TAX RESEARCH MEMO

CLIENT C:Client C received a notification that he is being examined by Office Audit. He has a meeting scheduled with IRS in two weeks. The letter he received from IRS indicated that they will be examining his 2019 tax return. Specifically, he will be examining the following and requests the following information:

• Rental income – copies of deposit slips for rental income.

Rental expenses; Depreciable assets purchased – copies of invoice for purchase and proof of payment.Rental repairs and maintenance – copies of bills and cancelled checks.

This is all the letter indicates with regard to the subject matter of the audit.

QUESTIONS:

• Client C feels confident that he can convince the IRS of anything. Should you allow your client to join you at the examination? If so, why? If not, why not?
• For items paid with credit cards C has copies of credit card statements but no receipts. As the statement reflects the payee, amount and the date of the transaction do you feel this is sufficient? If not why not?
• Since the client has a separate bank account for rental property, client would like to bring all the bank statements and all the rental receipts. Is this advisable? If not, why not?

THE FORMAT THAT I NEED IS:

RELEVANTS FACTS

SPECIFIC ISSUES

CONCLUSIONS

SUPPORT

Your Rights
as a Taxpayer
Publication 1
This publication explains your rights as a taxpayer and the processes for examination, appeal, collection, and refunds.
Also available in Spanish.
The Taxpayer Bill of Rights
1. The Right to Be Informed
6. The Right to Finality
Taxpayers have the right to know what they need to do to
comply with the tax laws. They are entitled to clear
explanations of the laws and IRS procedures in all tax forms,
instructions, publications, notices, and correspondence. They
have the right to be informed of IRS decisions about their tax
accounts and to receive clear explanations of the outcomes.
Taxpayers have the right to know the maximum amount of
time they have to challenge the IRS’s position as well as the
maximum amount of time the IRS has to audit a particular tax
year or collect a tax debt. Taxpayers have the right to know
when the IRS has finished an audit.
2. The Right to Quality Service
Taxpayers have the right to receive prompt, courteous, and
professional assistance in their dealings with the IRS, to be
spoken to in a way they can easily understand, to receive clear
and easily understandable communications from the IRS, and
to speak to a supervisor about inadequate service.
3. The Right to Pay No More than the
Correct Amount of Tax
Taxpayers have the right to pay only the amount of tax legally
due, including interest and penalties, and to have the IRS
apply all tax payments properly.
4. The Right to Challenge the IRS’s Position
and Be Heard
Taxpayers have the right to raise objections and provide
additional documentation in response to formal IRS actions or
proposed actions, to expect that the IRS will consider their
timely objections and documentation promptly and fairly, and
to receive a response if the IRS does not agree with their
position.
5. The Right to Appeal an IRS Decision in an
Independent Forum
Taxpayers are entitled to a fair and impartial administrative
appeal of most IRS decisions, including many penalties, and
have the right to receive a written response regarding the
Office of Appeals’ decision. Taxpayers generally have the right
to take their cases to court.
The IRS Mission
7. The Right to Privacy
Taxpayers have the right to expect that any IRS inquiry,
examination, or enforcement action will comply with the law
and be no more intrusive than necessary, and will respect all
due process rights, including search and seizure protections,
and will provide, where applicable, a collection due process
hearing.
8. The Right to Confidentiality
Taxpayers have the right to expect that any information they
provide to the IRS will not be disclosed unless authorized by
the taxpayer or by law. Taxpayers have the right to expect
appropriate action will be taken against employees, return
preparers, and others who wrongfully use or disclose taxpayer
return information.
9. The Right to Retain Representation
Taxpayers have the right to retain an authorized representative
of their choice to represent them in their dealings with the
IRS. Taxpayers have the right to seek assistance from a Low
Income Taxpayer Clinic if they cannot afford representation.
10. The Right to a Fair and Just Tax System
Taxpayers have the right to expect the tax system to consider
facts and circumstances that might affect their underlying
liabilities, ability to pay, or ability to provide information timely.
Taxpayers have the right to receive assistance from the
Taxpayer Advocate Service if they are experiencing financial
difficulty or if the IRS has not resolved their tax issues properly
and timely through its normal channels.
Provide America’s taxpayers top-quality service by helping them understand and meet
their tax responsibilities and enforce the law with integrity and fairness to all.
Publication 1 (Rev. 9-2017) Catalog Number 64731W Department of the Treasury Internal Revenue Service www.irs.gov
Examinations, Appeals, Collections, and Refunds
Examinations (Audits)
We accept most taxpayers’ returns as filed.
If we inquire about your return or select it
for examination, it does not suggest that
you are dishonest. The inquiry or
examination may or may not result in more
tax. We may close your case without
change; or, you may receive a refund.
The process of selecting a return for
examination usually begins in one of two
ways. First, we use computer programs to
identify returns that may have incorrect
amounts. These programs may be based
on information returns, such as Forms
1099 and W-2, on studies of past
examinations, or on certain issues
identified by compliance projects. Second,
we use information from outside sources
that indicates that a return may have
incorrect amounts. These sources may
include newspapers, public records, and
individuals. If we determine that the
information is accurate and reliable, we
may use it to select a return for
examination.
Publication 556, Examination of Returns,
Appeal Rights, and Claims for Refund,
explains the rules and procedures that we
follow in examinations. The following
sections give an overview of how we
conduct examinations.
By Mail
We handle many examinations and
inquiries by mail. We will send you a letter
with either a request for more information
or a reason why we believe a change to
your return may be needed. You can
respond by mail or you can request a
personal interview with an examiner. If you
mail us the requested information or
provide an explanation, we may or may not
agree with you, and we will explain the
reasons for any changes. Please do not
hesitate to write to us about anything you
do not understand.
By Interview
If we notify you that we will conduct your
examination through a personal interview,
or you request such an interview, you have
the right to ask that the examination take
place at a reasonable time and place that is
convenient for both you and the IRS. If our
examiner proposes any changes to your
return, he or she will explain the reasons for
the changes. If you do not agree with these
changes, you can meet with the examiner’s
supervisor.
the Appeals Office of the IRS. Most
differences can be settled without
expensive and time-consuming court trials.
Your appeal rights are explained in detail in
both Publication 5, Your Appeal Rights and
How To Prepare a Protest If You Don’t
Agree, and Publication 556, Examination of
Returns, Appeal Rights, and Claims for
Refund.
If you do not wish to use the Appeals
Office or disagree with its findings, you
may be able to take your case to the U.S.
Tax Court, U.S. Court of Federal Claims, or
the U.S. District Court where you live. If
you take your case to court, the IRS will
have the burden of proving certain facts if
you kept adequate records to show your
tax liability, cooperated with the IRS, and
meet certain other conditions. If the court
agrees with you on most issues in your
case and finds that our position was largely
unjustified, you may be able to recover
some of your administrative and litigation
costs. You will not be eligible to recover
these costs unless you tried to resolve your
case administratively, including going
through the appeals system, and you gave
us the information necessary to resolve the
case.
Collections
Publication 594, The IRS Collection
Process, explains your rights and
responsibilities regarding payment of
federal taxes. It describes:
• What to do when you owe taxes. It
describes what to do if you get a tax bill
and what to do if you think your bill is
wrong. It also covers making installment
payments, delaying collection action,
and submitting an offer in compromise.
• IRS collection actions. It covers liens,
releasing a lien, levies, releasing a levy,
seizures and sales, and release of
property.
• IRS certification to the State Department
of a seriously delinquent tax debt, which
will generally result in denial of a
passport application and may lead to
revocation of a passport.
Your collection appeal rights are explained
in detail in Publication 1660, Collection
Appeal Rights.
Innocent Spouse Relief
If we examined your return for the same
items in either of the 2 previous years and
proposed no change to your tax liability,
please contact us as soon as possible so
we can see if we should discontinue the
examination.
Generally, both you and your spouse are
each responsible for paying the full
amount of tax, interest, and penalties due
on your joint return. However, if you
qualify for innocent spouse relief, you may
be relieved of part or all of the joint
liability. To request relief, you must file
Form 8857, Request for Innocent Spouse
Relief. For more information on innocent
spouse relief, see Publication 971, Innocent
Spouse Relief, and Form 8857.
Appeals
Potential Third Party Contacts
If you do not agree with the examiner’s
proposed changes, you can appeal them to
Generally, the IRS will deal directly with you
or your duly authorized representative.
Repeat Examinations
However, we sometimes talk with other
persons if we need information that you
have been unable to provide, or to verify
information we have received. If we do
contact other persons, such as a neighbor,
bank, employer, or employees, we will
generally need to tell them limited
information, such as your name. The law
prohibits us from disclosing any more
information than is necessary to obtain or
verify the information we are seeking. Our
need to contact other persons may
continue as long as there is activity in your
case. If we do contact other persons, you
have a right to request a list of those
contacted. Your request can be made by
telephone, in writing, or during a personal
interview.
Refunds
You may file a claim for refund if you think
you paid too much tax. You must generally
file the claim within 3 years from the date
you filed your original return or 2 years from
the date you paid the tax, whichever is
later. The law generally provides for interest
on your refund if it is not paid within 45
days of the date you filed your return or
claim for refund. Publication 556,
Examination of Returns, Appeal Rights,
and Claims for Refund, has more
information on refunds.
If you were due a refund but you did not
file a return, you generally must file your
return within 3 years from the date the
return was due (including extensions) to get
that refund.
Taxpayer Advocate Service
TAS is an independent organization within
the IRS that can help protect your taxpayer
rights. We can offer you help if your tax
problem is causing a hardship, or you’ve
tried but haven’t been able to resolve your
problem with the IRS. If you qualify for our
assistance, which is always free, we will do
everything possible to help you. Visit
www.taxpayeradvocate.irs.gov or call
1-877-777-4778.
Tax Information
The IRS provides the following sources for
forms, publications, and additional
information.
• Tax Questions: 1-800-829-1040
(1-800-829-4059 for TTY/TDD)
• Forms and Publications:
1-800-829-3676 (1-800-829-4059 for
TTY/TDD)
• Internet: www.irs.gov
• Small Business Ombudsman: A small
business entity can participate in the
regulatory process and comment on
enforcement actions of the IRS by
calling 1-888-REG-FAIR.
• Treasury Inspector General for Tax
Administration: You can confidentially
report misconduct, waste, fraud, or
abuse by an IRS employee by calling
1-800-366-4484 (1-800-877-8339 for
TTY/TDD). You can remain anonymous.