Question

Your client, a public corporation, has received a Revenue Agent’s Report (RAR) from the IRS proposing a significant income tax liability relating to a transfer pricing issue. A) Briefly discuss the purpose of the RAR and options available to your client. B) What factors should your client consider before taking action?

Answer 1

Revenue Audit Report: Revenue audit report is a detailed analysis by IRS, of a person income and expenses claimed during the year while filling a return of the year.This analysis is done by the department on the basis of information and documents filed in support of the return by assessee and also any finding or information relates to assessee which they gather from outside authorities such as banks and other institutions.

it Is the duty of the assessee to file correct statement of return and documents while claiming tax exemtions and deduction in taxable income. If in the eyes of department on the basis of finding any tax liablity is created against the assessee then an opportunity to being heard shall be given and assessee has a right to explain the discrepencies find by the department. this opportunity will be given either in the form of filling questionair which is send to assessee through mail or sometime by giving opportunity to meet face to face discussion at office of the concerned officials of the department.

So assessee has a right to explain the discrepencies before raising any tax demand on him/her, and still after being heard, a tax demand is raised then assessee can go to higher authority by way of appeal.

Thanks