Cancellation of Debt. Forgiveness of a debt without payment or consideration. Cancellation of a debt can often result in taxable income to the debtor.

Cash Expenditures Method. An indirect method of proof of income used by the IRS to establish the existence of underreported or unreported income.

Certified Public Accountant. An accountant who has met the statutory and licensing requirements of the state.

Civil Fraud Penalty. A penalty equal to 75% of an underpayment that is attributable to fraud.

Civil Penalty. A fine or sanction against a taxpayer or tax preparer for failure to comply with tax rules.

Claim-of-Right Doctrine. A judicial doctrine that includes an amount in the gross income of the taxpayer, regardless of receipt, when the taxpayer has an unrestricted claim to the amount.

Closing Agreement. A written agreement between the taxpayer and the IRS that conclusively settles a tax liability or a particular tax year or settles one or more issues affecting such liability.

Collateral Agreement. A written commitment by a taxpayer to induce some action by the IRS. For example, a taxpayer may offer the IRS a collateral agreement whereby the taxpayer agrees to pay the IRS additional amounts based upon future income in excess of a some certain to induce the IRS to accept an Offer in Compromise (OIC).

Collection Statute Expiration Date (CSED).  The CSED is a time period established by law to collect taxes. The CSED is generally ten years from the date of assessment; however, under various circumstances the running of the statutory period is suspended and/or extended. Each assessment carries its own CSED and there may be multiple assessments for any tax year. If no return is filed for a tax period, the CSED can not be computed and will not expire.

Currently Not Collectible.  Also referred to as "CNC" and "53ing an account" (refers to an IRS computer code indicating that the case is in "currently not collectible" status). When the taxpayer establishes that, even under a very Spartan budget imposed by the IRS, even small monthly payments would cause a severe economic hardship, then the IRS will place the account in CNC status for a period of time and not actively seek collection.

Constructive Dividend. The IRS reclassification of a corporate expense into a nondeductible disguised dividend.

Constructive Receipt. A doctrine whereby income that is not received but is available to a taxpayer is taxed to the taxpayer.

Corporate Veil. The protection afforded an individual by the use of the corporate entity. Courts may pierce the Corporate Veil to reach the underlying person.

Criminal Investigation Division (CID). The part of the IRS that conducts criminal investigations and recommends prosecution of taxpayers for alleged criminal defenses.

D.
Debt Forgiveness Income. See Discharge of Indebtedness Income.

Deficiency.  The difference between the amount of tax assessed by the IRS and the amount reported on your return.

Delay Adjustment. IRS Examination parlance a term used to describe the IRS proposed change of an item of income or expense.

Delinquent Return. A tax return not filed within the time proscribed by the Internal Revenue Code.

Discriminant Function System (DIF Score). A scoring system used by the IRS to evaluate the likelihood that the return will generate more revenue if audited.

Divorce Transfer. A transfer of assets occurring within one year after a marriage ceases resulting in no gain or loss on the transfer.

Document Locator Number. The number assigned to each return or other document introduced into processing, for control and file reference purposes. (more info)

< Prev | Next >