dbriefs deposits and advance pmts 08312011
TRANSCRIPT
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
1/31
The Dbriefs Tax Controversy series presents:
Deposits and Advance
Payments: Rules andStrategies to Protect YourOptionsThomas Cryan, Deloitte Tax LLPJohn Keenan, Deloitte Tax LLP
Randy Bessinger, Deloitte Tax LLP
August 31, 2011
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
2/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Agenda
Introduction
Deposits and advance payments
Options to reduce interest accrual
Question & answer
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
3/31
Deposits and advance
payments
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
4/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Overview Deposits
IRC 6603
Rev. Proc. 2005-18 (superseded Rev. Proc. 84-58)
Implemented IRC 6603
Establishes procedures to make, withdraw, or identify deposits tosuspend the running of interest on potential underpayments
Provides for interest on the deposit returned to the taxpayer tothe extent the deposit is attributable to a disputable tax
Enables taxpayers to limit exposure to underpayment interest in atax dispute without surrendering access to funds for an indefinite
term in a non-interest bearing account
1
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
5/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Have you made a deposit under 6603?
Yes No
Not applicable
Poll question #1
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
6/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Interest on deposits
Interest will be paid on returned deposits at the short-term
Federal rate provided for in IRC 6621(b) but only on theportion of the deposit attributable to a disputable tax
Interest will be paid from the date of deposit to a date not
more than 30 days preceding the date of the check
2
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
7/31Copyright 2011 Deloitte Development LLC. All rights reserved.
What is a Disputable Tax?
A disputable taxis the amount of tax specified by thetaxpayer at the time of the deposit as the reasonableestimate of the maximum amount of tax attributable todisputable items
A disputable itemis any item of income, gain, loss, deductionor credit if the taxpayer has a reasonable basis for itstreatment of the item and reasonably believes that the IRSalso has a reasonable basis for disallowing the taxpayers
treatment of the item
3
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
8/31Copyright 2011 Deloitte Development LLC. All rights reserved.
Calculating the Disputable Tax
If the deposit is made prior to the issuance of a 30-day letter,any reasonable method may be used to calculate the amountof disputable tax
To the extent that a taxpayers calculation of a disputable tax
exceeds the amount proposed as a deficiency in a 30-dayletter issued to the taxpayer, or the taxpayer desired to remita deposit prior to receiving a 30-day letter, the taxpayer mustprovide a written statement to the Service identifying and
describing the amount of the disputable tax at the time thedeposit is remitted
4
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
9/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Deposit should be sent to the IRS Center where the taxpayerfiles its return orto the office where the taxpayers return isunder examination
A written statement designating the remittance as a depositmust accompany the depositThe statement must include:
The type(s) of tax; The tax year(s); and Statement identifying the amount of and basis for the disputable tax
Interest on an assessed tax liability will be suspended on thedate the deposit is received by the IRS
Designating a Deposit Under IRC 6603
5
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
10/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Statement Identifying the Amount of andBasis for the Disputable Tax
Taxpayers relying on the proposed deficiency in a 30-dayletter may provide a copy of that letter with the deposit in lieuof a written statement
However, if the taxpayers calculation exceeds the proposed
deficiency in the 30-day letter or the taxpayer wants to remita deposit prior to receiving a 30-day letter, additionalinformation must be included in the written statement
6
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
11/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Poll question #2
For those taxpayers who made 6603 deposits, which ofthe following did you deposit?
An amount equal to that shown on the 30-day letter
An amount less than that shown on the 30-day letter An amount greater than that shown on the 30-day letter
Not Applicable
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
12/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Statement Identifying the Amount of andBasis for the Disputable Tax
The statement must also include:The taxpayers calculation
A description of the item for which the taxpayer has a reasonablebasis for the treatment of the item on its return, and for which the
taxpayer reasonably believes that the IRS also has a reasonablebasisfor disallowing the taxpayers treatment of the item
The basis for the taxpayers belief that it has a reasonable basis
for the tax treatment and that the IRS also has a reasonablebasisfor disallowing the taxpayers treatment of the item
7
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
13/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Failure to Identify Amount and Nature of theDisputable Tax
IRS will not allow interest on a deposit that does not properlyidentify the amount and nature of the disputable tax
If the taxpayer subsequently provides a written statement
identifying and describing the disputable tax, interest willaccrue on the deposit from the date the additional informationis provided to the IRS
In lieu of a written statement, a taxpayer may rely on the amount of adeficiency proposed in a 30-day letter as the amount of thedisputable tax, but the taxpayer must provide a copy of the 30-dayletter to the Service
8
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
14/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Withdrawal of Deposits
Deposits may be withdrawn at any time before the IRS uses
the deposit as a payment of tax A written statement to withdraw the deposit should be sent to the
office where the deposit was remitted
The statement must include:
The date(s) and amount(s) of the original deposit(s); The type(s) of tax to which the deposit was intended to be applied;
The tax year(s) to which the deposit was intended to be applied
9
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
15/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
IRS Ability to Credit/Offset IRC 6603Deposit
The Service cannot unilaterally credit an excess IRC 6603 deposit to an outstanding liability under IRC 6402(a)
The Service does not have the authority to offset
excess IRC 6603 deposits to pay other outstandingbalances
10
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
16/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Poll question #3
Has the Internal Revenue Service returned to you aSection 6603 deposit attributable to a disputable tax andpaid interest on the deposit?
Yes No
Not Applicable
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
17/31
Options to reduce interest
accrual
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
18/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Strategies for Making a Deposit Prior toIssuance of a 30-Day Letter
Make deposit when there is reasonable certainty IRS willexamine and challenge the taxpayers treatment of an item
Schedule M-3 permanent items
Schedule UTP items
Form 8275 or Form 8275-R
Form 5701
Identified in audit plan or LIFE MOU
Emphasize why taxpayer has reasonable basis for the tax
treatment of an item Use IRS published guidance or Form 5701 to explain why
IRS has reasonable basis for disallowing the taxpayers
treatment of the item
11
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
19/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Strategies for Making a Partial AdvancePayment after Issuance of 30-Day Letter
No requirement to identify items in dispute and basis fortaxpayers belief with regard to taxpayers treatment of an
item and IRS disallowance of an item
Stops hot interest on portion of proposed deficiency
Preserves the right to go to Tax Court
12
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
20/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Strategies for Making a Full AdvancePayment after Issuance of 30-Day Letter
Eliminates future accrual of any interest Eliminates ability to petition Tax Court
Accelerates ability to file refund claim and bring suit inDistrict Court or Court of Federal Claims
Prevents Appeals Officer from speculating on taxpayers
view of issues
13
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
21/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Strategies for Making a Full AdvancePayment after Issuance of 90-Day Letter
Eliminates future accrual of any interest
Hot interest accrues from 31st day after issuance of 30-dayletter to advance payment
Allows taxpayer to petition Tax Court Allows taxpayer to file refund claim and bring suit in District
Court or Court of Federal Claims
14
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
22/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Completion of Examination
If the taxpayer executes a waiver of restrictions on
assessment and collection or agrees to the full amount of thedeficiency, the deposit will be treated as a payment of tax asof the date of assessment. Interest on any underpayment will accrue from the due date of the
original return (without regard to an extension) to the date the depositwas made by the taxpayer.
15
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
23/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Completion of Examination
If the taxpayer does not execute a waiver of restrictions onassessment and collection and agree to the full amount ofthe proposed deficiency, a 90-day letter will be issued
Taxpayer may file a petition with the Tax Court and request,before the expiration of the 90 or 150-day period, that the deposit
continue to be treated as a deposit during the Tax Courtproceedings
Failure to make such a request will allow IRS to convert the deposit toan advance payment
Taxpayer may decide to not file a petition with the Tax Court but thedeposit will be treated as a payment of tax upon expiration of the90 or 150-day period during which assessment is stayed
16
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
24/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Poll question #4
A taxpayer who makes a 6603 deposit will be precludedfrom petitioning the Tax Court.
True
False Not Applicable
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
25/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Excess Deposits of Disputable Tax
Taxpayer may elect, in writing, to have excess depositsapplied against another assessed or unassessed liability
Request must be sent to same office where original deposit wasmade
If excess deposits are applied to another assessed orunassessed liability, interest will continue to accrue from the dateof the original deposit provided that the excess on the originaldeposit relates to a disputable tax
For example, a deposit of $200 is made on 5/1/2005 (thedisputable tax is $200) for a 2008 liability and the taxpayer has an
excess deposit of $100 which is then applied to the 2009 liability.The taxpayer will receive interest on the excess deposit from5/1/2005 to 3/15/2010 (due date of the 2009 liability)
17
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
26/31
Question & answer
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
27/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
CPE certificates are now available
for immediate download.
Click the Request CPE link in thelower right hand corner of thescreen.
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
28/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
Contact info
+1 202 378 5238
John Keenan
+1 202 879 5605
Randy Bessinger
+1 816 802 7219
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected] -
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
29/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
This presentation contains general information only and Deloitte is not, by means of this
presentation, rendering accounting, business, financial, investment, legal, tax, or otherprofessional advice or services. This presentation is not a substitute for such professional adviceor services, nor should it be used as a basis for any decision or action that may affect yourbusiness. Before making any decision or taking any action that may affect your business, youshould consult a qualified professional advisor. Deloitte shall not be responsible for any losssustained by any person who relies on this presentation.
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
30/31
Copyright 2011 Deloitte Development LLC. All rights reserved.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited byguarantee, and its network of member firms, each of which is a legally separate and independent entity.Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte ToucheTohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed descriptionof the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attestclients under the rules and regulations of public accounting.
-
8/4/2019 Dbriefs Deposits and Advance Pmts 08312011
31/31