Lesson 7.1.2 Structure of the IRS

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From the course by University of Illinois at Urbana-Champaign

Taxation of Business Entities II: Pass-Through Entities

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University of Illinois at Urbana-Champaign

Taxation of Business Entities II: Pass-Through Entities

1 оценка

Course 4 of 5 in the Specialization U.S. Federal Taxation

This course provides an introduction to the U.S. federal income taxation of pass-through business entities, including Subchapter S corporations, partnerships, and limited liability companies. The course focuses on the relevant provisions of Subchapters S and K of the Internal Revenue Code, as well as related Treasury Regulations and judicial opinions, governing the formation, operation, and termination of pass-through entities. Practical in-class study problems facilitate self-discovery of technical tax knowledge along with the development of a variety of professional skills and attitudes.

From the lesson

Module 7 Professional Tax Practice & Ethics

In this module, you will examine the ethical guidelines that encompass the professional tax practice. It will begin with a discussion of the mission and authority of the Internal Revenue Service (IRS), the enforcement agency overseeing the professional tax industry. Next, we will highlight the various penalties that can be assessed at the taxpayer level, both civil and criminal. Finally, you will be introduced to the ethical standards imposed upon tax advisors: Circular 230 and AICPA standards.

Lesson 7.1.1 The IRS Mission3:04

Lesson 7.1.2 Structure of the IRS3:14

Lesson 7.1.3 Powers of the IRS2:47

Lesson 7.1.4 Tax Return Audits6:40

Lesson 7.1.5 The Tax Gap1:25

Meet the Instructors

Michael P Donohoe, PhD, CPA
Associate Professor of Accountancy and PwC Faculty Fellow
Department of Accountancy, Gies College of Business

The IRS intentionally has an organizational structure that closely resembles

a private sector model of organizing around customers with similar needs.

Noticeably, the Commissioner,

a presidential appointee who serves a five year renewable term,

is ultimately responsible for the operations and activities of the entire agency.

Several specialized units report directly to the Commissioner,

these include critical and other national level services such as Chief of Staff,

IRS Chief Counsel, Appeals,

and Taxpayer Advocate Services.

For instance, the Chief Counsel is the head legal officer.

As a presidential appointee,

the Chief Counsel provides legal advice to the IRS and guidance to

the public on matters pertaining to the administration and enforcement of tax laws.

The Chief Counsel also represents the IRS in all litigation before the US Tax Court.

In addition, the Taxpayer Advocate Service is an independent organization within the IRS.

Its goal is to ensure that every taxpayer is treated

fairly and that taxpayers know and understand their rights.

In addition to helping taxpayers when normal IRS channels are ineffective,

the Service also reports structural problems in tax administration directly to Congress.

From here, there are Deputy Commissioners responsible for

services and enforcement and operation support.

For services and enforcement,

most divisions are based on the type of tax return involved.

They include the Wages and Investment division,

Large Business and International division,

Small Business/Self-Employed division, and Tax-Exempt and Government Entities division.

For example, the Large Business and International division

focuses its efforts on Subchapter C Corporations,

Subchapter S Corporations, and partnerships with assets greater than $10 million.

Other service and enforcement functions include

the Criminal Investigations division and the Whistleblower Office.

The Criminal Investigations division focuses on

high-profile criminal activity including abusive return prepare fraud,

abuse of tax scheme fraud,

identity theft fraud, terrorism financing, and more.

During fiscal year 2016,

the division initiated 3,395 new

investigations with a large majority of those cases involving narcotics.

The Whistleblower Office offers rewards to informants who provide the IRS

with information about substantial business or individual tax deficiencies.

When the information is useful,

an informant could be awarded up to 30 percent of taxes collected by the IRS.

However, it can take many years for a case to settle,

it might even involve substantial legal fees to obtain an award.

Finally, the operations support function involves

shared services such as Human Resources, Procurement and Technology.

Overall, like any private sector business organization,

the IRS structure aims to make the most efficient use of its resources.

It seems to be working, as the IRS is one of

the world's most efficient tax administrators spending

about 35 cents for every 100 dollars collected.

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