IRS TCO cheat sheet

Gross income under IRC §61 includes all income from whatever source derived unless a specific exclusion applies; exclusions must be located in the Code, not inferred.

Filing status is determined as of the last day of the tax year; married filing jointly requires a valid marriage and both spouses' consent, while head of household requires an unmarried or considered-unmarried taxpayer supporting a qualifying person.

Standard deduction amounts are set annually by statute and indexed for inflation; additional amounts apply for age 65+ or blindness, and the additional deduction is per-person, not per-return.

Marginal tax brackets apply progressively: tax equals the sum of each bracket slice taxed at its own rate, so a taxpayer's top marginal rate is not applied to all income.

The child tax credit is partially refundable through the additional child tax credit; the refundable portion is computed on Schedule 8812 using earned income thresholds.

Self-employment tax under SECA is 15.3% on net earnings up to the Social Security wage base and 2.9% Medicare above it, with one-half of SE tax deductible as an adjustment to income.

Withholding and estimated tax rules require quarterly payments when tax liability minus withholding is $1,000 or more; underpayment penalties are computed on Form 2210 by quarter.

Capital gains on assets held more than one year are long-term; net long-term gains are taxed at preferential rates (0%, 15%, or 20%) based on taxable income thresholds.

Substantiation rules under §274(d) require contemporaneous records for travel, gifts, and listed property; without adequate records, no deduction is allowed regardless of actual expense.

The Taxpayer Bill of Rights (IRC §7803(a)(3)) lists ten rights: to be informed, to quality service, to pay no more than the correct amount, to challenge the IRS and be heard, to appeal a decision in an independent forum, to finality, to privacy, to confidentiality, to retain representation, and to a fair and just tax system.

A statutory notice of deficiency (90-day letter) gives the taxpayer 90 days (150 if addressed outside the US) to petition the US Tax Court before assessment; filing the petition suspends assessment and collection.

Collection Due Process rights arise from a filed NFTL or a final notice of intent to levy; the taxpayer has 30 days to request a CDP hearing, and Tax Court review follows the determination.

The IRS must notify taxpayers of their right to representation and may not require a taxpayer to accompany an authorized representative unless a summons is issued.

The Taxpayer Advocate Service (TAS) assists taxpayers experiencing significant hardship or systemic problems; a case is accepted only after the normal channels fail or the statutory criteria are met.

Penalty relief is available through reasonable cause under §6664(c) or first-time abatement for failure-to-file, failure-to-pay, and failure-to-deposit penalties when the taxpayer has a clean three-year compliance history.

Examination methods include correspondence examination, office examination, and field examination; taxpayers may request an appeal through the IRS Independent Office of Appeals after an unagreed examination.

Innocent spouse relief under §6015 has three tracks: traditional relief, separation of liability, and equitable relief; each has distinct eligibility and time limits, generally two years from collection activity for equitable claims.

The IRS may abate interest attributable to unreasonable IRS delay or error under §6404, and the taxpayer must request abatement in writing with supporting facts.

Every case file entry should record the date, time, channel (phone, letter, in person), parties present, and a factual summary free of opinion or characterization.

Third-party contacts require an authorization (Form 2848 for representatives, Form 8821 for tax information authorization) verified before any substantive discussion of return information.

Disclosure rules under §6103 prohibit discussing a taxpayer's return information with anyone outside the authorized scope; unauthorized disclosure can carry civil and criminal penalties.

Case notes should distinguish what the taxpayer stated from what the employee verified; unverified taxpayer assertions are recorded as allegations, not facts.

Correspondence must include the taxpayer's name, TIN masked where appropriate, tax period, the specific issue, and the action requested with a deadline and response channel.

The IRS's plain language standards require short sentences, active voice, and defined technical terms; notices must state what action the taxpayer must take and what happens if they do not.

A complete case history allows a subsequent employee to reconstruct the case without contacting the taxpayer; gaps in chronology are the most common documentation deficiency.

When a taxpayer requests an oral explanation of a notice, the employee should identify the notice type, the computation, and the taxpayer's appeal and payment options in that order.

Secure transmission of taxpayer data requires encryption and approved channels; email of return information outside IRS secure systems is prohibited.

Frivolous return positions are listed in IRS Notice 2010-33 and updated by subsequent notices; filing based on these positions can trigger a $5,000 frivolous return penalty under §6702.

The IRS may assert the civil fraud penalty under §6663 at 75% of the underpayment attributable to fraud; the burden of proof on fraud is on the IRS and must be met by clear and convincing evidence.

Referral to the IRS Criminal Investigation division requires a reasonable indication of willfulness, an affirmative act, and a tax loss; the referral is documented on Form 3949-A or through the appropriate internal channel.

The abusive tax promotion penalties under §§6700 and 6701 apply to promoters and preparers; the amounts differ and depend on whether the conduct is a statement or an organized promotion.

Trust fund recovery penalty under §6672 applies to willful failure to collect or pay over employment taxes; the penalty equals the unpaid trust fund portion and is assessed against responsible persons individually.

A summons under §7602 may be issued for examination, collection, or investigation; third-party summonses require notice to the taxpayer with a 20-day period to petition to quash.

Collection enforcement tools include the federal tax lien (arises on assessment and demand), the NFTL (filed for public notice), and the levy; each has distinct notice and appeal rights.

The IRS may refer a case to the Department of Justice for civil litigation or criminal prosecution; DOJ Tax Division handles defense of refund suits and prosecution of criminal tax cases.

Identity theft cases are routed to the Identity Protection Specialized Unit; the taxpayer receives an IP PIN and the account is flagged to prevent fraudulent refunds.