1. REPRESENTATION TECHNIQUESREPRESENTATION TECHNIQUES
Dennis G. PhillipsDennis G. Phillips

2. WHAT WE WILL DISCUSSWHAT WE WILL DISCUSS
 Audit ProcessAudit Process
 Audit/Collection TipsAudit/Collection Tips
 AppealsAppeals
 CDP 101CDP 101
 Statute of LimitationsStatute of Limitations
 TranscriptsTranscripts

3. THE AUDIT PROCESSTHE AUDIT PROCESS
 The IRS uses a computerized statistical samplingThe IRS uses a computerized statistical sampling
technique to select tax returns for most audits.technique to select tax returns for most audits.
 When a return is selected for an audit it isWhen a return is selected for an audit it is
usually subject to an “office” audit or a “field”usually subject to an “office” audit or a “field”
audit.audit.

4. THE AUDIT PROCESSTHE AUDIT PROCESS
 The office audit is conducted in an InternalThe office audit is conducted in an Internal
Revenue Office and is typically for individualRevenue Office and is typically for individual
taxpayers with little or no business activities.taxpayers with little or no business activities.
 In a field audit, the IRS agent reviews aIn a field audit, the IRS agent reviews a
taxpayer’s books and records at the taxpayer’staxpayer’s books and records at the taxpayer’s
place of business or the office of the accountant.place of business or the office of the accountant.

5. AUDIT TIPSAUDIT TIPS
 Conduct yourself courteously and professionallyConduct yourself courteously and professionally
showing that you have prepared for the auditshowing that you have prepared for the audit
 Review the strengths and weaknesses of your positionReview the strengths and weaknesses of your position
before the agent arrivesbefore the agent arrives
 Cooperate with the agent and promptly respond to allCooperate with the agent and promptly respond to all
requestsrequests
 Establish time tables for completion of auditEstablish time tables for completion of audit

6. PREPARING FOR
EXAMINATIONS
 Interview your client before the IRS does
 Anticipate what is going to be asked of your
client
 Try to resolve all issues before the IRS makes
assumptions.

7. DO AND DON’TS WITHDO AND DON’TS WITH
AUDITSAUDITS
 Don’t impede the audit processDon’t impede the audit process
 Present your case in a clear and logical mannerPresent your case in a clear and logical manner
 Don’t argue frivolous issuesDon’t argue frivolous issues
 Don’t submit fraudulent documentsDon’t submit fraudulent documents

8. WHAT HAPPENS IF I DON’TWHAT HAPPENS IF I DON’T
AGREE WITH THE AUDITORAGREE WITH THE AUDITOR
OR THE REVENUE OFFICEROR THE REVENUE OFFICER
Every taxpayer has the right to appeal theEvery taxpayer has the right to appeal the
findings of the examiner.findings of the examiner.

9. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Usually done prior to issuance of the 30 dayUsually done prior to issuance of the 30 day
letter.letter.
 Form 14017 must be completed by the taxpayerForm 14017 must be completed by the taxpayer
and the IRS (Both must agree)and the IRS (Both must agree)
 The taxpayer must provide the examiner with aThe taxpayer must provide the examiner with a
brief, concise and soundly written statement ofbrief, concise and soundly written statement of
the facts along with a statement of theirthe facts along with a statement of their
position.position.

10. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Appeals officer trained in MediationAppeals officer trained in Mediation
 Acts asActs as neutralneutral mediatormediator
 Assists in aAssists in a neutralneutral locationlocation
 Works with TP and Compliance officerWorks with TP and Compliance officer
 Can settle cases based on hazards of litigationCan settle cases based on hazards of litigation

11. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Cases that can be fast tracked are:Cases that can be fast tracked are:
 Non-docketed cases while in SB/SENon-docketed cases while in SB/SE
 Fully developed factual and legal casesFully developed factual and legal cases

12. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Fast Track Excludes:Fast Track Excludes:
 Most collection casesMost collection cases
 No-response casesNo-response cases
 TEFRA casesTEFRA cases
 Campus and ACS casesCampus and ACS cases
 Whipsaw issuesWhipsaw issues
 Frivolous ArgumentsFrivolous Arguments

13. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 The benefits of fast track are:The benefits of fast track are:
 Hazards can be used to resolve the caseHazards can be used to resolve the case
 Resolution usually takes about 60 daysResolution usually takes about 60 days
 Can opt out any timeCan opt out any time
 Taxpayer retains traditional Appeal RightsTaxpayer retains traditional Appeal Rights

14. COLLECTION ISSUESCOLLECTION ISSUES
 Many taxpayers will be coming toMany taxpayers will be coming to
you for collection adviceyou for collection advice
 You should understand theYou should understand the
Services policy on Collection ofServices policy on Collection of
unpaid taxes.unpaid taxes.

15. COLLECTION CASESCOLLECTION CASES
 Correspondence with Collection Division andCorrespondence with Collection Division and
ACS is very important.ACS is very important.
 Strict time framesStrict time frames

16. The “Tiered” ApproachThe “Tiered” Approach
 Collection uses the tiered approach forCollection uses the tiered approach for
collecting delinquent taxes.collecting delinquent taxes.
 The IRS employee usually makes the ultimateThe IRS employee usually makes the ultimate
decision, not the taxpayer.decision, not the taxpayer.

17. TiersTiers
 First Tier- Abatement/Adjustment when tax,First Tier- Abatement/Adjustment when tax,
penalty, or interest incorrectpenalty, or interest incorrect
 Second Tier-Full paymentSecond Tier-Full payment
 Third Tier-Short extensionThird Tier-Short extension
 Fourth Tier-Installment AgreementFourth Tier-Installment Agreement
 Offer in compromiseOffer in compromise
 Currently not collectibleCurrently not collectible

18. WORKING WITH REVENUEWORKING WITH REVENUE
OFFICERSOFFICERS
 They have been instructed to collect as much ofThey have been instructed to collect as much of
the tax as possible.the tax as possible.
 Don’t jeopardize your reputation by providingDon’t jeopardize your reputation by providing
false information.false information.
 Some RO’s are hard to work with.Some RO’s are hard to work with.
 If you cannot communicate effectively with theIf you cannot communicate effectively with the
RO, call their manager.RO, call their manager.

19. WORKING WITH REVENUEWORKING WITH REVENUE
OFFICERSOFFICERS
 Often, RO’s will give you ideas to resolve yourOften, RO’s will give you ideas to resolve your
case. They may tell you that the case appears tocase. They may tell you that the case appears to
qualify for an Offer in compromise or anqualify for an Offer in compromise or an
installment agreementinstallment agreement
 But remember they will still try to collect asBut remember they will still try to collect as
much as possible.much as possible.

20. TAX LIENTAX LIEN
 Can be a “secret lien”Can be a “secret lien”
 Can be public lienCan be public lien
 Attaches to all property owned by the taxpayer.Attaches to all property owned by the taxpayer.

21. Tax LienTax Lien
 Can be releasedCan be released
 If an OIC is acceptedIf an OIC is accepted
 Bankruptcy dischargeBankruptcy discharge
 Innocent SpouseInnocent Spouse
 Paid in fullPaid in full
 Collection statute expiresCollection statute expires

22. TAX LEVYTAX LEVY
 A levy is a legal seizure of the taxpayer’sA levy is a legal seizure of the taxpayer’s
property to satisfy a tax debtproperty to satisfy a tax debt
 A levy attaches funds due to the taxpayer fromA levy attaches funds due to the taxpayer from
third parties, such asthird parties, such as
 Salary paymentsSalary payments
 Business receivables orBusiness receivables or
 Money in a bank accountMoney in a bank account

23. COLLECTION DUE PROCESSCOLLECTION DUE PROCESS
 If a taxpayer received either a Notice of FederalIf a taxpayer received either a Notice of Federal
Tax Lien or a notice of intent to levy, theTax Lien or a notice of intent to levy, the
taxpayer a right to a collection due processtaxpayer a right to a collection due process
hearing with Appeals.hearing with Appeals.

24. COLLECTION DUE PROCESSCOLLECTION DUE PROCESS
 IRS issues notice of intent to levy and right toIRS issues notice of intent to levy and right to
hearinghearing
 Exceptions:Exceptions:
 Jeopardy levyJeopardy levy
 Levy on state income tax refundLevy on state income tax refund
 Right to a hearing is after levyRight to a hearing is after levy
 Taxpayer must request hearing within 30 daysTaxpayer must request hearing within 30 days

25. Request for a HearingRequest for a Hearing
• Must be in writingMust be in writing
• Must include:Must include:
 Name, address, daytime telephone number, signature, and dateName, address, daytime telephone number, signature, and date
• Form 12153Form 12153
• Suspends collection statuteSuspends collection statute
• IRS may not levyIRS may not levy
• Right to judicial review of Appeals determination if requestedRight to judicial review of Appeals determination if requested
timelytimely

26. Equivalent hearingEquivalent hearing
• Late request for hearing (more than 30 days)Late request for hearing (more than 30 days)
• Same issues consideredSame issues considered
• No collection suspensionNo collection suspension
• IRS may levy, but generally will notIRS may levy, but generally will not
• No right to judicial review of Appeals decisionNo right to judicial review of Appeals decision

27. Nature of HearingNature of Hearing
 InformalInformal
 By correspondence, telephone, or face-to-faceBy correspondence, telephone, or face-to-face
meetingmeeting
 With an Appeals or Settlement Officer withWith an Appeals or Settlement Officer with
no prior involvement in case (unless waived)no prior involvement in case (unless waived)

28. What Appeals Considers:What Appeals Considers:
The “Big” ThreeThe “Big” Three
1.1. Did IRS follow required procedures?Did IRS follow required procedures?
2.2. Issues the taxpayer raisesIssues the taxpayer raises
3.3. Balancing the need for efficient taxBalancing the need for efficient tax
collection with the taxpayer’s legitimatecollection with the taxpayer’s legitimate
concerns re its intrusivenessconcerns re its intrusiveness

29. Issues the Taxpayer May RaiseIssues the Taxpayer May Raise
 Innocent SpouseInnocent Spouse
 Challenges to the appropriateness of theChallenges to the appropriateness of the
proposed collection actionproposed collection action
 Offers of Collection AlternativesOffers of Collection Alternatives

30. Challenges to the appropriateness ofChallenges to the appropriateness of
proposed actionproposed action
Excludes:Excludes:
Moral, religious, constitutional, conscientiousMoral, religious, constitutional, conscientious
objection, or similar grounds.objection, or similar grounds.
 Challenges to assessment process, unlessChallenges to assessment process, unless
separate FOIA requestseparate FOIA request

31. Collection AlternativesCollection Alternatives
 Installment AgreementsInstallment Agreements
 Offers In CompromiseOffers In Compromise
 Currently not collectibleCurrently not collectible

32. Underlying Liabilities???Underlying Liabilities???
Must consider:Must consider:
 Innocent spouseInnocent spouse
 Self-assessed returnsSelf-assessed returns
 Assessments for which no statutory notices wereAssessments for which no statutory notices were
issuedissued

33. Underlying Liabilities???Underlying Liabilities???
Must not consider:Must not consider:
 Liabilities for which taxpayer received statutoryLiabilities for which taxpayer received statutory
notice of deficiency (90-day letter)notice of deficiency (90-day letter)
 Other opportunity for Appeals considerationOther opportunity for Appeals consideration
 Example: Letter proposing trust fund recoveryExample: Letter proposing trust fund recovery
penaltypenalty

34. Issues PrecludedIssues Precluded
 Issues decided by a court, or raised andIssues decided by a court, or raised and
considered at a previous CDP hearing orconsidered at a previous CDP hearing or
Appeals conference regarding this tax liability,Appeals conference regarding this tax liability,
andand
 The taxpayer participated meaningfully in such aThe taxpayer participated meaningfully in such a
hearing or proceeding.hearing or proceeding.

35. Determination LetterDetermination Letter
Includes:Includes:
 Appeals determination re levy or notice of lienAppeals determination re levy or notice of lien
 Consideration of the “Big Three”Consideration of the “Big Three”
 Explains right to request judicial review inExplains right to request judicial review in
appropriate court within 30 daysappropriate court within 30 days

36. Judicial ReviewJudicial Review
Did Appeals abuse itsDid Appeals abuse its
discretion in this case?discretion in this case?

37. APPEALS PROCESSAPPEALS PROCESS
 To minimize the cost of litigation in both timeTo minimize the cost of litigation in both time
and money, the IRS encourages the resolution ofand money, the IRS encourages the resolution of
tax disputes through an administrative appealstax disputes through an administrative appeals
process.process.
 The Appeals Office provides the taxpayer with aThe Appeals Office provides the taxpayer with a
final opportunity to resolve the tax controversyfinal opportunity to resolve the tax controversy
without litigation.without litigation.

38. APPEALS PROCESSAPPEALS PROCESS
 The Appeals Office will review the case and make aThe Appeals Office will review the case and make a
determination that is fair and impartial to both thedetermination that is fair and impartial to both the
government and the taxpayer.government and the taxpayer.
 The meeting with the Appeals Employee is an informalThe meeting with the Appeals Employee is an informal
meeting.meeting.
 The Appeals Office has the authority to settle all factualThe Appeals Office has the authority to settle all factual
and legal issues raised by exam.and legal issues raised by exam.
 Appeals can also settle on the hazards of litigation.Appeals can also settle on the hazards of litigation.
 No hazards on an Offer in CompromiseNo hazards on an Offer in Compromise

39. ““DON’TS” IN APPEALSDON’TS” IN APPEALS
 Don’t go in unprepared.Don’t go in unprepared.
 Don’t argue frivolous issues.Don’t argue frivolous issues.
 Don’t talk down to Appeals OfficerDon’t talk down to Appeals Officer
 Don’t submit fraudulent documents.Don’t submit fraudulent documents.
 Don’t try to arbitrarily settle cases on aDon’t try to arbitrarily settle cases on a
percentage.percentage.

40. Expediting your case throughExpediting your case through
AppealsAppeals
 Set realistic target dates.Set realistic target dates.
 Follow up in writing the target dates discussed.Follow up in writing the target dates discussed.
 If the Appeals person is not meeting agreedIf the Appeals person is not meeting agreed
upon target dates, then you should contact theupon target dates, then you should contact the
Appeals Team Manager.Appeals Team Manager.

41. EX-PARTEEX-PARTE
COMMUNICATIONSCOMMUNICATIONS
 Appeals cannot have communications withAppeals cannot have communications with
another Service function without theanother Service function without the
participation of the taxpayer or taxpayer’sparticipation of the taxpayer or taxpayer’s
representative.representative.
 Appeals may ask questions that involveAppeals may ask questions that involve
ministerial, administrative or procedural mattersministerial, administrative or procedural matters
and do not address the substance of the issues.and do not address the substance of the issues.

42. APPEALS JUDICIAL APPROACHAPPEALS JUDICIAL APPROACH
AND CULTURE (AJAC)AND CULTURE (AJAC)
 In July 2013, the Appeals function implementedIn July 2013, the Appeals function implemented
AJACAJAC
 AJAC impactsAJAC impacts
 New issuesNew issues
 Docketed casesDocketed cases
 Offer in compromisesOffer in compromises
 Collection Due Process casesCollection Due Process cases

43. AJACAJAC
NEW ISSUESNEW ISSUES
 New issues will not be raised by Appeals
 Appeals also will not reopen an issue on which
the taxpayer and the Service are in agreement..

44. AJACAJAC
CDP CASESCDP CASES
 CDP files sent to Appeals should contain
sufficient documentation for Appeals to make a
determination..
 If a CDP file lacks documentation, it cannot be
returned to Collection as a premature referral
due to statutory requirements
 Appeals will either secure the information or willAppeals will either secure the information or will
make a determination based on information inmake a determination based on information in
the file.the file.

45. AJACAJAC
CDP CASESCDP CASES
 If a taxpayer asks for a collection alternative andIf a taxpayer asks for a collection alternative and
the taxpayer does not qualify for a guaranteed orthe taxpayer does not qualify for a guaranteed or
streamlined IAstreamlined IA
 A Collection Information Statement of 12 monthsA Collection Information Statement of 12 months
or less is considered current.or less is considered current.
 Appeals will treat a current CIS that comes with a
CDP case will be deemed verified since Collection
reviewed it or had an opportunity to review it.

46. AJACAJAC
OIC CASESOIC CASES
 In a non-CDP OIC case, Appeals will not “re-work”
the offer rejected by Collection. Appeals will consider
those items in dispute at the time of the rejection
 A case will not be returned as a premature referral
where Collection did not fully develop certain issues.
Weigh Collection’s development of the issue versus
information and testimony provided by the taxpayer,
and make the decision based upon those factors.
 The Appeals hearing officer will not request
information or evidence (from any party) solely for the
purpose of strengthening the government's case.

47. AJACAJAC
OIC CASESOIC CASES
 Agreed RCP issues that were previously
addressed during the investigation by Collection
will not be re-examined by Appeals.
 Appeals employees will not attempt to identify
and value any additional assets. In addition,
Appeals employees should not revise the value
of an asset to an amount that is higher than
previously determined by Collection.

48. WHAT’S NEW IN APPEALS
 Virtual Service Delivery
 Quick Look Process

49. STATUTE OF LIMITATIONS
AND
TRANSCRIPT AWARENESS

50. ASSESSMENT STATUTE
 The form 1040 is due three and a half
months after the close of a taxable year or
fiscal year. The assessment statute is three
(3) years from when a return is filed (if filed
before the due date, the actual due date for
the return begins the due date for the return)

51. ASSESSMENT STATUTE
 The 1120 is due 15th of the third month after
the close of the entity’s taxable year or fiscal
year. Early and late return provisions apply as
with Form 1040; regular statute is three years.

52. ASSESSMENT STATUTE
6 year statute
 If taxpayer omits from gross income an amount
properly includible in income that is in excess of
25% of the gross income reported on the return,
the statute becomes six years IRC Sec. 6501(e)
(1)

53. MISCELLANEOUS STATUTE
ISSUES
 Delinquent return filed after SFR – three year
statute begins upon filing of delinquent return.
 Failure to file – no statute IRC 6501(c)(3)
 False or fraudulent return – no statute IRC
6501(c)(1)
 Net Operating Loss – statute of carryback years,
with respect to this issue, is controlledby the
statute on the originating year of the NOL

54. MISCELLANEOUS STATUTE
ISSUES
 Claims-A refund claim is timely if it is filed
within three years from the date on which the
original return was filed, or two years from the
time the tax was paid (whichever occurs later). If
no return is filed, the period for filing a refund
claim expires two years from the time the tax
was paid. A substitute return prepared by the
IRS does not constitute a return filed by the
taxpayer for this purpose.

55. TRUST FUND RECOVERY
PENALTY
 The IRS has 3 years from the later of the
succeeding April 15th or from the date the
return was filed to assess the Trust Fund
Recovery Penalty against the responsible
person. For example, if the corporation files
a 941 tax return for the period ended 9/30/12
by 10/31/12, the IRS has until 4/15/2016 to
assess the penalty against the responsible
person for any unpaid trust fund taxes still
outstanding for that quarter.

56. MISCELLANEOUS STATUTE
ISSUES
 Notice of Deficiency suspends statute for 90 days (150
days if mailed outside the U.S.) to allow taxpayer to file
Tax Court petition. Another 60 days is added to the
statute to allow the assessment to be made.
 Notice of Deficiency – If a taxpayer agrees during the
90 day period, the 90 day period ends on the date the
agreement form is received. The revised statute date is
generally the number of days between the notice
issuance and the agreement receipt date, plus 60 days,
added to the original statute date

57. Collection Statute Expiration
Date - CSED

58. IRC 6502
Tax may be collected by levy or by a proceeding in
court, but only if begun:
--within 10 years of assessment, or
--prior to expiration of any period agreed on
with Secretary and taxpayer before the ten years
expires.

59. Suspension & Extension of
CSED
 Suspension:
 halts the running of the statute, which results in
extension of general CSED.
 Extension:
 Addition of time at the end of general 10-year
period.

60. Waiver - After 12/31/99:
Only with I/A
Limited to 5-year extension by policy

61. 6503 Suspensions:
 (a): Notice of Deficiency
 (b): Custodia Legis
 (c): TP outside of US
 (f): Wrongful levy
 (h): Bankruptcy

62. Other suspensions:
 IRC 7811(d): Taxpayer Assistance Order
 IRC 7508: Military Deferments
 Certain collection suits
 IRC 6015(2): Innocent spouse
 Involves only 6015(b) and (c).
 CSED is suspended during period no levy may be made
pursuant to 6015(e)(1)(B).

63. IRC 6330(e): Collection Due Process
 Suspension of CSED for period while hearing is
pending, and any appeals.
 CSED won’t expire less than 90 days after final
determination.

64. TRANSCRIPTS
 Return Transcript
 includes most of the line items of a tax return as
filed with the IRS. Transcripts are only available for
the following returns: Form 1040 series, Form 1065,
Form 1120, Form 1120A, Form 1120H, Form
1120L, and Form 1120S.

65. TRANSCRIPTS
 Account Transcript
 Contains information on the financial status of the
account, such as payments made on the account,
penalty assessments, and adjustments made by you
or the IRS after the return was filed. Return
information is limited to items such as tax liability
and estimated tax payments. Account transcripts are
available for most returns.

66. TRANSCRIPTS
 Record of Account
 is a combination of line item information and later
adjustments to the account. Available for the current
year and three prior tax years.

67. TRANSCRIPTS
 Individual Master File (IMF)
 IMF is the Individual Master File. This file shows all
individual returns and transactions that occur on
individual returns.

68. TRANSCRIPTS
 Business Master File (BMF)
 All tax data and related information pertaining to
individual business income taxpayers are posted
to the BMF.

69. TRANSCRIPTS
 NON-MASTER FILE (NMF)
 This is a database that has entries that cannot be
input on the master file. A NMF taxpayer may have
several accounts for the same tax period