Dealing with the IRS can be a dangerous labyrinth for the untrained taxpayer or their non-tax advisors. In a recent Federal court case, E. John Rewwer, et al. v. United States, the taxpayers filed the wrong form claiming a refund and both the IRS and the DOJ Tax Division cried foul and tried to dismiss their case. Fortunately, the court found that the taxpayer’s filing met the “informal refund claim” requirements and denied the government’s motion.
The taxpayers received an unfavorable audit determination increasing their tax liabilities for 2007, 2008 and 2009. All amounts were paid and the taxpayers then filed IRS Form 843 (Claim for Refund and Request for Abatement) for all three years. The taxpayer’s attorney, not the taxpayers, signed the requests for refund but didn’t include IRS Form 2848 (Power of Attorney). The IRS allowed the 2008 claim but then denied the 2007 and 2009 claims, so the taxpayers appealed within the IRS. A taxpayer generally has two years from the date of the determination to file a refund suit in federal district court. The taxpayers didn’t hear from IRS Appeals, and the two years was expiring, so they filed their refund suit.
All kinds of penalties are being assessed by the Internal Revenue Service (IRS) against taxpayers, and more can be expected in the future. In 1954 there were 13 penalties in the Internal Revenue Code, and now there are more than 150. Taxpayers should not overlook the opportunity to request the IRS to abate penalties. The IRS abates many penalties for reasonable cause.
Once the IRS makes an assessment against a taxpayer, the taxpayer will receive several notices before the IRS takes enforced collection action.
Many people end up owing the IRS for many reasons and there are various options to resolve your tax debt. Some of the options include an offer in compromise, installment agreement, or currently non-collectible status.
There is a general misconception about what the IRS can and cannot do. Owing money to the IRS is not like owing any other creditor. The IRS is one of only a few creditors who can seize and sell your home even though state law may prohibit other creditors from doing the same.
Deadlines are important in legal matters, especially when it relates to tax issues. There are estimated tax deadlines, tax return filing deadlines, and a host of deadlines if a return is audited and any adjustments are challenged. Once you get to court in a tax dispute – more deadlines. Anytime a taxpayer misses a deadline they usually lose some portion, if not all, of the rights associated with that deadline. Imagine, however, that a taxpayer attempts to meet the deadline by mailing a document that the IRS claims they never received.
Field examinations involve returns with more complex issues, thereby requiring examination by someone more knowledgeable in the field of accounting and the Internal Revenue laws. Field examinations are conducted by Revenue Agents and are normally performed at the taxpayer’s place of business where the Revenue Agent can examine the taxpayer’s books and records and decide on the taxpayer’s correct taxable income and correct tax liability. The Revenue Agent is supposed to make an appointment with the taxpayer at a time and place that will be convenient for the taxpayer. The arrangement of the time and place can be done by telephone; however, the telephone contact cannot be used to verify items appearing on the income tax return.
While dealing with the IRS generally involves submitting documents or legal authority to support a client’s position, in most cases the element of negotiating is present. Negotiating becomes particularly important in dealing with the IRS where documentation may not exist, or the law is in the gray area. Most practitioners will find that when dealing with the Examination Division, 
One of the most powerful tools in the Internal Revenue Service arsenal is the John Doe summons. However, as we all learned from Spider-Man, with great power comes great responsibility.