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1040ez2012 3. 1040ez2012 Dispositions of Business Property Table of Contents Introduction Useful Items - You may want to see: What Is a Disposition of Property?Like-kind exchanges. 1040ez2012 How Do I Figure a Gain or Loss?Is My Gain or Loss Ordinary or Capital? Is My Capital Gain or Loss Short Term or Long Term? Where Do I Report Gains and Losses? Introduction If you dispose of business property, you may have a gain or loss that you report on Form 1040. 1040ez2012 However, in some cases you may have a gain that is not taxable or a loss that is not deductible. 1040ez2012 This chapter discusses whether you have a disposition, how to figure the gain or loss, and where to report the gain or loss. 1040ez2012 Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property Sch D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting publications and forms. 1040ez2012 What Is a Disposition of Property? A disposition of property includes the following transactions. 1040ez2012 You sell property for cash or other property. 1040ez2012 You exchange property for other property. 1040ez2012 You receive money as a tenant for the cancellation of a lease. 1040ez2012 You receive money for granting the exclusive use of a copyright throughout its life in a particular medium. 1040ez2012 You transfer property to satisfy a debt. 1040ez2012 You abandon property. 1040ez2012 Your bank or other financial institution forecloses on your mortgage or repossesses your property. 1040ez2012 Your property is damaged, destroyed, or stolen, and you receive property or money in payment. 1040ez2012 Your property is condemned, or disposed of under the threat of condemnation, and you receive property or money in payment. 1040ez2012 For details about damaged, destroyed, or stolen property, see Publication 547, Casualties, Disasters, and Thefts. 1040ez2012 For details about other dispositions, see chapter 1 in Publication 544. 1040ez2012 Nontaxable exchanges. 1040ez2012 Certain exchanges of property are not taxable. 1040ez2012 This means any gain from the exchange is not recognized and you cannot deduct any loss. 1040ez2012 Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. 1040ez2012 Like-kind exchanges. 1040ez2012 A like-kind exchange is the exchange of property for the same kind of property. 1040ez2012 It is the most common type of nontaxable exchange. 1040ez2012 To be a like-kind exchange, the property traded and the property received must be both of the following. 1040ez2012 Business or investment property. 1040ez2012 Like property. 1040ez2012 Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. 1040ez2012 For more information about like-kind exchanges, see chapter 1 in Publication 544. 1040ez2012 Installment sales. 1040ez2012 An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 1040ez2012 If you finance the buyer's purchase of your property, instead of having the buyer get a loan or mortgage from a third party, you probably have an installment sale. 1040ez2012 For more information about installment sales, see Publication 537, Installment Sales. 1040ez2012 Sale of a business. 1040ez2012 The sale of a business usually is not a sale of one asset. 1040ez2012 Instead, all the assets of the business are sold. 1040ez2012 Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. 1040ez2012 Both the buyer and seller involved in the sale of a business must report to the IRS the allocation of the sales price among the business assets. 1040ez2012 Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 1040ez2012 The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 1040ez2012 For more information about the sale of a business, see chapter 2 of Publication 544. 1040ez2012 How Do I Figure a Gain or Loss? Table 3-1. 1040ez2012 How To Figure a Gain or Loss IF your. 1040ez2012 . 1040ez2012 . 1040ez2012 THEN you have a. 1040ez2012 . 1040ez2012 . 1040ez2012 Adjusted basis is more than the amount realized Loss. 1040ez2012 Amount realized is more than the adjusted basis Gain. 1040ez2012 Basis, adjusted basis, amount realized, fair market value, and amount recognized are defined next. 1040ez2012 You need to know these definitions to figure your gain or loss. 1040ez2012 Basis. 1040ez2012 The cost or purchase price of property is usually its basis for figuring the gain or loss from its sale or other disposition. 1040ez2012 However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. 1040ez2012 For more information about basis, see Publication 551, Basis of Assets. 1040ez2012 Adjusted basis. 1040ez2012 The adjusted basis of property is your original cost or other basis plus certain additions, and minus certain deductions such as depreciation and casualty losses. 1040ez2012 In determining gain or loss, the costs of transferring property to a new owner, such as selling expenses, are added to the adjusted basis of the property. 1040ez2012 Amount realized. 1040ez2012 The amount you realize from a disposition is the total of all money you receive plus the fair market value of all property or services you receive. 1040ez2012 The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. 1040ez2012 Fair market value. 1040ez2012 Fair market value is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 1040ez2012 Amount recognized. 1040ez2012 Your gain or loss realized from a disposition of property is usually a recognized gain or loss for tax purposes. 1040ez2012 Recognized gains must be included in gross income. 1040ez2012 Recognized losses are deductible from gross income. 1040ez2012 However, a gain or loss realized from certain exchanges of property is not recognized. 1040ez2012 See Nontaxable exchanges, earlier. 1040ez2012 Also, you cannot deduct a loss from the disposition of property held for personal use. 1040ez2012 Is My Gain or Loss Ordinary or Capital? You must classify your gains and losses as either ordinary or capital gains or losses. 1040ez2012 You must do this to figure your net capital gain or loss. 1040ez2012 Generally, you will have a capital gain or loss if you dispose of a capital asset. 1040ez2012 For the most part, everything you own and use for personal purposes or investment is a capital asset. 1040ez2012 Certain property you use in your business is not a capital asset. 1040ez2012 A gain or loss from a disposition of this property is an ordinary gain or loss. 1040ez2012 However, if you held the property longer than 1 year, you may be able to treat the gain or loss as a capital gain or loss. 1040ez2012 These gains and losses are called section 1231 gains and losses. 1040ez2012 For more information about ordinary and capital gains and losses, see chapters 2 and 3 in Publication 544. 1040ez2012 Is My Capital Gain or Loss Short Term or Long Term? If you have a capital gain or loss, you must determine whether it is long term or short term. 1040ez2012 Whether a gain or loss is long or short term depends on how long you own the property before you dispose of it. 1040ez2012 The time you own property before disposing of it is called the holding period. 1040ez2012 Table 3-2. 1040ez2012 Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. 1040ez2012 . 1040ez2012 . 1040ez2012 THEN you have a. 1040ez2012 . 1040ez2012 . 1040ez2012 1 year or less Short-term capital gain or loss. 1040ez2012 More than 1 year Long-term capital gain or loss. 1040ez2012 For more information about short-term and long-term capital gains and losses, see chapter 4 of Publication 544. 1040ez2012 Where Do I Report Gains and Losses? Report gains and losses from the following dispositions on the forms indicated. 1040ez2012 The instructions for the forms explain how to fill them out. 1040ez2012 Dispositions of business property and depreciable property. 1040ez2012 Use Form 4797. 1040ez2012 If you have taxable gain, you may also have to use Schedule D (Form 1040). 1040ez2012 Like-kind exchanges. 1040ez2012 Use Form 8824, Like-Kind Exchanges. 1040ez2012 You may also have to use Form 4797 and Schedule D (Form 1040). 1040ez2012 Installment sales. 1040ez2012 Use Form 6252, Installment Sale Income. 1040ez2012 You may also have to use Form 4797 and Schedule D (Form 1040). 1040ez2012 Casualties and thefts. 1040ez2012 Use Form 4684, Casualties and Thefts. 1040ez2012 You may also have to use Form 4797. 1040ez2012 Condemned property. 1040ez2012 Use Form 4797. 1040ez2012 You may also have to use Schedule D (Form 1040). 1040ez2012 Prev Up Next Home More Online Publications
Understanding Your CP282 Notice
You received this notice because you indicated on your Form 1065, U.S. Return of Partnership Income, or Form1065-B, U.S. Return of Income for Electing Large Partnerships, that you have foreign partners.
Generally, when a foreign person engages in a trade or business in the United States, all income from sources in the United States connected with the conduct of that trade or business is considered to be Effectively Connected Taxable Income (ECTI). A partnership (foreign or domestic) that has income effectively connected with a U.S. trade or business (or income treated as effectively connected) must pay a withholding tax on the ECTI that it allocates to its foreign partners (Section 1446 of the Internal Revenue Code). The partnership, or a withholding agent for the partnership, must pay the withholding tax. A partnership that must pay the withholding tax but fails to do so may be liable for the payment of the tax plus any penalties and interest.
What you need to do if you determine you are liable for withholding:
Page Last Reviewed or Updated: 30-Jan-2014
Printable samples of this notice (PDF)
Tax publications you may find useful
How to get help
- Call the 1-800 number listed on the top right corner of your notice.
- Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
- See if you qualify for help from a Low Income Taxpayer Clinic.
1040ez2012 Publication 556 - Main Content Table of Contents Examination of ReturnsIf Your Return Is Examined Interest Netting Abatement of Interest Due to Error or Delay by the IRS Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Offer in Compromise Appeal RightsAppeal Within the IRS Appeals to the Courts Refund or Credit of Overpayments Before Final Determination Claims for RefundTime for Filing a Claim for Refund Limit on Amount of Refund Processing Claims for Refund Reduced Refund How To Get Tax Help Examination of Returns Your return may be examined for a variety of reasons, and the examination may take place in any one of several ways. 1040ez2012 After the examination, if any changes to your tax are proposed, you can either agree with those changes and pay any additional tax you may owe, or you can disagree with the changes and appeal the decision. 1040ez2012 Examination selection criteria. 1040ez2012 Your return may be selected for examination on the basis of computer scoring. 1040ez2012 A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. 1040ez2012 If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability. 1040ez2012 Your return may also be selected for examination on the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return. 1040ez2012 Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue. 1040ez2012 In addition, your return may be selected as a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. 1040ez2012 This information can come from a number of sources, including newspapers, public records, and individuals. 1040ez2012 The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation. 1040ez2012 Notice of IRS contact of third parties. 1040ez2012 The IRS must give you reasonable notice before contacting other persons about your tax matters. 1040ez2012 You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. 1040ez2012 The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. 1040ez2012 This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. 1040ez2012 Taxpayer Advocate Service. 1040ez2012 The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. 1040ez2012 If you have an ongoing issue with the IRS that has not been resolved through normal processes, or your problems with the IRS are causing financial difficulty, contact the Taxpayer Advocate Service. 1040ez2012 Before contacting the Taxpayer Advocate Service, you should first discuss any problem with a supervisor. 1040ez2012 Your local Taxpayer Advocate will assist you if you are unable to resolve the problem with the supervisor. 1040ez2012 For more information, see Publication 1546. 1040ez2012 See How To Get Tax Help , near the end of this publication, for more information about contacting the Taxpayer Advocate Service. 1040ez2012 Comments from small business. 1040ez2012 The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards have been established to receive comments from small business about federal agency enforcement actions. 1040ez2012 The Ombudsman will annually evaluate the enforcement activities of each agency and rate their responsiveness to small business. 1040ez2012 If you wish to comment on the enforcement actions of the IRS, you can take any of the following steps. 1040ez2012 Fax your comments to 1-202-481-5719. 1040ez2012 Write to the following address: Office of the National Ombudsman U. 1040ez2012 S. 1040ez2012 Small Business Administration 409 3rd Street, SW Washington, DC 20416 Call 1-888-734-3247. 1040ez2012 Send an email to ombudsman@sba. 1040ez2012 gov. 1040ez2012 File a comment or complaint online at www. 1040ez2012 sba. 1040ez2012 gov/ombudsman. 1040ez2012 If Your Return Is Examined Some examinations are handled entirely by mail. 1040ez2012 Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. 1040ez2012 If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. 1040ez2012 However, the IRS makes the final determination of when, where, and how the examination will take place. 1040ez2012 Throughout the examination, you can act on your own behalf or have someone represent you or accompany you. 1040ez2012 If you filed a joint return, either you or your spouse, or both, can meet with the IRS. 1040ez2012 The person representing you can be any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent (a person enrolled to practice before the IRS), an enrolled actuary, or the person who prepared the return and signed it as the preparer. 1040ez2012 If you want someone to represent you in your absence, you must furnish that person with proper written authorization. 1040ez2012 You can use Form 2848 or any other properly written authorization. 1040ez2012 If you want to consult with an attorney, a certified public accountant, an enrolled agent, or any other person permitted to represent a taxpayer during an interview for examining a tax return or collecting tax, you should make arrangements with that person to be available for the interview. 1040ez2012 In most cases, the IRS must suspend the interview and reschedule it. 1040ez2012 The IRS cannot suspend the interview if you are there because of an administrative summons. 1040ez2012 Third party authorization. 1040ez2012 If you checked the box in the signature area of your income tax return (Form 1040, Form 1040A, or Form 1040EZ) to allow the IRS to discuss your return with another person (a third party designee), this authorization does not replace Form 2848. 1040ez2012 The box you checked on your return only authorizes the other person to receive information about the processing of your return and the status of your refund during the period your return is being processed. 1040ez2012 For more information, see the instructions for your return. 1040ez2012 Confidentiality privilege. 1040ez2012 Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. 1040ez2012 Confidential communications are those that: Advise you on tax matters within the scope of the practitioner's authority to practice before the IRS, Would be confidential between an attorney and you, and Relate to noncriminal tax matters before the IRS, or Relate to noncriminal tax proceedings brought in federal court by or against the United States. 1040ez2012 In the case of communications in connection with the promotion of a person's participation in a tax shelter, the confidentiality privilege does not apply to written communications between a federally authorized practitioner and that person, any director, officer, employee, agent, or representative of that person, or any other person holding a capital or profits interest in that person. 1040ez2012 A tax shelter is any entity, plan, or arrangement, a significant purpose of which is the avoidance or evasion of income tax. 1040ez2012 Recordings. 1040ez2012 You can make an audio recording of the examination interview. 1040ez2012 Your request to record the interview should be made in writing. 1040ez2012 You must notify the examiner 10 days in advance and bring your own recording equipment. 1040ez2012 The IRS also can record an interview. 1040ez2012 If the IRS initiates the recording, you must be notified 10 days in advance and you can get a copy of the recording at your expense. 1040ez2012 Transfers to another area. 1040ez2012 Generally, your return is examined in the area where you live. 1040ez2012 But if your return can be examined more quickly and conveniently in another area, such as where your books and records are located, you can ask to have the case transferred to that area. 1040ez2012 Repeat examinations. 1040ez2012 The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. 1040ez2012 If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability, please contact the IRS as soon as possible to see if the examination should be discontinued. 1040ez2012 The Examination An examination usually begins when you are notified that your return has been selected. 1040ez2012 The IRS will tell you which records you will need. 1040ez2012 The examination can proceed more easily if you gather your records before any interview. 1040ez2012 Any proposed changes to your return will be explained to you or your authorized representative. 1040ez2012 It is important that you understand the reasons for any proposed changes. 1040ez2012 You should not hesitate to ask about anything that is unclear to you. 1040ez2012 The IRS must follow the tax laws set forth by Congress in the Internal Revenue Code. 1040ez2012 The IRS also follows Treasury Regulations, other rules, and procedures that were written to administer the tax laws and court decisions. 1040ez2012 However, the IRS can lose cases that involve taxpayers with the same issue and still apply its interpretation of the law to your situation. 1040ez2012 Most taxpayers agree to changes proposed by examiners, and the examinations are closed at this level. 1040ez2012 If you do not agree, you can appeal any proposed change by following the procedures provided to you by the IRS. 1040ez2012 A more complete discussion of appeal rights is found later under Appeal Rights . 1040ez2012 If You Agree If you agree with the proposed changes, you can sign an agreement form and pay any additional tax you may owe. 1040ez2012 You must pay interest on any additional tax. 1040ez2012 If you pay when you sign the agreement, the interest is generally figured from the due date of your return (excluding any extension of time to file) to the date of your payment. 1040ez2012 If you do not pay the additional tax when you sign the agreement, you will receive a bill that includes interest. 1040ez2012 If you pay the amount due within 10 business days of the billing date, you will not have to pay more interest or penalties. 1040ez2012 This period is extended to 21 calendar days if the amount due is less than $100,000. 1040ez2012 If you are due a refund, you will receive it sooner if you sign the agreement form. 1040ez2012 You will be paid interest on the refund. 1040ez2012 If the IRS accepts your tax return as filed, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. 1040ez2012 You should keep this letter with your tax records. 1040ez2012 If You Do Not Agree If you do not agree with the proposed changes, the examiner will explain your appeal rights. 1040ez2012 If your examination takes place in an IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. 1040ez2012 If an agreement is reached, your case will be closed. 1040ez2012 If you cannot reach an agreement with the supervisor at this meeting, or if the examination took place outside of an IRS office, the examiner will write up your case explaining your position and the IRS's position. 1040ez2012 The examiner will forward your case for processing. 1040ez2012 Fast track mediation. 1040ez2012 The IRS offers fast track mediation services to help taxpayers resolve many disputes resulting from: Examinations (audits), Offers in compromise, Trust fund recovery penalties, and Other collection actions. 1040ez2012 Most cases that are not docketed in any court qualify for fast track mediation. 1040ez2012 Mediation can take place at a conference you request with a supervisor, or later. 1040ez2012 The process involves an Appeals Officer who has been trained in mediation. 1040ez2012 You may represent yourself at the mediation session, or someone else can act as your representative. 1040ez2012 For more information, see Publication 3605. 1040ez2012 30-day letter and 90-day letter. 1040ez2012 Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. 1040ez2012 You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. 1040ez2012 The letter will explain what steps you should take, depending on which action you choose. 1040ez2012 Be sure to follow the instructions carefully. 1040ez2012 Appeal Rights are explained later. 1040ez2012 90-day letter. 1040ez2012 If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. 1040ez2012 You will have 90 days (150 days if it is addressed to you outside the United States) from the date of this notice to file a petition with the Tax Court. 1040ez2012 Filing a petition with the Tax Court is discussed later under Appeals to the Courts and Tax Court . 1040ez2012 The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. 1040ez2012 Suspension of interest and penalties. 1040ez2012 Generally, the IRS has 3 years from the date you filed your return (or the date the return was due, if later) to assess any additional tax. 1040ez2012 However, if you file your return timely (including extensions), interest and certain penalties will be suspended if the IRS does not mail a notice to you, stating your liability and the basis for that liability, within a 36-month period beginning on the later of: The date on which you filed your tax return, or The due date (without extensions) of your tax return. 1040ez2012 If the IRS mails a notice after the 36-month period, interest and certain penalties applicable to the suspension period will be suspended. 1040ez2012 The suspension period begins the day after the close of the 36-month period and ends 21 days after the IRS mails a notice to you stating your liability and the basis for that liability. 1040ez2012 Also, the suspension period applies separately to each notice stating your liability and the basis for that liability received by you. 1040ez2012 The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. 1040ez2012 Seeking relief from improperly assessed interest. 1040ez2012 You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. 1040ez2012 If you believe that interest was assessed with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where you filed your return. 1040ez2012 The IRS will review the Form 843 and notify you whether interest will be abated. 1040ez2012 If the IRS does not abate interest, you can pay the disputed interest assessment and file a claim for refund. 1040ez2012 If your claim is denied or not acted upon within 6 months from the date you filed it, you can file suit for a refund in your United States District Court or in the United States Court of Federal Claims. 1040ez2012 If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. 1040ez2012 If the IRS denies your claim, the Tax Court may be able to review that determination. 1040ez2012 See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . 1040ez2012 If you later agree. 1040ez2012 If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. 1040ez2012 Keep a copy for your records. 1040ez2012 You can pay any additional amount you owe without waiting for a bill. 1040ez2012 Include interest on the additional tax at the applicable rate. 1040ez2012 This interest rate is usually for the period from the due date of the return (excluding any extension of time to file) to the date of payment. 1040ez2012 The examiner can tell you the interest rate(s) or help you figure the amount. 1040ez2012 You must pay interest on penalties and additions to tax for failing to file returns, for overstating valuations, for understating valuations on estate and gift tax returns, and for substantially understating tax liability. 1040ez2012 Interest is generally figured from the date (including extensions) the tax return is required to be filed to the date you pay the penalty and/or additions to tax. 1040ez2012 If you pay the amount due within 10 business days after the date of notice and demand for immediate payment, you will not have to pay any additional penalties and interest. 1040ez2012 This period is extended to 21 calendar days if the amount due is less than $100,000. 1040ez2012 How To Stop Interest From Accruing If you think that you will owe additional tax at the end of the examination, you can stop the further accrual of interest by sending money to the IRS to cover all or part of the amount you think you will owe. 1040ez2012 Interest on part or all of any amount you owe will stop accruing on the date the IRS receives your money. 1040ez2012 You can send an amount either in the form of a deposit in the nature of a cash bond or as a payment of tax. 1040ez2012 Both a deposit and a payment stop any further accrual of interest. 1040ez2012 However, making a deposit or payment will stop the accrual of interest on only the amount you sent. 1040ez2012 Because of compounding rules, interest will continue to accrue on accrued interest, even though you have paid the underlying tax. 1040ez2012 To stop the accrual of interest on both tax and interest, you must make a deposit or payment for both the tax and interest that has accrued as of the date of deposit or payment. 1040ez2012 Payment or Deposit Deposits differ from payments in two ways: You can have all or part of your deposit returned to you without filing for a refund. 1040ez2012 However, if you request and receive your deposit and the IRS later assesses a deficiency for that period and type of tax, interest will be figured as if the funds were never on deposit. 1040ez2012 Also, your deposit will not be returned if one of the following situations applies: The IRS assesses a tax liability. 1040ez2012 The IRS determines that, by returning the deposit, it may not be able to collect a future deficiency. 1040ez2012 The IRS determines that the deposit should be applied against another tax liability. 1040ez2012 Deposits returned to you will include interest based on the Federal short-term rate determined under section 6621(b). 1040ez2012 The deposit returned will be treated as a tax payment to the extent of the disputed tax. 1040ez2012 A disputed tax means the amount of tax specified at the time of deposit as a reasonable estimate of the maximum amount of any tax owed by you, such as the deficiency proposed in the 30-day letter. 1040ez2012 Notice not mailed. 1040ez2012 If you send money before the IRS mails you a notice of deficiency, you can ask the IRS to treat it as a deposit. 1040ez2012 You must make your request in writing. 1040ez2012 If, after being notified of a proposed liability but before the IRS mails you a notice of deficiency, you send an amount large enough to cover the proposed liability, it will be considered a payment unless you request in writing that it be treated as a deposit. 1040ez2012 Keep copies of all correspondence you send to the IRS. 1040ez2012 If the amount you send is at least as much as the proposed liability and you do not request that it be treated as a deposit, the IRS will not send you a notice of deficiency. 1040ez2012 If you do not receive a notice of deficiency, you cannot take your case to the Tax Court. 1040ez2012 See Tax Court , later under Appeal Rights . 1040ez2012 Notice mailed. 1040ez2012 If, after the IRS mails the notice of deficiency, you send money without written instructions, it will be treated as a payment. 1040ez2012 You will still be able to petition the Tax Court. 1040ez2012 If you send money after receiving a notice of deficiency and you have specified in writing that it is a “deposit in the nature of a cash bond,” the IRS will treat it as a deposit if you send it before either: The close of the 90-day or 150-day period for filing a petition with the Tax Court to appeal the deficiency, or The date the Tax Court decision is final, if you have filed a petition. 1040ez2012 Using a Deposit To Pay the Tax If you agree with the examiner's proposed changes after the examination, your deposit will be applied against any amount you may owe. 1040ez2012 The IRS will not mail you a notice of deficiency and you will not have the right to take your case to the Tax Court. 1040ez2012 If you do not agree to the full amount of the deficiency after the examination, the IRS will mail you a notice of deficiency. 1040ez2012 Your deposit will be applied against the proposed deficiency unless you write to the IRS before the end of the 90-day or 150-day period stating that you still want the money to be treated as a deposit. 1040ez2012 You will still have the right to take your case to the Tax Court. 1040ez2012 Installment Agreement Request You can request a monthly installment plan if you cannot pay the full amount you owe. 1040ez2012 To be valid, your request must be approved by the IRS. 1040ez2012 However, if you owe $10,000 or less in tax and you meet certain other criteria, the IRS must accept your request. 1040ez2012 Before you request an installment agreement, you should consider other less costly alternatives, such as a bank loan. 1040ez2012 You will continue to be charged interest and penalties on the amount you owe until it is paid in full. 1040ez2012 Unless your income is below a certain level, the fee for an approved installment agreement has increased to $105 ($52 if you make your payments by electronic funds withdrawal). 1040ez2012 If your income is below a certain level, you may qualify to pay a reduced fee of $43. 1040ez2012 For more information about installment agreements, see Form 9465, Installment Agreement Request. 1040ez2012 Interest Netting If you owe interest to the IRS on an underpayment for the same period the IRS owes you interest on an overpayment, the IRS will figure interest on the underpayment and overpayment at the same interest rate (up to the amount of the overpayment). 1040ez2012 As a result, the net rate is zero for that period. 1040ez2012 Abatement of Interest Due to Error or Delay by the IRS The IRS may abate (reduce) the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act (discussed later). 1040ez2012 Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. 1040ez2012 The amount of interest will not be reduced if you or anyone related to you contributed significantly to the error or delay. 1040ez2012 Also, the interest will be reduced only if the error or delay happened after the IRS contacted you in writing about the deficiency or payment on which the interest is based. 1040ez2012 An audit notification letter is such a contact. 1040ez2012 The IRS cannot reduce the amount of interest due to a general administrative decision, such as a decision on how to organize the processing of tax returns. 1040ez2012 Ministerial act. 1040ez2012 This is a procedural or mechanical act, not involving the exercise of judgment or discretion, during the processing of a case after all prerequisites (for example, conferences and review by supervisors) have taken place. 1040ez2012 A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. 1040ez2012 Example 1. 1040ez2012 You move from one state to another before the IRS selects your tax return for examination. 1040ez2012 A letter stating that your return has been selected is sent to your old address and then forwarded to your new address. 1040ez2012 When you get the letter, you respond with a request that the examination be transferred to the area office closest to your new address. 1040ez2012 The examination group manager approves your request. 1040ez2012 After your request has been approved, the transfer is a ministerial act. 1040ez2012 The IRS can reduce the interest because of any unreasonable delay in transferring the case. 1040ez2012 Example 2. 1040ez2012 An examination of your return reveals tax due for which a notice of deficiency (90-day letter) will be issued. 1040ez2012 After you and the IRS discuss the issues, the notice is prepared and reviewed. 1040ez2012 After the review process, issuing the notice of deficiency is a ministerial act. 1040ez2012 If there is an unreasonable delay in sending the notice of deficiency to you, the IRS can reduce the interest resulting from the delay. 1040ez2012 Managerial act. 1040ez2012 This is an administrative act during the processing of a case that involves the loss of records or the exercise of judgment or discretion concerning the management of personnel. 1040ez2012 A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. 1040ez2012 Example. 1040ez2012 A revenue agent is examining your tax return. 1040ez2012 During the middle of the examination, the agent is sent to an extended training course. 1040ez2012 The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. 1040ez2012 Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. 1040ez2012 How to request abatement of interest. 1040ez2012 You request an abatement (reduction) of interest on Form 843. 1040ez2012 You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. 1040ez2012 If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. 1040ez2012 If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. 1040ez2012 Generally, you should file a separate Form 843 for each tax period and each type of tax. 1040ez2012 However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). 1040ez2012 If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. 1040ez2012 Tax Court can review failure to abate interest. 1040ez2012 The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. 1040ez2012 The IRS has mailed you a notice of final determination or a notice of disallowance. 1040ez2012 You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. 1040ez2012 The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. 1040ez2012 For this purpose, individuals filing a joint return shall be treated as separate individuals. 1040ez2012 For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. 1040ez2012 For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. 1040ez2012 Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. 1040ez2012 The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. 1040ez2012 The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. 1040ez2012 If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. 1040ez2012 To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. 1040ez2012 Notify you when the adjustments are made. 1040ez2012 Refund any interest paid by you where appropriate. 1040ez2012 For more information on disaster area losses, see Disaster Area Losses in Publication 547. 1040ez2012 For more information on other tax relief for victims of terrorist attacks, see Publication 3920. 1040ez2012 Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. 1040ez2012 If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. 1040ez2012 The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). 1040ez2012 There is doubt as to whether you can pay the amount you owe based on your financial situation. 1040ez2012 An economic hardship would result if you had to pay the full amount owed. 1040ez2012 Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. 1040ez2012 If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. 1040ez2012 The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. 1040ez2012 For more information, see Publication 3605. 1040ez2012 Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. 1040ez2012 The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. 1040ez2012 The 30 days immediately after the offer is rejected. 1040ez2012 While your timely-filed appeal is being considered by Appeals. 1040ez2012 Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. 1040ez2012 For more information about submitting an offer in compromise, see Form 656. 1040ez2012 Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. 1040ez2012 Most differences can be settled within this system without expensive and time-consuming court trials. 1040ez2012 However, your reasons for disagreeing must come within the scope of the tax laws. 1040ez2012 For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. 1040ez2012 In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. 1040ez2012 See Appeals to the Courts , later, for more information. 1040ez2012 Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. 1040ez2012 The Appeals Office is the only level of appeal within the IRS. 1040ez2012 Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. 1040ez2012 If you want an appeals conference, follow the instructions in the letter you received. 1040ez2012 Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. 1040ez2012 You or your representative should be prepared to discuss all disputed issues at the conference. 1040ez2012 Most differences are settled at this level. 1040ez2012 If agreement is not reached at your appeals conference, you may be eligible to take your case to court. 1040ez2012 See Appeals to the Courts , later. 1040ez2012 Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. 1040ez2012 Also, see the special appeal request procedures in Publication 1660. 1040ez2012 Written protest. 1040ez2012 You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. 1040ez2012 All partnership and S corporation cases without regard to the dollar amount at issue. 1040ez2012 All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. 1040ez2012 If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. 1040ez2012 The IRS urges you to provide as much information as you can, as it will help speed up your appeal. 1040ez2012 That will save you both time and money. 1040ez2012 Be sure to send the protest within the time limit specified in the letter you received. 1040ez2012 Small case request. 1040ez2012 If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. 1040ez2012 In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. 1040ez2012 If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. 1040ez2012 For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. 1040ez2012 Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. 1040ez2012 If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. 1040ez2012 You can use a Form 2848 or any other properly written power of attorney or authorization. 1040ez2012 You can also bring witnesses to support your position. 1040ez2012 Confidentiality privilege. 1040ez2012 Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. 1040ez2012 See Confidentiality privilege under If Your Return Is Examined , earlier. 1040ez2012 Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. 1040ez2012 These courts are independent of the IRS. 1040ez2012 If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. 1040ez2012 However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. 1040ez2012 If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. 1040ez2012 See Appeal Within the IRS, earlier. 1040ez2012 Prohibition on requests to taxpayers to give up rights to bring civil action. 1040ez2012 The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. 1040ez2012 However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. 1040ez2012 Burden of proof. 1040ez2012 For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. 1040ez2012 You complied with all substantiation requirements of the Internal Revenue Code. 1040ez2012 You maintained all records required by the Internal Revenue Code. 1040ez2012 You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. 1040ez2012 You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. 1040ez2012 The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. 1040ez2012 Use of statistical information. 1040ez2012 In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. 1040ez2012 Penalties. 1040ez2012 The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. 1040ez2012 Recovering litigation or administrative costs. 1040ez2012 These are the expenses that you pay to defend your position to the IRS or the courts. 1040ez2012 You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. 1040ez2012 You exhaust all administrative remedies within the IRS. 1040ez2012 Your net worth is below a certain limit (see Net worth requirements , later). 1040ez2012 You do not unreasonably delay the proceeding. 1040ez2012 You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. 1040ez2012 You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. 1040ez2012 ustaxcourt. 1040ez2012 gov www. 1040ez2012 ustaxcourt. 1040ez2012 gov . 1040ez2012 Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. 1040ez2012 Note. 1040ez2012 If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. 1040ez2012 Prevailing party. 1040ez2012 Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. 1040ez2012 You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. 1040ez2012 The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. 1040ez2012 ), or Has lost in courts of appeal for other circuits on substantially similar issues. 1040ez2012 The court will generally decide who is the prevailing party. 1040ez2012 Reasonable litigation costs. 1040ez2012 These include the following costs: Reasonable court costs. 1040ez2012 The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. 1040ez2012 The reasonable costs of expert witnesses. 1040ez2012 Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. 1040ez2012 See Attorney fees , later. 1040ez2012 Reasonable administrative costs. 1040ez2012 These include the following costs: Any administrative fees or similar charges imposed by the IRS. 1040ez2012 The reasonable costs of studies, analyses, engineering reports, tests, or projects. 1040ez2012 The reasonable costs of expert witnesses. 1040ez2012 Attorney fees that generally may not exceed $125 per hour. 1040ez2012 See Attorney fees , later. 1040ez2012 Timing of costs. 1040ez2012 Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. 1040ez2012 Net worth requirements. 1040ez2012 An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. 1040ez2012 For this purpose, individuals filing a joint return are treated as separate individuals. 1040ez2012 For estates — your net worth does not exceed $2 million as of the date of the decedent's death. 1040ez2012 For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. 1040ez2012 For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. 1040ez2012 Qualified offer rule. 1040ez2012 You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. 1040ez2012 You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. 1040ez2012 Qualified offer. 1040ez2012 This is a written offer made by you during the qualified offer period. 1040ez2012 It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. 1040ez2012 To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. 1040ez2012 Qualified offer period. 1040ez2012 This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. 1040ez2012 It ends 30 days before your case is first set for trial. 1040ez2012 Attorney fees. 1040ez2012 Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. 1040ez2012 However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. 1040ez2012 See IRS. 1040ez2012 gov for more information. 1040ez2012 Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. 1040ez2012 In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. 1040ez2012 Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. 1040ez2012 Jurisdiction for determination of employment status. 1040ez2012 The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. 1040ez2012 Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). 1040ez2012 The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. 1040ez2012 S. 1040ez2012 Tax Court for a determination of employment status. 1040ez2012 There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. 1040ez2012 For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. 1040ez2012 Section 530(a) of the Revenue Act of 1978. 1040ez2012 This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. 1040ez2012 It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. 1040ez2012 Tax Court review of request for relief from joint and several liability on a joint return. 1040ez2012 As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). 1040ez2012 You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. 1040ez2012 If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. 1040ez2012 See Publication 971 for more information. 1040ez2012 Note. 1040ez2012 Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. 1040ez2012 See Rev. 1040ez2012 Proc. 1040ez2012 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at www. 1040ez2012 irs. 1040ez2012 gov/pub/irs-irbs/irb03-05. 1040ez2012 pdf. 1040ez2012 Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. 1040ez2012 For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. 1040ez2012 For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. 1040ez2012 For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. 1040ez2012 You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. 1040ez2012 You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). 1040ez2012 The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. 1040ez2012 Withdrawal of notice of deficiency. 1040ez2012 If you consent, the IRS can withdraw a notice of deficiency. 1040ez2012 A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. 1040ez2012 However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. 1040ez2012 See Revenue Procedure 98-54 for a more detailed explanation of the requirements. 1040ez2012 Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. 1040ez2012 The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. 1040ez2012 After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. 1040ez2012 Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. 1040ez2012 Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. 1040ez2012 If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. 1040ez2012 Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). 1040ez2012 Collection can proceed even if you think that the amount is excessive. 1040ez2012 Publication 594 explains IRS collection procedures. 1040ez2012 If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. 1040ez2012 You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. 1040ez2012 Small tax case procedure. 1040ez2012 If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. 1040ez2012 If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. 1040ez2012 You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. 1040ez2012 W. 1040ez2012 , Washington, DC 20217. 1040ez2012 More information can be found on the Tax Court's website at www. 1040ez2012 ustaxcourt. 1040ez2012 gov. 1040ez2012 Motion to request redetermination of interest. 1040ez2012 In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. 1040ez2012 You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. 1040ez2012 The assessment included interest. 1040ez2012 You have paid the entire amount of the deficiency plus the interest claimed by the IRS. 1040ez2012 The Tax Court has found that you made an overpayment. 1040ez2012 You must file the motion within one year after the decision of the Tax Court becomes final. 1040ez2012 District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. 1040ez2012 The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. 1040ez2012 Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. 1040ez2012 Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. 1040ez2012 As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. 1040ez2012 If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. 1040ez2012 If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. 1040ez2012 You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. 1040ez2012 However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. 1040ez2012 You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. 1040ez2012 However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. 1040ez2012 For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. 1040ez2012 Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. 1040ez2012 In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. 1040ez2012 The court can order these refunds before its decision on the case is final. 1040ez2012 Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. 1040ez2012 Note. 1040ez2012 The court may no longer order a refund of an overpayment after the case is final. 1040ez2012 Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. 1040ez2012 Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. 1040ez2012 You can claim a credit or refund by filing Form 1040X. 1040ez2012 See Time for Filing a Claim for Refund , later. 1040ez2012 File your claim by mailing it to the IRS Service Center where you filed your original return. 1040ez2012 File a separate form for each year or period involved. 1040ez2012 Include an explanation of each item of income, deduction, or credit on which you are basing your claim. 1040ez2012 Corporations should file Form 1120X, Amended U. 1040ez2012 S. 1040ez2012 Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. 1040ez2012 See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. 1040ez2012 Requesting a copy of your tax return. 1040ez2012 You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. 1040ez2012 This includes a copy of the Form W-2 or Form 1099 filed with your return. 1040ez2012 Use Form 4506 to make your request. 1040ez2012 You will be charged a fee, which you must pay when you submit Form 4506. 1040ez2012 Requesting a copy of your tax account information. 1040ez2012 Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. 1040ez2012 The tax return transcript contains most of the line items of a tax return. 1040ez2012 A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. 1040ez2012 A record of account is a combination of line item information and later adjustments to the account. 1040ez2012 Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. 1040ez2012 Penalty for erroneous claim for refund. 1040ez2012 If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. 1040ez2012 An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. 1040ez2012 The penalty may be waived if you can show that you had a reasonable basis for making the claim. 1040ez2012 Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. 1040ez2012 If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. 1040ez2012 If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. 1040ez2012 Returns you filed before the due date are considered filed on the due date. 1040ez2012 This is true even when the due date is a Saturday, Sunday, or legal holiday. 1040ez2012 Disaster area claims for refund. 1040ez2012 If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. 1040ez2012 This section discusses the special rules that apply to Presidentially declared disaster area refunds. 1040ez2012 A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. 1040ez2012 Postponed refund deadlines. 1040ez2012 The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. 1040ez2012 The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. 1040ez2012 The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. 1040ez2012 For more information, see Publication 547. 1040ez2012 If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. 1040ez2012 A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. 1040ez2012 fema. 1040ez2012 gov and at the IRS website at www. 1040ez2012 irs. 1040ez2012 gov. 1040ez2012 Nonfilers can get refund of overpayments paid within 3-year period. 1040ez2012 The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. 1040ez2012 This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. 1040ez2012 The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. 1040ez2012 For more information, see Publication 3920. 1040ez2012 Claim for refund by estates electing the installment method of payment. 1040ez2012 In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. 1040ez2012 S. 1040ez2012 District Court or the U. 1040ez2012 S. 1040ez2012 Court of Federal Claims before all the installment payments have been made. 1040ez2012 However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. 1040ez2012 All installment payments due on or before the date the suit is filed have been made. 1040ez2012 No accelerated installment payments have been made. 1040ez2012 No Tax Court case is pending with respect to any estate tax liability. 1040ez2012 If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. 1040ez2012 No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. 1040ez2012 The executor has not included any previously litigated issues in the current suit for refund. 1040ez2012 The executor does not discontinue making installment payments timely, while the court considers the suit for refund. 1040ez2012 If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. 1040ez2012 This includes any part of the disallowed amount previously collected by the IRS. 1040ez2012 Protective claim for refund. 1040ez2012 If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. 1040ez2012 A protective claim can be either a formal claim or an amended return for credit or refund. 1040ez2012 Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. 1040ez2012 A protective claim preserves your right to claim a refund when the contingency is resolved. 1040ez2012 A protective claim does not have to state a particular dollar amount or demand an immediate refund. 1040ez2012 However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. 1040ez2012 Generally, the IRS will delay action on the protective claim until the contingency is resolved. 1040ez2012 Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. 1040ez2012 Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. 1040ez2012 Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. 1040ez2012 Special refunds. 1040ez2012 If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. 1040ez2012 These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. 1040ez2012 The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. 1040ez2012 For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. 1040ez2012 Periods of financial disability. 1040ez2012 If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. 1040ez2012 The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. 1040ez2012 To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. 1040ez2012 Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. 1040ez2012 The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. 1040ez2012 Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi