2.1 The Federal Tax System

The federal income tax system is administered by the Internal Revenue Service (IRS), which is part of the Treasury Department. The IRS is governed by Title 26 of the United States Code, also known as the Internal Revenue Code (IRC), as well as by the related title of the Code of Federal Regulations. The IRS also promulgates the Internal Revenue Manual (IRM), which is a guide for IRS agents and employees. Throughout this chapter, citations to “I.R.C.” are to the Internal Revenue Code; citations to “I.R.M.” are to the Internal Revenue Manual1 . Citations to the “I.R.B.” are to the Internal Revenue Bulletin, which is the authoritative source for recent rulings and procedures of the IRS, recent Treasury Decisions, Executive Orders, and notable tax cases. These sources, and nearly all forms, returns, and instructions needed to help your clients can be obtained at the official IRS website, www.irs.gov.

The IRS will process tax returns, conduct audits, calculate liability, send notices, and try to collect unpaid tax liability. At many junctures, you can appeal IRS actions or proposed actions, and the appeal will eventually go to the IRS Appeals Division. The Appeals Division is part of the IRS but maintains a strict firewall between itself and the rest of the agency; the Division does discuss cases with the regular IRS agents. The IRS also has a Taxpayer Advocate who is charged with helping taxpayers and advocating on their behalf; the Advocate also manages Taxpayer Assistance Centers around the country. The taxpayer can appeal final decisions of the IRS to the United States Tax Court, which is based in Washington, D.C. The judges of the Tax Court travel the country to hold trials. In Louisiana, the Tax Court holds trials in Shreveport and New Orleans. The IRS is represented in Tax Court by attorneys from the IRS Office of Chief Counsel, which has field offices around the country. Refund lawsuits, in which the contested tax is paid but then a refund is requested by petition, are filed in the local federal district court. In these cases, the IRS is defended by Justice Department attorneys.

In addition to the Taxpayer Advocate, other organizations can help low-income taxpayers. The Volunteer Income Tax Assistance (VITA) program has trained volunteers who help low-income taxpayers prepare their annual tax returns for free. VITA programs are often associated with non-profit agencies or higher education institutions, and local programs can be found online. In addition, most states have at least one Low-Income Taxpayer Clinic (LITC), which is a legal clinic where attorneys provide free legal services for low-income taxpayers. The LITC program is funded by the IRS, but the clinics are independent.2

• 1The IRS regularly revises and reorganizes the Internal Revenue Manual, which IRS staff generally follow in processing taxpayer cases. IRM citations may have changed since the revision of this Chapter. The Internal Revenue Manual can be found using the search function at www.irs.gov.
• 2In Louisiana, a federal tax controversy with the IRS may be referred to the Low-Income Taxpayer Clinic (LITC) at Southeast Louisiana Legal Services. This LITC serves clients anywhere in the state of Louisiana. For more information, see Se. La. Legal Servs., http://www.slls.org.