part4-249
- 4.35.1.1
Overview
-
This chapter discusses tax audit guidelines for partnerships and S corporations.
-
This manual was prepared for all examiners who make field examinations
of income tax returns. -
The manual has been developed for application and use in making quality
audits. It contains standards and techniques relating to the evaluation and
disposition of assigned returns and the auditing and reporting on examined
returns. Audit standards relate to the overall quality of performance, and
audit techniques are ways in which to meet these standards.
-
The Tax Audit Guidelines for Partnerships and S Corporations have been
prepared for all examiners who make field examinations of income tax returns.
They contain techniques relating to the evaluation and disposition of assigned
returns and the auditing and reporting on examined returns.
-
The function of the Internal Revenue Service is to administer the Internal
Revenue Code. It is the duty of the Service to correctly apply the laws enacted
by Congress; to determine the true meaning of various Code provisions in light
of the Congressional purpose in enacting them; and to perform this work in
a fair and impartial manner, with neither a government nor a taxpayer point
of view. -
The mission of the Service is to provide Americas taxpayers top quality
service by helping them understand and meet their tax responsibilities. (See
policy statement P-1-1.) Examination supports the mission of the Service by
encouraging the correct reporting by taxpayers of income, estate, gift, employment,
and certain excise taxes. This is accomplished by:-
Measuring the degree of voluntary compliance as reflected on filed returns;
-
Reducing noncompliance by identifying and allocating resources to those
returns most in need of examination; and -
Conducting on a timely basis quality audits of each selected tax return
to determine the correct tax liability.
-
-
The purpose of auditing a tax return is to determine the taxpayer’s
correct liability—no more or no less. A quality audit is the examination
of a taxpayer’s books and records in sufficient depth to fully develop
relevant fact concerning issues of merit; ascertaining the true meaning of
applicable tax laws; and correctly applying such laws to the relevant facts. -
One responsibility of Examination is to conduct on a timely basis quality
audits of selected tax returns to determine the correct tax liability. Examination
standards were developed as the level of achievement required for you to discharge
this responsibility. Examination procedures necessary to achieve the standards
are explained in the sections of the Manual indicated. Efforts have been made
to define all standards as fully as possible; however, certain terms in the
standards are intangible or subjective, and, as such, do not lend themselves
to explicit definition. These include terms such as reasonable and professional
judgment. Although the explanations have been written in a manner to show
you the intended meaning of the terms, you must use your technical knowledge,
training, and experience to correctly apply these concepts to the examination
process.
