W4 & W8

W4- D1

Locate a revenue ruling or other regulation.  Explain what the ruling/regulation covers and how you might use that is support in your tax research.  Also, identify any areas that you feel might be considered vague and open to interpretation.  

C#1

Professor and Classmates,

A revenue ruling is an official interpretation by the Internal Revenue Code's Service, related statutes, tax treaties, and regulations (IRS, 2020). The Service's conclusion on how the law applied to a specific set of facts.

The Revenue Ruling of 2008-47 Section 6621 of the Internal Revenue Code establishes interest rates on tax overpayments and tax underpayments. Section 6621(a)(1) stated that the overpayment rate is the sum of the federal short-term rate plus three percentage points except for the quality of the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal short-term rate plus 0.5 of a percentage point (IRS, 2020).  In section 6621(a)(2), the underpayment rate is the sum of the national short-term rate plus three percentage points. Lastly, Section 6621(c) determines the purpose of interest payable on any large corporation underpayment.

Additionally, Section 6621(d) anticipates relief in the form of "interest netting" so that such taxpayer with simultaneously over and underpayment does not owe interest to the Service, to the extent those payments overlap and offset (Berke, 2018). Furthermore, Section 6621(d) points out how interest accrues on the potential offsetting payments. The interest rate that large corporate taxpayers must pay the Service on tax underpayment, which is 4.5 percentage points higher than the interest rate on corporations’ tax overpayments (Berke, 2018).

I believe that the Revenue ruling of 2008-47 of Section 6621 is essential for tax researchers because it discusses the possible use of these ruling to their client that acquires a business interest that may qualify for either deduction or deferral. It also helps in the examination of underpayment or overpayment rate concerning corporation taxpayers.

D2

What is an IRS Announcement?  When is it used?  In your opinion, could a tax practitioner rely on an IRS Announcement as authority for a tax return position?  Would your answer change at all if we are talking about an IRS Notice?

C#2

Professor and Classmates,

IRS announcement is the weekly public pronouncement publish in Internal Revenue Bulletin. It concerns tax matters on explanations of rulings, form information, and effective dates of temporary regulations. However, it is not included in Cumulative Bulletin but is issued when substantive nature is needed promptness.

According to McMahon (2020), IRS announcements serve only to summarize the law without adding substantive interpretation and particularly for only immediate or short-term value. Tax practitioners can rely on an IRS announcement as authority for a tax return position, but they should confirm and use proper research techniques. Nonetheless, IRS Announcements use to alert interested parties that certain entities had lost their tax-exempt status and tax practitioners sanctioned by the IRS (McMahon, 2020).

I believe that my answer would not change at all if we are talking about an IRS notice. Hickman (2012) mentioned that the IRS notice represents final agency action that determines taxpayer rights and obligations and binds the IRS. Generally, the IRS takes the position by providing guidance documents like Notice and Pronouncements that includes the interpretative rules or policy statements (Hickman, 2021).

References

W8

C#1

Hello Professor and classmates,

As originally introduced in June 2000, the SEC rules would have had a substantial effect on audit firms supplying audit clients with tax related services. The general independence principles of the proposal specified that independence would be undermined when the auditor acted as an agent for the audit client. Without any more transparency or compromised independence, the original SEC draft cast doubt about whether the auditor will do anything more than review the tax clause in the financial statements or prepare the client's tax returns. The amendment would have excluded "value-added" and advocacy fees for audit clients as well. The SEC sought comments on whether supplying audit clients with tax opinions would compromise the independence of an auditor. The AICPA tax executive committee noted the SEC’s inconsistency in excluding “tax-related services” and yet emphasizing that the exclusion applied only to “traditional tax preparation services.” Commentators said the legal system must temper any propensity to actual or apparent prejudice that a CPA rendering such an opinion might have in talking about tax opinions. The comments suggested that any lack of freedom, rather than the presence of a specific service relationship, should be assessed circumstantially.The final rules take a more moderate approach on audit firms that provide audit clients with tax-related services. The presence of advocacy, as originally suggested, was a definitive impairment of independence. However, in the final rules, the SEC shifted advocacy as one of four values to be considered in making determinations of independence.

C#2

While the traditional method of filing tax returns with paper tax forms is possible, there are now many taxpayers who rely on tax preparation software to easily and accurately plan and file their taxes. Over the past few years, tax software programs have grown in popularity, but tax software programs have advantages and disadvantages, as all other software programs.One of the main benefits of using a tax software program is that it is fairly simple and easy to use. Tax software systems are normally step-by-step; thus, many people will complete a tax return quicker and in less than half the time than on conventional paper. The software versions that provide both state and federal tax forms are favored by many taxpayers who use tax software. The majority of software systems would move the data to a state tax return from a federal return. Not only does this save time, it also means that the information found on a state tax return is correct. Another benefit of using a software program for tax planning is that it costs less than using a tax professional's services. In general, tax preparation fees depend on where taxes are prepared, how many tax forms need to be done, and how complex they are. E filing makes it easier to receive and process a tax return faster, which also helps in taxpayers receiving their tax refunds earlier. Tax software helps a lot, especially in those calculations that do not require a great deal of interpretation. However, when the taxpayer has more complex and tax-relevant businesses and operations, tax systems have limitations. Automated systems do not have the ability to interpret laws, and the fact that laws are constantly changing is a challenge for system designers. It is almost impossible for such systems to include real-time updates and offer solutions to contingencies on interpretation and application of the tax law.

References