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Tax Glossary

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  • Abatement of Penalties

    An abatement of penalties is a request to the IRS to remove certain penalties that were added to the taxpayers account for a particular year or multiple years. The taxpayer is required to have reasonable cause that is specific for each year when submitting this request and must be able to explain why this reason should grant the penalties to be removed from their account.

  • Amended Tax Return

    This is a tax return filed to make changes to a previously filed tax return. A taxpayer can amend any tax return from a previous tax year, going back as far they they desire; however, taxpayers have only three (3) years from the due date of the original return or the actual date of filing to file an amended return in order to collect refunds. **If filing amended returns, you must have a copy of the original return filed, along with an explanation and documentation as to what items need to be amended.

  • Appeal

    IRS administrative process for taxpayers to contest decisions within the IRS. Also known as the Appeals Division.

  • Back Taxes

    Taxes that have not been paid on the due date or were underreported either by accident or by intention on a past tax return. The tax authorities (IRS) can demand payment of back taxes plus the imposing of penalties and or interest.

  • Bankruptcy

    This is a legal process under Federal statutes that provides for rehabilitation of a debtor (provide the opportunity to make a fresh start) through the discharge of certain debts or through a debt repayment plan over a certain period of time. Creditors cannot contact the debtor during the bankruptcy. They must wait until it is fully discharged. There are three chapters of bankruptcy.

    See descriptions below:

    Chapter 7: In Title 11, United States Code, this chapter of bankruptcy law provides for a full liquidation of an entitys non-exempt property to satisfy creditors, and discharges all dischargeable debts.

    Chapter 11: This chapter of the bankruptcy law provides for a partial payment of some debts and the partial discharge of some debts belonging to a business.

    Chapter 13: This chapter of the bankruptcy law provides for the partial payment of some debts and the partial discharge of some debts for an individual. It is also known as the Wage Earners Repayment Plan since all creditors must receive a dividend.

  • Basis

    The cost of an asset owned by a taxpayer. The cost of the asset may be adjusted upwards by the cost of improvements, or may be adjusted downward by depreciating the asset.

  • Burden of Proof

    A formal legal requirement to provide persuasive information or evidence of the legitimacy of a claim. For tax returns, OICs, or requests for any resolution, the burden of proof to substantiate the claim or deduction rests with the individual or entity either required to sign the return or who submitted the claim.

  • Centralized Authorization File (CAF)

    Located three of the ten IRS Service Centers, it contains all Forms 2848, Powers of Attorney, and Forms 8821, Tax Information Authorizations. Each individual authorized by these forms will be given a CAF number.

  • Collection Division

    That organizational arm of the IRS which has the mission of collecting delinquent taxes and securing delinquent tax returns for individuals, businesses, corporations, trusts, or any other entity that owes IRS money. The Service Center Collection Function, the Automated Collection Site, or the Field Collection Function is all part of the Collection Division. The revenue officer is required to effectively collect against any Balance Due accounts.

  • Collection Information Statement (CIS)

    IRS standard financial statements required from individuals and/or self-employed individuals (Form 433-A) and businesses (Form 433-B) that owe IRS taxes and have indicated an inability to pay the liability. IRS uses these forms to determine the taxpayers ability to pay in full by installment agreement or a hardship situation.


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