YOUR TAX PROCEDURE RIGHTS

by

Curtis L. Harrington

HARRINGTON & HARRINGTON

6300 State University Drive, Suite 250

Long Beach, CA 90815

(562) 594-9784, Fax: (562) 594-4414

http:/www.patentax.com E-mail: curt@patentax.com PATENTAX®

A

PATENTAX®

PRESENTATION

Disclaimer: Educational Only: This outline is Educational Only and no part of this presentation can be considered as federal or state tax advice, opinion, or position and is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the internal revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein, nor (iii) constituting guidance on any tax or intellectual property matter.

I.	Overview of Tax Authorities in California

A.	Internal Revenue Service

1.	Individual Income Tax

2.	Corporate Income Tax

3.	Employment Tax

4.	Estate Tax

B.	Franchise Tax Board

1.	Individual Income Tax

2.	Corporate Income Tax

3.	Employment Tax

C.	State Board of Equalization

1.	Property Tax

2.	Sales & Use Tax

D.	Employment Development Department

3.	Employment Tax

II.	Entry Contact Points with the Federal Tax System

A.	Filing of Required Tax Returns

1.	Individual

2.	Corporate / Partnership

3.	Estate

4.	Trust

5.	Separate F-Bar Filing

6.	Secondary Entities: Retirement Plans, Charities

B.	Taxpayer Contact for adjustments based upon error or inconsistency.

1.	Sometimes results in a refund based upon error in the return.

2.	Such as identity mismatch (SS#'s or tax ID#s)

3.	In some cases IRS seeks an explanation such as "matching" for state income tax deductions, requiring simple explanation.

4.	Some of these point contact inquiries can be avoided by including an explanation with the return when it is filed.

5.	Insure that the explanation provided is adequate and is not an "admission" of a much larger problem.

C.	Taxpayer Contact due to mathematical inconsistencies on the return

1.	High casualty losses

2.	High charitable non-cash contributions

3.	Blatant Unallowable items

4.	Deduction of medical insurance and medical payments without showing medical reimbursements.

5.	Large travel and entertainment expenditures.

6.	Disproportionately high interest paid w/respect to taxpayers income on return.

7.	Aggressive deductions based upon Use of "Home Office" re US Supreme Court in Commissioner v. Soliman, 506 U.S. 168, 93-1 USTC Para 50,014, 113 SCt. 701 (1993)

8.	Exemptions claimed by non-custodial parents.

9.	Interest payments to individuals and real estate closing deductions.

D.	Taxpayer Full Audits

1.	Ascertaining the scope of the Audit

2.	Gathering and placing in order a complete set of books, receipts, financial statements & balance sheets

3.	Interview taxpayers to insure that their narrative of the facts and circumstances fits with all of the records.

4.	Where records are missing, or where other special circumstances are present, gather support and substantiation in support.

5.	If the position on the return needs records (such as depreciation for prior years, have such records at the ready, in an isolated manner, so as to not invite an expansion of the audit into other years.

6.	The auditor should be contacted to limit the scope of the audit to include only the current issues and only enough factual inquiry to support proof of those issues.

7.	Where the Auditor has requested a wide ranging set of papers, the actual type and number of documents to be produced should be negotiated, and agreed upon to preserve "cooperative" status.

8.	Once the identities and types of documents are agreed upon

E.	Limitation Periods for assessment regardless of contact for a tax year.

1.	3 years from later of (a) return due date or (b) date that return was actually filed. (Request extension will extend the time for the statute of limitations.) Early Returns are not considered as having been filed until the actual due date.

2.	Date of Amended return does not affect the limitation period, it is based upon the original return.

3.	Assessments that may be made at any time:

(a)	Fraudulent Returns

(b)	Return not filed at all

4.	Assessments that may be made within 6 years:

(a)	Returns which omit >25% of income

(b)	Returns which omit constructive dividend from foreign corporation.

(c)	Estate Returns which omit >25% of gross estate

(d)	Gift Tax Returns which omit >25% of gifts

(e)	Excise Tax Returns which omit >25% of tax reported.

5.	Assessments that may be made within 18 months:

(a)	By Written Request for a prompt assessment for a non-
estate return.

(b)	By Written Request for a prompt assessment for a dissolving corporation.

6.	Limitation period on assessments may be extended by agreement between the taxpayer and the IRS.

7.	Recoupment allows the taxpayer to defeat a claim where a same transaction would be treated differently simply because of the limitations period, such as an overpayment in an earlier, closed year which can be used to offset an amount owing in a more recent year, arising from the same transaction. In some cases recoupment where there was more than one transaction, has been allowed.

F.	Audits of other taxpayers which results in reconciling that taxpayer's interaction with you.

G.	State Tax Audit which results in Alerting the Federal Tax Authorities of a change result.

H.	Collections Division

1.	Normally the Taxpayer will have gone through a number of the following before reaching the collections division: (1) mail contact, (2) audit, (3) proposed assessment, (4) final assessment, or (5) Tax Court

2.	There are some legitimate reasons why a taxpayer might end up in Collections first, since the IRS need only prove that a notice was properly mailed to the last known address. Where a taxpayer moves without notifying of a forwarding address, it is possible (though unlikely) that (1) mail contact, (2) audit notices, (3) proposed assessment notices, and (4) final assessment may have been sent but not actually received by the taxpayer. Upon final assessment, the collections division begins taking steps to collect the tax.

3.	The Automated collection service (ACS), is a computer driven division of the Collections division and will begin a series of notices over several months threatening a lien and other collection action.

4.	In addition to the "automatic lien" on the taxpayers assets which results from a final assessment, the collections division will, once the notification cycle of ACS is complete, file a formal lien on real property of the taxpayer. The lien give a more formal notice to potential purchasers of real estate that the property is subject to the payment of tax.

5.	Treatment of businesses versus individual may differ.

6.	A Revenue Officer may typically visit the property or the taxpayer near the time when the lien is placed, in order to get further data on the property, its condition, whether the taxpayer resides there or whether there are renters, and more.

I.	Collections Procedures

1.	Collections actions can be challenged:

a.	In the APPEALS division, especially by the filing of form 911 and a showing sufficient to stop the appeal, such as undue hardship.

b.	Upon filing a petition in tax court.

c.	Very important that all of the lower procedural steps (such as request for a re-hearing) occur before the subsequent step is taken.

2.	Requirements for a lien are found in IRC sections 6321 and 6322 and: (a) assessment of tax, (b) notice of assessment and demand for payment (c) taxpayer refusal to pay.

3.	Collections activity can be suspended for a variety of reasons.

a.	A tax court filing or an Appeals Division request is supposed to (subject to bad communications within the IRS) stop the collection actions. This is another reason that all filings should include a direct copy to the agent/officer at the field level.

b.	It is contrary to the rules to file any request merely for the purposes of delay.

F.	Criminal Investigation Division Referral:

1.	Direct, first contact sources may include business associates, spouses, close friends, employees, and others.

2.	The Criminal Investigation Division Referral might grow directly from a civil investigation as an Audit in which a badge of fraud or other criminal wrongdoing is discovered.

III.	Resolution Exits with the Federal Tax System

A.	Full Payment

1.	Depending upon the stage in the case in which this occurs, the taxpayer may be required to sign a closing agreement.

2.	An ethical problem can exist where the practitioner has reason to believe that the amount of tax owing is significantly greater than that which the government is alleging. The taxpayer should always be the one to sign any closing agreements.

B.	Installment Plan

1.	Taxpayer should make certain that he can meet the requirements of making the amount of installment payments in a timely manner. In some cases a missed payment can put the case back into collections.

2.	Keep in mind that interest continues on the unpaid amounts and the taxpayer should always consider a lower interest loan as a cheaper alternative, if its available.

C.	Offer in Compromise (OIC)

1.	The amount of the offer is based upon the sum of (1) the taxpayers net worth, and (2) expected flow of future earnings.

2.	As a result, the taxpayers who will pay the fewest "pennies on the dollar" are the ones who are most destitute. In the current economy, this might turn into a planning opportunity.

3.	A down-payment of 20% of the proffered offer is required with the offer in compromise. If the offer is rejected, the government keeps the 20% down-payment, and will continue to press for the unpaid tax.

4.	The OIC process has turned out to be not just a simple application and approval, but an interactive process where the IRS will intermittently seek additional information and documentation from the representative; and the process might take more than a year.

D.	IRS Appeals Division

1.	Whereas the auditors have very limited discretion to compromise the amount owing for non-mathematical considerations such as the risks of appeal and other practical considerations which might lessen the amount owing, the Appeals Division can take such considerations into account.

2.	Agreement or settlement with the Appeals Division may or not preclude further action by the taxpayer, depending upon the form of the agreement.

3.	An agreement with the Appeals division could affect tax years other than those at issue.

E.	IRS Appeals Jurisdiction

1.	Pre-assessment: Protest response to the 30-day letter.

2.	Jurisdiction over post-assessment penalty cases which are subject to reasonable cause.

3.	Employee Plan and Exempt Organization cases.

4.	Collection cases

5.	Jeopardy Levies

6.	Claims for Refund and Settlement of Refund Suits.

7.	Offers in Compromise.

F.	Alternative Dispute Resolution/Mediation/Arbitration

1.	Disputes with Exam or Appeals

2.	Early/Advance referral of developed but un-agreed issues.

G.	Tax Court (Substantive Case Hearing)

1.	In this forum, somewhat to be thought of as an "ultimate" IRS disposition, the case can be considered generally without having to pay the tax in full.

2.	Once a tax court petition is filed, a recent rule change requires the government to file an answer, as is normally done in most litigation matters.

3.	Once the government answers, the case is again placed with Appeals division for a further look at the hazards of litigation and hopefully to settle before the case must actually be heard by the court.

4.	Exhaustion of Remedies is an important factor in getting to and going beyond Tax Court. The Taxpayer must take each opportunity to ask for a hearing, re-hearing, and reconsideration at each step leading to and each step beyond Tax Court.

H.	Federal District Court (Substantive Case Hearing)

1.	Path is as follows: (a) pay the tax, (b) file a request for refund, (c) request for refund denied, (d) file suit in federal district court for the refund.

2.	Claims generally must be filed within the statute of limitations period, usually within 3 years from the time the return was filed or within 2 years from the time the tax was paid.

I.	Federal Bankruptcy with discharge of taxes

1.	Taxes for taxable years within three years of the date of the bankruptcy petition are not dischargeable.

2.	Tax on returns filed less than 2 years before filing of the bankruptcy petition are not dischargeable.

3.	Taxes that have not been assessed for at least 240 days are not dischargeable.

4.	Taxpayer must not have been fraudulent or otherwise attempt to evade or defeat the tax (regarding all returns at issue)

IV.	Franchise Tax Board (FTB) Compared with Federal

A.	Entry contact points are very similar to that for the IRS, however a the list is more than doubled in its duplication:

1.	Federal Tax Due Changes are Reported to the State and vice versa.

2.	Federal Audit information is shared.

B.	Mail contact and Audits by FTB are similar to Federal contact and Audits.

C.	FTB and IRS will often perform criminal prosecutions in an "either/or mode to save resources. Where the Federal Government begins a Criminal prosecution, the State of California may defer, and where the State of California begins a Criminal prosecution, the Federal Government may defer.

D.	Taxpayers have 60 days to respond to a notice of proposed assessment instead of 30 days.

E.	With the filing of the FTB protest, an oral hearing can be requested.

F.	After a Notice of Action is issued in response to the protest, California taxpayers have 30 days to file a written appeal to the Board of Equalization.

G.	After a Board of Equalization decision, the taxpayer has 30 days to petition for a re-hearing before the Board of Equalization. After re- hearing or denial of the request for re-hearing, the Board's decision becomes final 30 days thereafter.

H.	If the decision is not satisfactory, payment of the tax must be made, followed by filing a claim for refund within the longer of the limitation period (as/if extended) or within one year of the overpayment.

I.	Appeal to the Board of Equalization may be had on the claim upon (a) notice of disallowance of the FTB claim plus 90 days or (b) 6 months after the date of filing of the claim of refund.

J.	A complaint filed in Superior Court based upon the claim for refund may be filed after the claim for refund is filed and denied; upon the later of (Rev & TC sec 19083):

1.	notice of disallowance of the FTB claim plus 90 days;

2.	6 months after the date of filing of the claim of refund (deemed
denial).

3.	one year from the date that the tax was paid (payment of tax is a pre-requisite to filing a claim for refund)

4.	four years from the last date prescribed for filing the return.

K.	Investigation Division Referral:

1.	Direct, first contact sources may include business associates, spouses, close friends, employees, and others.

2.	A Criminal Investigation Referral might grow directly from a civil investigation as an Audit in which a badge of fraud or other criminal wrongdoing is discovered.

L.	Settlement Bureau within FTB can receive offers in compromise and can propose settlement based upon other considerations. In some cases, a federal settlement ratio can be submitted with some greater likelihood of acceptance being based upon the federal compromise of the federal tax liability.

M.	Additional rights available for Franchise Income Tax matters.

1.	Innocent spouse procedures include participation by the appealing and non-appealing spouse.

2.	Additional briefing and evidence procedure were added in 2008.

3.	Appellants are now held to have waived their confidentiality rights when they appeal from actions of the Franchise Tax Board. (Another stick to encourage settlement).

V.	The California Employment Development Department (EDD)

A.	Rules for and collection of State Employment Taxes.

B.	Administers unemployment insurance audits

C.	Major activity is to make rulings on whether workers are "employees" or "independent contractors".

D.	Procedural Issues

1.	EDD audit is performed.

2.	Where the taxpayer is not in compliance, a Notice of Assessment is sent to the taxpayer.

3.	Within 30 days of the Notice of Assessment, a petition for re-
assessment must be made to the California Unemployment Insurance Appeals Board.

4.	A hearing is held by an administrative law judge appointed by the board, and who subsequently renders a decision.

5.	An appeal from the Administrative law judges decision to the board directly must be made within 30 days of the administrative law judge's decision.

6.	Similar to state tax matters, an adverse result at the board can be had by judicial appeal in state court, but only after the tax amount due is paid in full.

7.	The procedures in items 1 through 6 above can be circumvented by a settlement agreement with EDD.

VI.	Sales & Use Tax Matters

A.	Sales tax relates to direct sales occurring within the state (with some basis for argument as to whether the seller is subject to state sales jurisdiction) while use taxes are imposed upon property brought within the state which is purchased elsewhere.

B.	In-state sellers are to have a Board of Equalization permit.

1.	The permit enables sales tax collection and requires sales taxes to be forwarded to the Board of Equalization.

2.	Sales tax permits are also used to justify to upstream sellers that sales taxes are not due upon sales to re-sellers who show the permit.

C.	Sales tax audits are initiated by the Board of Equalization

1.	Sales tax audits are an extensive activity involving (a) sales records, (b) sales tax returns, (c) federal tax returns, (d) a check of sales tax permits and re-seller records, (e) the complete accounting books of the retail sales business, (f) purchase invoices, & (g) bank records. See, generally Rev & Tax Code sections 6051, 6012, 6201-4, 6401, Civ. Code section 1656.1.),

2.	As a general matter every retailer is required to retain records for a minimum period of four years (California Code of Regulations, title 18, section 1698, & Rev. & Tax. Code section 7053.)

3.	Going beyond financial records and into business management matters, the auditor may (a) attempt to divide products sold into lines of business with gross markup percentages in order to detect inordinate shrinkage or diversion of the products to other purposes or disposal, and (b) accounting invoice fraud "audit letters" to suppliers and distributees to verify the legitimacy of purchase orders and re-seller sales. The results of these two extraordinary measures make the process more subjective than many other tax inquiries.

4.	Audits normally occur for 12 consecutive quarters. Such time length is required in order that markup percentages will have enough data behind them to be meaningful. As a result, although the use of ratios and markups is questionable, some compensation is had by having the audit normally cover three years of operation.

5.	The result of the above field audit is a "field audit letter" which is sent to the taxpayer by the Board of Equalization, along with a determination of assessment.

6.	Taxpayer has 30 days to file a request for re-determination to the Board of Equalization.

7.	After a notice of re-determination is issued by the Board of Equalization, if the tax liability remains, the tax is due and payable.

8.	As is the case of tax liability before the FTB and EDD, the sales & use tax liability must be paid and a claim for refund filed before initiating court action.

9.	As a side note, the Board of Equalization has a "managed audit program" which encourages and enables retailers to perform self-audits in exchange for a reduction by half, of the interest rate on owed tax deficiencies.

10.	As a further side note, the Board of Equalization also manages some twenty various special tax and fee programs, including:

-Alcohol Beverage Tax	-Aircraft jet fuel tax

-Diesel fuel tax	-Motor vehicle fuel tax

-Recycling programs	-Tobacco tax

11.	BOE is also responsible for:

-Overseeing the practice of the state's County Assessors

-Property Tax (Veterans/Exempt Organizations) Exemption

-Intergovernmental Property Valuation Disputes

-Motor vehicle fuel tax

-Recycling programs	-Tobacco tax

12.	Limitation Period:

- Where return is filed: Notices of Determination within either (1) THREE YEARS AFTER one month after the end of a quarterly reporting period, or (2) THREE YEARS AFTER the date that the return was filed.

-Where no return is filed: EIGHT YEARS AFTER the end of the calendar month following the quarterly period in question. (Rev. & Tax Code section 6487).

VII.	Ethical Considerations

A.	Husband - Wife

1.	Especially where marital discord may be present H&W may be setting the practitioner up for a tug of war over the tax problems.

2.	After the confidential review, while both are under attorney-
client privilege, the practitioner should withdraw unless both parties are on the same page, and a memorialization of same should be recorded before proceeding.

B.	Corporations - Officers & Investors

1.	In the current economic climate, every deal is subject to falling apart with blame being directed everywhere. Always get some signatory direction from the president/director. Where members or shareholders are concerned, make certain that if a consensus is not had that a meeting with voting is had.

2.	If there are members who are threatening, try to get an indemnification from the corporate entity as a further sign of command and control. Be very careful that the client is identified and their directions followed.

C.	Opinions

1.	Opinions per se are out of style, with most practitioners forming a position paper with the advantages and disadvantages of each position detailed.

2.	The chances of an opinion being interpreted as a "covered opinion" are great, with the result that if you don't investigate the facts and circumstances like a well paid private eye, you will be liable to the client (since the standard is dictated by Circular 230) and with the Office of Professional Responsibility.

D.	Statistical Tendencies, for EA's, Accountants, & Attorneys- Informal conversation with the Office of Professional Responsibility (OPR).

1.	CPA's are more likely to get into trouble for taking positions on tax returns which are too aggressive. Remember that being too aggressive can trigger an audit and that its not up to the practitioner to weigh the advantages of the Audit lottery with the extra client expense of an audit.

2.	Enrolled Agents are more likely to get into trouble by mixing a number of activities from other licenses such as insurance, securities, etc., expanding the likelihood of a tax ethical violation where the other activity has some relationship with tax.

3.	Attorneys are more likely to get into trouble at the tax planning stage where they will either be characterized as encouraging tax avoidance/evasion, and in the extreme as a co-conspirator.

C.	Intentional Delaying Tactics

1.	It is an ethical violation to encourage a client to avail themselves of the tax procedure mechanisms merely for delay. Keep in mind that interest continues to accrue when procedures are utilizes which are not ultimately successful.

2.	If the tax is so severe that it would cause a drastic life change for an individual or end an ongoing business, a bankruptcy expert should be called in to evaluate the applicability of using the bankruptcy laws to protect the taxpayer at the earliest possible time. Un-necessary delay could impair the ability of the taxpayer to do what is necessary to make a fresh start, when there is no basis for challenging the tax liability, or the taxpayers ability to pay.

D.	Signing documents, especially closure documents.

1.	Practitioners should be careful of the federal rules regarding the signature of documents. Federal default rules for signatures are that the tax practitioner has read the document, understands it, and within his/her knowledge it is correct.

2.	Even if the standards above can be met, it is better practice to have the client taxpayer sign all documents by which the tax owing is compromised. There is potential for "settler remorse" and since the vast majority of the underlying facts and circumstances of the underlying tax liability is within the sole memory and experience of the taxpayers, they are in the best position to know and understand the legitimacy of the documents they sign. This also helps to eliminate a lot of the potential for mis-communication.

D.	Privilege.

1.	Attorneys

(a)	Confidentiality Context

-Communications between Attorney and Client are protected by Confidentiality.

-Confidentiality is lost where disclosure is waived by either filing a return containing the information, or by expressly waiving the privilege.

(b)	Work Product: Work done by Attorneys and controlled by Attorneys which is aimed at protecting work done in anticipation of litigation.

(c)	Disclosure of work product to Outside Auditor, even under a confidentiality agreement may be considered a waiver if the disclosure is closely related to preparing financial statements. Current case in this area is Textron Inc. case in which a first circuit en banc panel held that the work-product privilege does not protect a company's tax accrual work papers from IRS discovery.

2.	Accountants & Enrolled Agents, Federally

(a)	IRC §7525 generally:

-Applies to an individual authorized under Federal law to practice before the Internal Revenue Service where the practice is subject to Federal regulation under 31 U.S.C. sec 330.

-Covers advice given by an individual with respect to a matter that is within the scope of the individual's authority to practice.

-Limitation (1) does not cover advice given which is or becomes a in criminal proceedings or state law matters.

-applies only to communications made on or after July 22, 1998.

-The privilege does not apply to any written communication before October 22, 2004, between a federally authorized tax practitioner and a director, shareholder, officer, employee, agent, or representative of a corporation in connection with the promotion of the direct or indirect participation of such corporation in any tax shelter.

-privilege does not apply to writings made on or after October 22, 2004, involving a federally authorized tax practitioner with respect to the participation of any person in a tax shelter. (This is one of the reasons tax practitioners don't write opinions).

-does not apply to non-CPA, non-EA accountants

-beware mixing of files for "advice clients" and "tax return preparation" clients. Material used to support a tax filing will generally be considered to have its privilege waived.

3.	Accountants & Enrolled Agents, State of California

(a)	Passed a state analogue to IRC 7525 in 2004 but it was supposedly "inadvertently" allowed to lapse at the end of 2008.

(b)	FTB is supposed to continue to honor the federally authorized tax practitioner privilege.

(c)	AB 129 has been introduced to reinstate the California Privilege officially

VIII.	Other Important Procedural Considerations

A.	Representation

1.	Helps to Limit the IRS fishing expedition

2.	Enables taxpayers to put forth a more consistent & controlled financial impression

3.	IRS employees generally take much more care when they know you are represented knowing that your rights are known to you.

B.	Taxpayer Records and Affidavits

1.	Your representative views the evidence as to how it will be received by the IRS and the courts.

2.	Redact any information from the records and affidavits which might lead to problems such as unwarranted admissions, problems for others, or problems in other years, or ancillary problems for the taxpayer.

3.	Quickly respond to Information Documentation Requests and Summons, with adequate explanation of any delays, deficiencies, and inconsistencies.

4.	Prepare witness statements and other ancillary documentation from third parties, where possible. These should be used to explain the Taxpayer's position and to complete a cogent, full picture of the reasonableness and in some cases the necessity of the Taxpayers actions.

5.	Creating a full, well supported picture of the taxpayer's background and records should be done at the EARLIEST MOMENT. Many taxpayers start their way through the procedures: letter contact, audit, notice of proposed assessment final assessment, and even Tax Court, before producing all the needed records and documents.

C.	Consider the taxpayer's pattern of expenses and income in comparison to similar businesses, utilizing the IRS' audit profiles published on the IRS web site for the type of business of the taxpayer.

D.	Limitation on Positions Taken by Federally Authorized Tax Preparers

1.	Circular 230 makes your tax preparer Personally liable for a position which cannot be supported.

2.	Sales & Use Tax

E.	Employment Development Department

3.	Employment Tax

F.	Do not use non-payment or Tax Procedure for Delay

1.	The interest and penalties the government charges are NOT DEDUCTIBLE. Early resolution, even if it means full payment, may enable deduction for the interest on a business loan (if applicable).

2.	Where naked delay is discovered the government will be more likely to be less flexible in dealing with your case.

G.	A showing of cooperation at each stage of the proceedings for:

1.	Having a chance to have the IRS pay your attorney fees.

2.	Avoid IRS hardened flexibility believing that you are hiding the truth.

3.	Movement of the tax case in the direction of criminal investigation. Criminal status moves the case from the civil arena where you are expected to disclose, to the criminal arena where you have the 5th amendment right against self- incrimination. These should be seen as correlating with each other than requiring in independent showing of criminal activity to move the case to the criminal domain.

H.	The use of the Kovel'ed Accountant to preserve privilege and to determine whether complete financial information available may show any signs of impropriety, especially in order to ascertain positions to be taken and the effect of those positions, confidentially.

I.	IRS Government Records

1.	Taxpayer transcripts can be ordered on-line or with a telephone call to the IRS. Transcripts are coded number summaries of tax returns, 1099's, etc and show the taxpayer's account as seen from the IRS' perspective.

2.	Freedom of Information Request (FOIA) is used to look at the actual file which is being processed within the IRS pursuant to the controversy at hand, be it audit, determination of proposed amounts due or simple mail contact.

J.	For Missed Regulatory Elections, a petition for relief can be had under Treasury Regulations 301.9100-1,-2, &-3 for elections which do not relate to subtitled E, G, H, & I.

(a)	Applies to regulations of the Federal Register, Revenue Ruling, Revenue Procedure, Notice, IRB.

(b)	Excluded are deadlines required by statute.

K.	Taxpayer Bill of Rights / Taxpayer Advocate (efficiency within the bureaucracy or "engineering feedback")

(a)	EDD/FTB/BOE

-Coordination of Taxpayer complaints and Problems.

-Identify issues and propose change

-Encourage Public Suggestions

-Coordinate Outreach Efforts.

(b)	IRS

-Much more individualistic approach

-Heart of Response to the Individual is Form 911, Request for Taxpayer Advocate Service Assistance

-TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

-toll-free case intake line at 1-877-777-4778.

(c)	IRS Taxpayer Advocacy Panel (TAP) is a two-way conduit; serving as a focus group for the IRS providing input on strategic initiatives, as well as providing a venue for raising issues identified by citizens. Structurally, there are seven geographically based Area Boards aligned with the current Taxpayer Advocate Service areas. Total of 95 members.

L.	Low Income Tax Clinic (LITC) grant program. A federal program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Nina E. Olson. The LITC program serves individuals who have a problem with the IRS and whose income is below a certain level.

(a)	Close coordination with the Tax Court, the judges know what to expect.

(b)	Close coordination with the IRS. Supposedly a high level of confidence in received cases, knowing that the tax payers are pre-screened for low income, and that the taxpayer representatives have no incentive to mis-represent.

(c)	Ancillary programs include outreach and education to taxpayers who speak English as a second language.

(d)	IRS awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand or maintain low-income taxpayer clinics.

(e)	Typically associated with accredited law, business or accounting schools, or 501(c) organizations and utilize students to represent low income taxpayers in tax disputes with the IRS.

IX.	Conclusions and Things to Remember

A.	Records. Each tax return should be prepared with records kept in an organized manner as if the taxpayer were going to have to undergo an audit the day after the tax returns were filed.

B.	Think of tax procedure or any procedure as an extreme left leaning structure which tapers narrowly toward the right. The fullest opportunity for showing and proving the taxpayers case occurs at the first opportunity, even at the filing of the tax return. Any explanation offered at the time of filing has a much better chance to be viewed as factual because of the fact that the taxpayer attempted to justify his position at the earliest moment. Not that taking a position on the return will prevent further inquiry, but it bolsters the frankness of the position taken.

C.	Regardless of whether the taxpayer is wrong or right, nothing makes a position worse than a taxpayer putting their head in the sand. This is usually done by ignoring communications from the IRS, or looking at the audit as an opportunity to argue your way out without records, or putting forth the minimum response communications to the IRS hoping to wait to the last minute to find an attorney to "win the day in tax court".

D.	Always consider every case as a bureaucratic disposal proposition. IRS/FTB wants to dispose of the case in a way that they can feel that an adequate compensation has been received given the difficulties of the taxpayer. Much will depend upon legitimately convincing the tax official that disposal of the case on terms acceptable terms to the client, with sufficient case notation to pass scrutiny of the tax official's superiors.

Curtis L. Harrington

Office:	Harrington & Harrington; 6300 State University Drive, Suite 250, Long Beach, CA

90815; Tel. (562) 594-9784; Fax (562) 594-4414

curt@patentax.com PATENTAX®	http://www.patentax.com

Specialty:	High Technology Patent / Trademark / Intellectual Property Law & Taxation

Education:	B.S. Chemistry - Auburn University (1974)

M. S. Electrical Engineering - California State University Long Beach (1990)

M.S. Chemical Engineering - Georgia Institute of Technology (1977)

J.D. - University of Houston School of Law (1983)

M.B.A. - University of Oklahoma (1985)

LL.M. Taxation - University of San Diego School of Law (1997)

Admitted	Supreme Courts of California, Arizona, Texas, & Nevada

to Practice: U.S. Supreme Court;	U.S. District Court, Central District of California

Internal Revenue Service	U.S. Patent and Trademark Office

U.S. Court of Appeals for the Federal, Fifth & Ninth Circuits

California Department of Real Estate - Broker

Los Angeles County California EMT-Basic

U.S. Tax Court	FCC-Commercial & Amateur Extra

Certified by The State Bar of California Board of Legal Specialization: Taxation

Languages	Japanese Language Proficiency Examination, Approved by Japan Foundation, Level 4; Kanji Proficiency Exam of the Japan Kanji Aptitude Testing Foundation, passed Level 7, recognized by the Japan Ministry of Education, mastery of 640 kanji; some technical Russian reading ability.

Patents	Prepared and prosecuted more than 100 patents, in the electrical and

Prepared	chemical technologies; specialty areas include optics, fiber optics, cryogenics electromagnetics, natural gas processing and computers, & trademark and copyright preparation and prosecution. Patents include: Chemical: 4,957,634; 4,851,077; Electrical: 4,876,892; 4,833,351; 4,837,525; Mechanical: 4,879,895; 4,906,199; and Optical: 4,919,512; 4,898,468.

Litigation	Associate counsel in patent matters, trade secret litigation; Judge pro tem, Long Beach Municipal Court; Superior Court Mediation program, Long Beach; Attorney- Client fee Dispute Arbitrator, Long Beach Bar Association; Patent Panel, American Arbitration Association.

Teaching	Adjunct Law Professor, Golden Gate University School of Law, LL.M. Taxation Program; Georgia Institute of Technology - previously taught heat and mass transfer laboratories, and analog and digital computer laboratory.

Member:	State bars of California, Arizona, Texas and Nevada; Long Beach Bar Association

(Board of Governors, 1994-95); Orange County Bar Association, Taxation Section, (Co-Chair Technology Law Section 1996); Past Member, Orange County Chapter of California Society of Enrolled Agents - President 2003-2004; Fellow, National Tax Practice Institute; California Bar Association: CEB committee (1999-2000); Income & Other Tax subcommittee (Chair 2000-2002); Taxation Section Executive Committee (2002-2005); Cal Bar Taxation Advisory Committee (2006-2011).