Chapter2Homework(ACCT620)(1)

Chapter2Homework(ACCT620)(1) - Chapter 2 Tax Compliance,...

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Chapter 2 Tax Compliance, the IRS, and Tax Authorities Problems 6, 8, 9, 13, 14, 20, 23, 24 Discussion Questions: (6) [LO2] Describe the differences between the three types of audits in terms of their scope and taxpayer type. The three types of IRS audits consist of correspondence, office, and field examinations. Correspondence examinations are the most common. These audits (as the name suggests) are conducted by mail and generally are limited to one or two items on the taxpayer’s return. Among the three types of audits, correspondence audits are generally the most narrow in scope and least complex. Office examinations are the second most common audit. As the name suggests, the IRS conducts these audits at the local IRS office. These audits are typically broader in scope and more complex than correspondence examinations. Small businesses, taxpayers operating sole proprietorships, and middle to high-income individual taxpayers are likely candidates for office examinations. In these examinations, the taxpayer receives a notice that identifies the items subject to audit, requests substantiation for these items as necessary, and notifies the taxpayer of the date, time, and location of the exam. Taxpayers may attend the examination alone or with representation (e.g., tax adviser, attorney, etc.). Field examinations are the least common audit. The IRS conducts these audits at the taxpayer’s office (i.e., place of business), or the location where the taxpayer’s books, records and source documents are maintained. Field examinations are generally the broadest in scope and most complex of the three audit types. They can last many months to multiple years and generally are limited to business returns and the most complex individual returns. (8) [LO2] Compare and contrast the three trial-level courts. The U.S. District Court is the only court that provides for a jury trial; the U.S. Tax Court is the only court that allows tax cases to be heard before the taxpayer pays the disputed liability and the only court with a small claims division (hearing claims involving disputed liabilities of $50,000 or less); the U.S. Tax Court judges are tax experts, whereas the U.S. District Court and
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Chapter2Homework(ACCT620)(1) - Chapter 2 Tax Compliance,...

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