IRS Examination Selection Process-What Happens to Tax Returns After They are Filed (Currently Unavailable)

Author: Stuart P Sobel

There are some lotteries you want to win, but the IRS "audit lottery" is not one of them. Although to many tax practitioners the IRS seems to be a clandestine organization, the vast majority of its practices and procedures are public information.

The IRS could do a much better job of educating its customers (tax practitioners) about the intricacies of the tax system.

Once the Internal Revenue receives a filed tax return for processing, many actions occur. First refunds are generated and balances due are processed. This course will unravel and demystify what happens next.

Computers, classifiers, referrals, informants, and many other sources generate IRS examinations. The IRS is selective in determining which tax returns it will examine, but many examinations could have been avoided if the tax returns themselves had provided a bit more information and clarification. This course is a must for practitioners who need more knowledge about the IRS's ever-changing methods of audit selection.

Publication Date: November 2014

Designed For
Tax practitioners involved in the planning and preparation of all types of tax returns.

Topics Covered

• IRS initial processing of a tax return
• How to research in the Internal Revenue Manual
• DIF — Discriminate Information Function — overview of the IRS computer selection process
• IRS planning process — formation of the IRS examination plan and its impact on determining which returns are selected for examination
• IRS statistics relating to return selection
• IRS policy statements — determining the substantially correct amount of tax
• IRS classification process — what happens after the computer selects a return and what the (human being) classifier looks for when determining which returns are selected for audit
• Overview of IRS special programs — tax shelters, tax protesters, S corporation compensation issues, EITC, itemized deductions, exemptions, T and E, unreported income, and many others
• IRS confidential informant program and rewards
• Correspondence, office, or field audit — criteria for selection
• Examination manager and Revenue Agent/Tax Auditor/Estate Tax Attorney authority to terminate an examination

Learning Objectives

• Differentiate the audit selection process
• Recognize how to reduce the chances of the IRS selecting returns for examination
• Identify improved comprehension of IRS terminology
• Recognize which section of the Internal Revenue Manual deals with examination
• Identify which IRS penalty can be asserted on a tax professional for promoting an abusive tax shelter
• Evaluate what occurs if a taxpayer attaches a Form 8275, Disclosure Statement, to a tax return
• Describe who is most likely to be examined for claimed travel and entertainment expenses
• Recognize which issues on filed S corporation returns the IRS scrutinize the most
• Identify recent court cases and which of the following was a major factor in determining whether an activity was a business or hobby
• Evaluate the mission of the IRS to collect
• Recognize which formula the computer uses to analyze filed tax returns
• Describe the percentage of tax practitioners deals with tax shelters
• Identify the forerunner of the NRP
• Evaluate the percentage of IRS examinations performed using correspondence techniques
• Recognize which IRS code section allows IRS personnel to go beyond books and records and to make adjustments for unreported income utilizing alternative sources of information
• Identify which entity has a higher overall tax rate
• Differentiate what test is applied to elect to postpone the determination that an activity was engaged into with the expectation of making a profit
• Recognize what a partner must do in order to deduct partnership expenses on Schedule E on a tax return
• Identify the number of days the Internal Revenue Manual allows the IRS to follow up on correspondence from a taxpayer's representative

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None