a brief guide to the types of writing that accountancy students and practising accountants are most often called on to do. It is not intended as a definitive text, but rather...
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...ASSIGNMENT 3 1. Legal forms of business in Malaysia. Start up Business in Malaysia - What is a business firm? Business firms can be either of these two types: 1. Sole proprietor/ Sole trader - Sole proprietor is a business carried out in the name of an individual. 2. Partnerships (governed by Partnership Act 1961) - Partnership is a business owned by two or more individuals. Both these types of business firms have no separate legal existence apart from the persons who owns the business and properties cannot be held under the name of the business firms. All contracts are signed in the name of the individuals who own the business and their liability is unlimited. Forms of business formation in Malaysia | Company | Partnership | Sole-proprietorship | 1. | StructureA company is a person separate from its members. | Two or more persons carrying on business with a view of profit. | Individual in business on his own. | 2. | RegistrationNeed to be registered with the Registrar of Companies as a company. | Need to register their business under the Registration of Businesses Act, 1956. | Needs to register his business under the Registration of Businesses Act, 1956. | 3. | TransferabilityShares in a company are generally transferable although the right of transfer may be restricted. | Generally, a partner cannot transfer his status as partner to someone else without the consent of all the other partners. | A sole-proprietor may transfer his business to someone...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 1. (LO 1) When enacting tax legislation, Congress often is guided by the concept of revenue neutrality so that any changes neither increase nor decrease the net revenues raised under the prior rules. Revenue neutrality does not mean that any one taxpayer’s tax liability remains the same. Since this liability depends upon the circumstances involved, one taxpayer’s increased tax liability could be another’s tax saving. Revenue-neutral tax reform does not reduce deficits, but at least it does not aggravate the problem. 2. (LO 2) Economic, social, equity, and political factors play a significant role in the formulation of tax laws. Furthermore, the IRS and the courts have had impacts on the evolution of tax laws. For example, control of the economy has been an important economic consideration in passing a number of laws (e.g., rapid depreciation, changes in tax rates). 3. (LO 2) The tax law encourages technological progress by allowing immediate (or accelerated) deductions and tax credits for research and development expenditures. 4. (LO 2) Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion. For example, the tax laws provide incentives to encourage savings by giving private retirement plans preferential treatment. 5. (LO 2) a. Section 1244 allows ordinary loss...
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...Technical Skills, Personal Qualities and/or Characteristics Needed to Be a Successful Tax Examiner Prepared By: Trina J Miller 5/22/2011 Education, Technical Skills, Personal Qualities and/or Characteristics Needed to Be a Successful Tax Examiner Prepared By: Trina J Miller 5/22/2011 LETTER OF TRANSMITTAL DATE: May 22, 2011 TO: Kari Carr FROM: Trina J Miller The findings of my research provided necessary information to be aware of in choosing the career of a Tax Examiner. The main place of employment that I discovered for a Tax Examiner is the IRS, including: state, federal, and other local government agencies. It is best to obtain a Bachelor’s degree for this position; however it is not always needed. Experience in the field and continuing education are necessary to maintain knowledge needed for a Tax Examiner. I may need to revise my educational options in order to achieve the best possibility of obtaining this career. Table of Contents Letter of Transmittal………………………………………………………………………………………2 Executive Summary……………………………………………………………………………………….4 Introduction: Requirements for becoming a Tax Examiner……………………………5 Background……………………………………………………………………………………………………6 Discussion of Findings……………………………………………………………………………………7 Conclusions and Recommendations……………………………………………………………..8 References…………………………………………………………………………………………………….9 Executive Summary The best education to achieve for a Tax Examiner is a Bachelor’s degree and field related experience. For the best experience...
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...Statement of problem: John and Susan plan to marry December 12, 2012, and want to maximize their tax returns for the year 2012 however tax concerns came along such as effect on tax liabilities and marriage penalty tax. Following calculation of taxes owed for the current year a higher tax penalty was determined. It was suggested by the clients that they individually file single until the day before they married, terminate their tax years and subsequently file a “short period” joint tax return for the time that they are married. Conclusion: On the Donald R. Pierce, TC Memo 1980 - 563. , Code Sec(s) 143 it states how “no matter what is the taxpayer’s status during the year, the law will only use taxpayer’s status on the last day of the year December 31.” The approach that the couple wants to take is illegal according due to the fact that once a “man and woman are legally married they are considered married for the entire year” per IRS Sec 7703-1. Furthermore, John and Susan will not be able to file as they suggested, and will have to accept the “marriage penalty tax.” Ultimately they could face severe penalty taxes by the IRS either for negligence at the time of filing their return or any other applicable reason. Supporting Evidence: As evidence to my conclusion, to determine the situation of the couple and if they could file their return as they suggested I used Donald R. Pierce, TC Memo 1980-563. , Code Sec(s) 143. On it is clearly stated the situation of marital status...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Learning Objective LO 1 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 3 Topic Revenue neutrality Controlling the economy Encouraging industries Research and development expenditures Social considerations Earned income credit Charitable contributions Fines and penalties Home ownership Higher education incentives Tax credit versus deduction Alleviating the effect of multiple taxation Double taxation and effect of a credit versus a deduction Wherewithal to pay concept: transfer to controlled corporation Avoiding the corporate income tax Wherewithal to pay: example Recognized gain versus realized gain: amount Like-kind exchange versus involuntary conversion: losses Settlement time period Installment method Keogh Plan: grace period Bracket creep: indexation Community property states Community property states Deterrence provisions $13,000 annual gift tax exclusion: audit Status: Present Edition New New New New New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Modified Modified New New New New New New New New New New New Q/P in Prior Edition 6 7 8 9 10 11 12 13 14 15 Instructor: For difficulty, timing, and assessment information about each item, see p. 1-3. 1-1 © 2012 Cengage...
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