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Circular 230: An Overview

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Overview Of Irs Audits Banner

Circular 230[1] is a publication of the U.S. Treasury regulations that include the rules that govern the practice of licensed professionals before the Internal Revenue Service.[2] These rules apply to those qualified and licensed to prepare tax returns and provide legal advice to do certain things within the boundaries of the field, including this San Diego tax attorney. The rules both encourage and prohibit certain conduct. Penalties are assessed when an admitted member is found to be non-compliant. With this in mind, rules of Circular 230 apply to attorneys, certified public accountants, enrolled agents, enrolled actuaries, appraisers, and enrolled retirement plan agents.

Key Takeaways

  • Only attorneys, CPAs, enrolled agents, enrolled actuaries, and/or enrolled retirement plan agents are allowed to represent their clients in proceedings before the Internal Revenue Service.
  • An individual preparing tax returns or giving tax advice must adhere to certain rules that govern both conduct and disclosure requirements.
  • Circular 230 also provides rules governing professional conduct in preparing tax returns. Any person preparing a tax return must take a position on a tax return. Submitting a frivolous tax return is prohibited. In addition, unreasonable delays are prohibited.

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IRS Form 1099: Informational Returns – Part Two

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Key Takeaways

  • IRS Form 1099-K
  • IRS Form 1099-LTC
  • IRS Form 1099-MISC
  • IRS Form 1099-OID
  • IRS Form 1099-PATR

Continued from: IRS Form 1099: Informational Returns – Part One

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IRS Form 1099: Informational Returns – Part One

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Information returns are tax documents that businesses are required to file to report certain business transactions. Businesses are required to file these reports to the Internal Revenue Service. The requirement to file information returns is mandated by IRS and related regulations. “Any person, including a corporation, partnership, individual, estate, and trust, who make reportable transactions during the calendar year must file information returns to report those transactions to the IRS” (IRS.gov, “Information Returns by Form,” 8/31/2013). Persons required to file one or more information returns will also be required to furnish statements to their respective recipients (IRS.gov, “Information Returns by Form,” 8/31/2013). Filers with 250 or more recipients must file their returns electronically.

Key Takeaways

  • IRS Form 1099-A
  • IRS Form 1099-B
  • IRS Form 1099-C
  • IRS Form 1099-CAP
  • IRS Form 1099-DIV

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Can I Make Payments to the IRS?

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IRS audit defense guide — Brotman Law

Many people who are not able to pay their tax payments immediately ask the question “Can I make payments to the IRS?” The answer is yes; however, paying your full tax debt will save you the set up fees and reduce or eliminate penalty costs. If you have another source, such as a credit card or loan, you could save money by paying your entire tax bill. If you have no other options, IRS installment agreements are a great way to help you avoid default.

Key Takeaways

  • Many people who are not able to pay their tax payments immediately ask the question “Can I make payments to the IRS?” The answer is yes; however, paying your full tax debt will save you the set up fees and reduce or eliminate penalty costs.
  • Prior to applying for installment agreement, you must file all of the required tax returns. Determine the amount you are able to pay each month. There is a minimum monthly installment requirement of $25.
  • You also want to know “Can I make payments to the IRS to avoid default with the IRS?” If you understand your IRS installment agreement, you will be able to avoid default.

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Why the IRS Audits Tax Returns?

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The Examination Division of the Internal Revenue Service is responsible for auditing federal tax returns to determine if income, expenses, and credits are reported accurately. Although the IRS accepts most tax returns when filed, there are circumstances that warrant an audit. Within this context, the IRS is motivated to evaluate those areas of a tax return that fail to comply with current policies and provisions. In general, the IRS motivation behind auditing taxpayer returns falls under multiple categories.

Key Takeaways

  • The Examination Division of the Internal Revenue Service is responsible for auditing federal tax returns to determine if income, expenses, and credits are reported accurately.
  • First, the IRS is motivated to audit returns for the purpose of finding unreported income. In conducting both random and strategic audits, the “IRS has taken a renewed interest in finding unreported income” (Kane, p. 4).
  • Second, the IRS Examination Division is motivated to audit returns to ensure customer service goals are met; these goals are specific to applying the provisions of the Taxpayer Act.

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IRS Examination

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Introduction to IRS Examination

IRS Examination is often likened unto and often referred to as the IRS audit function. Typically, the IRS accepts most federal tax returns when filed. However, there are circumstances in which the IRS examines, or “audits,” to determine if reported income, expenses, and credits have been reported accurately by the taxpayer. When a taxpayer’s return is selected for examination, it is first randomly chosen by computerized screening and then secondly selected by audit by a human reviewer who decided the level of audit that the taxpayer’s return will undergo.

Key Takeaways

  • IRS Examination is often likened unto and often referred to as the IRS audit function. Typically, the IRS accepts most federal tax returns when filed.
  • If an IRS Examination investigation results in a finding of additional tax owed, whether or not this is intentional or unintentional, the IRS requires the payment of a penalty in addition to the remaining tax obligation.
  • The IRS examination, or audit, process begins in one of ten service centers, which depends upon the location of the taxpayer. The service centers receive taxpayer returns; service center representatives catch errors and enter tax return data.

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The IRS Small Business Self-Employed Division

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Introduction to The IRS Small Business Self-Employed Division

The IRS Small Business Self-Employed Division oversees taxpayers and their issues that fall under one or both of these categories. The IRS Small Business Self Employed Division helps taxpayers meet their tax obligations by administering the Internal Revenue Code and applying tax law with “fairness and integrity,” according to the IRS mission statements. According to the IRS, the taxpayer profiles that fall under the IRS Small Business Self Employed Division include fifty-seven million taxpayers, forty-one million self-employed persons; and “[nine] million small businesses with assets of less than $10 million.” [1] An additional profile includes seven million filers of “employment, excise, and estate and gift returns.” [2] According to the IRS, the strategic priorities of the IRS Small Business/Self-Employed division address three types of tax gaps:

Key Takeaways

  • The IRS Small Business Self-Employed Division oversees taxpayers and their issues that fall under one or both of these categories.
  • The IRS Small Business Self-Employed Division’s purpose is also to improve service and business processes, reduce burden, develop human capital, and address strategies that help to promote productivity and improve employee engagement.

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The IRS Tax Exempt and Government Entities Division

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Introduction to the IRS Tax Exempt and Government Entities Division

Established in 1999[1], the Tax Exempt and Government Entities Division protects the public interest by applying tax fairly and provides quality service to customers by helping them understand and comply with applicable tax laws.[2] The Tax Exempt and Government Entities Division serves a customer profile that ranges from small community organizations and municipalities to universities, huge pension funds, state governments, and participants of tax exempt bond transactions.[3] The division’s customer profile also includes those taxpayers that “pay more than $220 billion in employment tax and income tax withholding and control $8.2 trillion in assets.” [4] The division also works with employee plans, exempt organizations, and government entities.

Key Takeaways

  • The customer profile for the IRS Tax Exempt and Government Entities Division represents the following. The division serves the need of three customer segments: Employee Plans, Exempt Organizations, and Government Entities.
  • The IRS Tax Exempt and Government Entities Division taxpayer profile is extended to include 88,000 federal, state, and local entities as well as 550 federal recognized Indian tribes (IRS.gov).
  • Education and communication efforts focus on helping taxpayers understand their tax responsibilities. Efforts include outreach programs and activities.

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The IRS Wage and Investment Division

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About the IRS Wage and Investment Division

The IRS Wage and Investment Division handles roughly ninety million tax returns for individual and married taxpayers. The IRS Wage and Investment Division primarily works with taxpayers that fall under a particular tax profile. Taxpayers that receive W-2 wages, who are employees, and who pay their taxes through withholdings generally fall within the profile that the IRS Wage and Investment Division is responsible for helping. Most taxpayers who contact this division do not do so more than once a year. Finally, many taxpayers associated with the IRS Wage and Investment Division will receive a refund as a result of excess withholdings. The IRS collects third party information from these taxpayers in the form of W2s filed by their employers and information taken from banks, brokerage houses, and other third parties.

Key Takeaways

  • The IRS Wage and Investment Division handles roughly ninety million tax returns for individual and married taxpayers. The IRS Wage and Investment Division primarily works with taxpayers that fall under a particular tax profile.
  • When it comes to administration and ensuring compliance, the IRS Wage and Investment Division’s primary purpose to ensure that returns are prepared correctly.
  • The IRS Wage and Investment Division headquarters office provides strategic and operational direction, which includes managing internal support processes.

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The Current IRS Organization

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The IRS Restructuring and Reform Act of 1998 triggered a comprehensive reorganization of the IRS, which modernized the Service and made it closer to being run like a private sector organization. As such, the IRS organization is led by the Commissioner serving as the chief official, the Chief of Staff and the Deputy Chief of Staff in the executive leadership roles below, and a number of “specialized IRS units” that serve different functions. [1] Staff members from each of these multiple units report to the Commissioner within the IRS Organization. Here is a list of the specialized units within the IRS Organization that report directly to the Commissioner. [2]

Key Takeaways

  • The IRS Restructuring and Reform Act of 1998 triggered a comprehensive reorganization of the IRS, which modernized the Service and made it closer to being run like a private sector organization.
  • Perhaps of most interest within the IRS organization from a tax resolution standpoint is the Services and Enforcement Unit.
  • Another key official within the IRS organization is the Deputy Commissioner for Operations Support, who also reports directly to the Commissioner.

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