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Tax Refund CPA discusses IRS Tax Positioning during Tax Preparation | tax strategy

tax refund cpa

You have the right to proactively position your affairs such that you pay the least possible amount of tax. (910) 399-2705.

Being a tax refund CPA is more of a philosophy than a specialty. It’s not just working all the angles once you send your documents to me. It includes tax positioning for next year, usually through a combination of legitimate tax strategies.

Gray Area Tax Positioning with new Tax Strategies

I  take a balanced tax research approach to gray area tax positioning, when possible, by building in a simultaneous penalty abatement defense. Just in case you’re audited. Or, if the tax strategy is disallowed. I base the tax strategy itself on IRS Regs, GAAP accounting and later Revenue Rulings. But other sources of IRS authority exist that:

  • Give insight into the IRS’ potential reaction.
  • Help develop tax strategies.
  • Can be used as the basis for an abatement request, if the proffered tax position is disallowed.

“Tax positioning in gray areas is akin to practicing law; one builds on earlier tax court cases, alternate sources of authority and IRS Regs. Sometimes new tax regs offer unintended loopholes.”
– Gary Bode, tax refund CPA

Developing Tax Strategies

The highest authority to back new tax strategies are the IRS Regs. Technical Memorandums on proposed Regs lead to temporary Regs. These offer the earliest opportunity to develop new tax strategies. Secondary to initial ambiguity, there may be a range of possible tax strategies within a new Reg. The IRS may eventually recognize incongruities in the Reg and issue subsequent Revenue Rulings on it. A Revenue Ruling is a pronouncement that deals with application of the Reg, generally using a specific example brought to light as taxpayers raise questions or try unintended loopholes.

Private Letter Rulings

For a fee, the IRS will generally make Private Letter Rulings. Here, the IRS gives proactive opinion on a taxation issue. But this opinion is only good for the taxpayer who paid for it. Go figure. Plus, it tips your hand, which as a CPA firm, we don’t like to do. But it’s the only sure way of achieving a preëmptive, positive affirmation. However, denial of the position stills allows the taxpayer to challenge it in tax court.

Potential loopholes gradually close as the IRS better interprets the Reg with Revenue Rulings.

Building in a Simultaneous Penalty Abatement Defense

While other taxpayer’s Private Letter Rulings can’t be used to support a tax position, redacted versions Private Letter Rulings and tax court decisions are published. They allow insight on how the IRS will eventually react to your attempted tax position. Other sources are useful too, if you can find them. IRS audit guides, General Counsel’s memorandums, Actions on (non tax court) Decisions, etc. can help. These less authoritative sources can be used to raise an eventual penalty abatement request by showing that the tax position, while disallowed, wasn’t frivolous.

Contact us for a free initial consult at (910) 399-2705

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