TP MUST PAY ASSERTED DEFICIENCY US Court of Federal Claims Located in DC, hears claims against the US gov't Claims court follows precedent of the Court of Appeals for the Federal Circuit, not the court of appeals where the TP resides (like dx ct) TP MUST PAY ASSERTED DEFICIENCY SOL Generally 3 years from the date return was filed or the due date of the return If TP omits a substantial amount of income, then 6 years If TP files fraudulent return or fails to file, then open SOL If agreement and waiver, then assessment is made and is collection or possible refund If decision adverse to TP, then Appeal If in US tax or has filed a refund suit in the dx, then appeal lies in the appellate area where the TP resides (ex. 9th circuit) If TP loses the court case in a court and loses in the appellate circuit, then in federal appeals court in dc, then writ to supreme court Assessment and collection If decision favorable to TP, then no further action Collection Interest accrues on any tax deficiency owed starting from the original due date of the return If the TP is owed tax, then the gov't pays the TP interest on the amount of the overpayment If TP has no money, then it goes to collections (ex. Garnish wages, take money from bank accounts, attachment) Possible Refund and Refund Suit TP may be owed refund by IRS - can assert a refund claim If TP pays asserted deficiency, TP can bring a refund suit for the tax in federal district court where the TP resides or US fed claims court (Wash DC) How returns are selected for an audit: 1-2% of returns are audited IRS has algorithm to select TP for audit and some are random audits to get compliance information Most cases get settled before litigation Sources of Tax Law Primary Authority Legislative Judicial Administrative IRC Legislative Hx Pending Legislation Tax Court Reg. Decisions Memo Decisions (BTA) U.S.D.C. U.S. Court of Fed. Claims U.S. Court of Appeals U.S. Supreme Court Treasury Regs Interpretive v. Legislative Temporary, and Proposed Revenue Rulings Revenue Procedures Private Letter Rulings Technical Advice Memoranda General Counsel Memoranda Actions on Decision Acquiescence or Nonacquiescence Notices Announcements IRS Manual Publications Legislative Generation of tax legislation
Private letter ruling private agreement between one TP and the IRS with respect to a prospective transaction NOT officially published, but publishers publish them S 6110k3 - Technically, TP are not allowed to rely on private letter rulings and cannot be cited as authority But they can be cited in practice and in memos because it is still information about the service's position Technical advice memoranda Similar to private letter ruling the fact private letter ruling - advice is requested after the transaction has occurred and the TP has been audited Actions on decision Service sending information to its people in the field Notices and announcements Fast way that the IRS sends out notices to its people The service puts the practicing on notice that they are going to litigate in a certain matter Communicates with the public and the tax attorney bar IRS manual The Service's communication to their field agents on how to do things Available online Publications Administrative pronouncements that are drafted for a lay taxpayer audience Available at: www. Irs.gov Tax Policy Method: Under what circumstances does the code section apply? If the code section applies, what does it do? Why is this rule in the code? Policy? What is the policy goal of this section? Is the goal met through application of the section? What is the actual effect of the section? Primary function of the IRC is to raise revenue BUT also serves other policies: Ex. Social policies, fiscal policies (ex. Homebuyer's credit) Tax rules create behavioral consequences b/c people will choose the lower tax when there is a choice Tax Policy - What should be, NOT what is Equity (2) Horizontal equity - similarly situated TP should be taxed similarly Could use GI or AGI as a measure of equality Vertical equity - VE requires that we apply an appropriate pattern for differentiating btwn TP's who are not equally situated TP with greater ability to pay tax should pay a higher rate of tax Progressive rate structure - tax rate increases as income increases Lower income pays lower and higher income pays a higher rate of tax Rationale: Want to base tax on ability to pay tax The declining marginal utility of income - as your income increases, the value to you of the next dollar you earn goes down Ex. 100 given to min wage person makes more of a difference than when it is given to bill gates Hood idea - If trying to further the aggregate wealth of society, then take money from the rich and distribute it to those who make less