memo assigment

i need to put this answers in tax memo format. It need to be in this order:

Relevant Facts

Specific Issues

Conclusions

Support

1. Is this an IRS examination? – CP2000 is not an examination action. (confirmed with lecture ppt)

No, this is not an IRS examination because the CP2000 Notice is classified as a non-examination review. This notice is also referred to as an “underreporter inquiry” and it depicts proposed changes to the taxpayer’s return for that year. According to IRM §4.19.7.1.4, calculations of the taxpayer’s account are made under the Automated Underreporter System—a system through which the IRS analyzes the variances between the third-party-reported information (e.g., Form 1099 data) and the income reported on a tax return. This is not considered a traditional, formal audit but more of an audit review, where the IRS attempts to correct errors by comparing external reports of income to submissions by the taxpayer. In the event of such discrepancies, it sends this notice identifying the issue to the taxpayer and asks for an explanation or correction of the discrepancy.

1. How do you respond to IRS?

According to IRS Publication 5181 (Rev. 12-2022), we will have to send a Response form in an envelope provided by the IRS. This Response form must be sent by the deadline stated in the CP2000 Notice. In our client’s case, it needs be filled out as if they disagree by selecting the “I don’t agree with some or all of the changes” option. We will advise the client that they cannot sign the agreement form in the notice. We will also have to include supporting documentation and an explanation of why they disagree, addressing each item in the notice. In this instance, we need to explain why the income from the brokerage 1099 was not included in the return and that the income from securities reported as a short-term gain is really from securities held in the long term. The publication also states that if income was left out of the return unintentionally, to tell the IRS and they will add it. If the IRS accepts our explanation, they will send us a letter stating they accept the return as filed and recommend we keep the letter with our tax records. If the IRS accepts our explanation for some issues and not all of them, they will send us a revised notice that includes the issues that were not resolved. From then, we will have to decide if we agree or disagree with said issues and respond within the given time frame. If the IRS does not accept our explanation or documents included in the response, they will send a letter explaining why they did not accept what we provided.

3. What document do you need in order for IRS to discuss the matter with you? (Jazmine)

In order for the IRS to discuss the matter with us, we would need our client’s signature on Form 2848, Power of Attorney, and Declaration of Representative so that we may effectively represent them in dealing with the IRS regarding this CP2000 Notice. Without it, the IRS agent we try to discuss the matter with will not grant us any information about this notice. This form is paramount as it helps us review and respond to any inquiries made by the IRS. It is also important in resolving discrepancies and clarifying matters arising from the taxpayer’s return.

4. In Addition to asking your client, how can you confirm that there are no additional accounts that your client may have missed?

Just to be on the safe side and for the highest degree of accuracy, we shall further request the transcript of our client’s income documents from the IRS directly by availing Form 4506-T, Request for Transcript of Tax Return, to avoid leaving out any financial account. This is a strategic measure that will help us secure a detailed record of every return that has been filed under your Social Security Number. We will use this step as a cross-verification of our account information with official IRS records to not miss any essential details needed in filing our client’s taxes correctly. This is inline with best practices when using Form 4506-T in the preparation of tax and the representation of the client—ensuring that due accurate account and reflection of any pertinent financial data in your dealing with IRS (Nickpour et al., 2022).

5. In Addition to asking your client What should you do when preparing later years’ returns to prevent a recurrence?

To ensure that such discrepancies on tax returns do not happen again in the future, this is the type of case where it should be ensured that the review of any work done is thorough. This will involve carefully collecting and verifying all relevant financial documents, along with using a checklist that includes all accounts from which income may be derived. Additionally, we plan to utilize the most up-to-date tax preparation software with advanced built-in error detection to correct any discrepancies before filing. Equally important will be our commitment to staying in touch with our client and scheduling an annual tax planning session. The literature by Nickpour et al. (2022) emphasizes that such sessions are meant to ensure a comprehensive capture and accurate reporting of all financial activities relevant, thereby guarding against oversights and subsequent filings based on inaccurate data.