Business Finance
TAX 700 CSUS Internal Revenue Service Audit & Notice of Proposed Adjustment Memorandum

TAX 700

California State University - Stanislaus

TAX

Question Description

I don’t know how to handle this Accounting question and need guidance.

TAX 700 Final Project II Guidelines and Rubric
Response Memo to the IRS
Overview
Researching

special tax issues for clients is important these days, as the Internal

Revenue Service (IRS) can challenge every aspect of difficult tax

stances. Certified Public Accountants (CPAs) must strive to navigate

their way through the ever-complicated tax code and back up every stance

they take with facts, relevant federal statutory tax legislation, and

case law to create a strong argument. This course has provided you with

real-life examples of IRS adjustments and has given you the opportunity

to respond and defend your client.
The treatment of per diem expenses

on tax returns has become a trending issue for the IRS in regard to

combining them with lodging, not including them as wages when the

assignment is greater than one year, and even not adding back the meals

and entertainment portion as part of a tax adjustment. This is a

real-life topic that has affected many companies over the past several

years, and you will have the ability to defend it just as other CPAs

have done for their clients.
Imagine that you are a CPA working for

an accounting firm. Your client is a Fortune 500 public company that has

revenues exceeding $10 billion. It is a fast-growing company that has

engaged your firm to handle all tax compliance and consulting. The

client has recently received notification from the IRS, and they have

determined that they will be under audit for the prior tax year. The

client contacts you to help them through this process. While meeting

with the IRS to understand what they need for their audit, you provided

the IRS with your client’s trial balances, recent tax return work

papers, and the tax returns themselves.
After further review of those

documents, the IRS provided your client with a Notice of Proposed

Adjustment (NOPA) related to per diem expenses that the client has been

providing to their employees when they travel for business. The per

diems were for the combined lodging and meal expenses. The IRS is

recommending that these per diems are nondeductible at a rate of 50

percent. The adjustment they have proposed is $5 million. While

discussing the issue with your client, you learn that they have

accounted for per diem expenses the same way for the past several years

in their tax returns. You estimate that the fees associated with your

services will be $250,000. This fee includes defending your client

before the IRS, drafting a response plan, preparing a NOPA response, and

defending your client through an appeal.
In Final Project I, you

drafted a plan for how your client should respond to the NOPA. Your plan

explained the client’s current situation, determined why they should

appeal to the IRS, and advised them on how to properly document the tax

uncertainty on their public disclosures. You also recommended measures

that your client can take to correct the tax issue related to per diems

for avoiding future audits.
For Final Project II, you must prepare a

memo to the IRS in response to the NOPA to initiate the appeal. Your

response will discuss the issue associated with the

Unformatted Attachment Preview

TAX 700 Final Project II Guidelines and Rubric Response Memo to the IRS Overview Researching special tax issues for clients is important these days, as the Internal Revenue Service (IRS) can challenge every aspect of difficult tax stances. Certified Public Accountants (CPAs) must strive to navigate their way through the ever-complicated tax code and back up every stance they take with facts, relevant federal statutory tax legislation, and case law to create a strong argument. This course has provided you with real-life examples of IRS adjustments and has given you the opportunity to respond and defend your client. The treatment of per diem expenses on tax returns has become a trending issue for the IRS in regard to combining them with lodging, not including them as wages when the assignment is greater than one year, and even not adding back the meals and entertainment portion as part of a tax adjustment. This is a reallife topic that has affected many companies over the past several years, and you will have the ability to defend it just as other CPAs have done for their clients. Imagine that you are a CPA working for an accounting firm. Your client is a Fortune 500 public company that has revenues exceeding $10 billion. It is a fastgrowing company that has engaged your firm to handle all tax compliance and consulting. The client has recently received notification from the IRS, and they have determined that they will be under audit for the prior tax year. The client contacts you to help them through this process. While meeting with the IRS to understand what they need for their audit, you provided the IRS with your client’s trial balances, recent tax return work papers, and the tax returns themselves. After further review of those documents, the IRS provided your client with a Notice of Proposed Adjustment (NOPA) related to per diem expenses that the client has been providing to their employees when they travel for business. The per diems were for the combined lodging and meal expenses. The IRS is recommending that these per diems are nondeductible at a rate of 50 percent. The adjustment they have proposed is $5 million. While discussing the issue with your client, you learn that they have accounted for per diem expenses the same way for the past several years in their tax returns. You estimate that the fees associated with your services will be $250,000. This fee includes defending your client before the IRS, drafting a response plan, preparing a NOPA response, and defending your client through an appeal. In Final Project I, you drafted a plan for how your client should respond to the NOPA. Your plan explained the client’s current situation, determined why they should appeal to the IRS, and advised them on how to properly document the tax uncertainty on their public disclosures. You also recommended measures that your client can take to correct the tax issue related to per diems for avoiding future audits. For Final Project II, you must prepare a memo to the IRS in response to the NOPA to initiate the appeal. Your response will discuss the issue associated with the 1 proposed adjustment, explain why your client disagrees, and include relevant legal research to defend your client’s case. Be sure to read the NOPA in its entirety in order to formulate a clear and thorough response. This assessment addresses the following course outcomes:    Develop plans that represent clients through the various stages of the IRS audit process for effectively resolving appeals Assess impacts of various federal taxation laws and generally accepted accounting principles on clients for informing appropriate responses to IRS audits Justify why an appeal is an appropriate course of action for clients based on materiality and applicable taxation rules and regulations Prompt Imagine that you are a CPA and your client, XYZ Inc., has received a Notice of Proposed Adjustment (NOPA) from the IRS related to the treatment of per diems on their prior-year tax return. Your client has decided to appeal the IRS’s proposed adjustment. Now, you must prepare a 2- to 3-page memo to the IRS on behalf of your client in response to the NOPA. Your memo must have three distinct sections: Issues, Stance, and Support. The Support section is where you need to defend why your client is appealing, and it should make up the bulk of your memo. Specifically, the following critical elements must be addressed: I. II. III. Issues: Identify each item that the IRS challenged your client on in the NOPA, and clearly state how the client intends to respond to the proposed adjustment. Stance: Declare your client’s stance on the items identified above by briefly explaining which facts or legal arguments in the NOPA you consider to be in error and why. Support: Explain why your client’s appeal should be granted, using relevant legal research to support their case. You may include Internal Revenue Code, regulations, reference to past revenue rulings, and/or revenue procedures in your defense. You will submit Final Project II in Module Nine. It should be a complete, polished artifact containing all of the critical elements of Final Project II. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project II Rubric. 2 Final Project II Rubric Guidelines for Submission: Your memo should be 2–3 pages, not including the references page, and follow APA formatting: 12-point font, double spaced, with one-inch margins. Remember to include a references page and to cite any research you use in your memo. Critical Elements Issues: Each item Exemplary Proficient Identifies each item that the IRS challenged the client on in the NOPA and clearly states how the client intends to respond to the proposed adjustment (100%) Stance: Client’s Stance Meets “Proficient” criteria, and response provides keen insight into why the client disagrees with certain facts or legal arguments in the NOPA (100%) Declares the client’s stance on the items identified above by briefly explaining which facts or legal arguments in the NOPA are considered to be in error and why (90%) Support: Relevant Legal Research Meets “Proficient” criteria, and legal research provided is exceptionally well suited for supporting the client’s case (100%) Explains why the client’s appeal should be granted, using relevant legal research to support their case (90%) 3 Needs Improvement Identifies each item that the IRS challenged the client on in the NOPA, but does not clearly state how the client intends to respond to the proposed adjustment, or identification contains inaccuracies (70%) Declares the client’s stance on the items identified above by briefly explaining which facts or legal arguments in the NOPA are considered to be in error, but does not explain why, or response contains inaccuracies (70%) Explains why the client’s appeal should be granted, but does not use legal research to support their case, or research used is irrelevant, or explanation is cursory or illogical (70%) Not Evident Does not identify each item that the IRS challenged the client on in the NOPA or state how the client intends to respond to the proposed adjustment (0%) Value 20 Does not declare the client’s stance on the items identified above (0%) 30 Does not explain why the client’s appeal should be granted (0%) 30 Articulation of Response Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-toread format (100%) Submission has no major errors related to citations, grammar, spelling, syntax, or organization (90%) Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas (70%) Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%) Total 4 20 100% ...
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Final Answer

Hi, check the attached paper.

RESPONSE MEMO TO THE IRS

1

Response Memo to the IRS
Name
Institution
Date

Authors Note

RESPONSE MEMO TO THE IRS

2

Gspark Accounting Group
123 W. Market Street
North Hub, PA 13928
XYZ, Inc.
345 Horseshoe Pint
Downingtown, PA 19455
March 22, 2020
To XYZ, Inc. CFO
Re:

Internal Revenue Service Audit and Notice of Proposed Adjustment
A recent notification by IRS informed the company that it needs to undergo a prior-year

tax return audit. We were contacted as the accounting firm for XYZ Inc. to assist in dealing with
the audit.
The current situation
The IRS puts all tax returns through a computerized screening process to determine any
calculation errors or differences between the documents provided and the figures in the return.
The returns then undergo discriminant inventory function (DIF) process before further review by
auditors to establish the returns that produce additional taxes and need to be audited. The
following documentations were given to the IRS: tax returns, trial balance, and the recent tax
work papers.
According to the IRS proposal for XYZ Inc., a deduction of $ 5,000,000should be
disallowed due to the failure to account for the per diems provided to employees. IRS is unable
...

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