Question

Describe the role of the courts and the Internal Revenue Service in interpreting and applying the sources of tax law.

Answer 1

The Internal Revenue Code (Code) generally is the first place to look when confronting a federal tax question, but it is important to recognize that much federal tax law is not statutory. The U.S. Department of the Treasury (Treasury) promulgates regulations, and the Internal Revenue Service (IRS) issues important guidance, such as Revenue Rulings, Revenue Procedures, and Notices (Hickman, 2009). Federal courts interpret all of these authorities. In order to understand and apply federal tax law, it is important to appreciate the role that federal trial courts, Courts of Appeals, and the U.S. Supreme Court play in developing the law. This essay provides an overview of federal tax litigation, discusses the deference courts give to guidance issued by the Treasury and IRS, and discusses when taxpayers have “standing” to challenge the tax laws in court. The essay also discusses cases in which Congress may step in to amend the Code following a court decision.

Internal Revenue Service has found the tax payer has underreported their income, neither the preparer nor taxpayer is subject to penalties. Substantial authority protects both the taxpayer and the tax preparer from penalties even if the IRS has challenged the tax return and won. Substantial authority is something taxpayers need to be aware of and needs to be used ethically by the tax preparers. The role of the courts and the Internal Revenue Service interpreting the sources of the tax laws are in the case of disputes and issues with taxpayer’s income tax filings. The purpose of the tax courts is to make sure that the taxpayers are paying the correct taxes that are assessed under the tax laws. The Internal Revenue Service’s role is to process tax returns and ensure that there.

Are no deficiencies. The Internal Revenue Service also ensures that the tax laws are being followed and issues administrative rulings for different issues. The courts role in interpreting and applying the sources of tax law are to enforce the tax laws as they interpret them.