What should I do if I receive a tax arrears or fine from the National Taxation Bureau? First, confirm the time limits for review, appeal, and administrative litigation.

Many companies focus on the following during the tax bureau's audit phase:

• Explain the transaction;
• Supplementary documents;

Communicate with the person in charge.

Until one day I received:

• Tax Amount Assessment Notice;
• Tax payment receipt;
• Ruling;

Upon receiving the fine payment notice, I suddenly realized that the case had moved from "investigation" to formal proceedings.The stage of administrative sanctions and administrative remedies.The most dangerous thing at this stage is not: "The IRS determines that it is detrimental to the company."

Instead:Missed the relief deadline.Because tax administrative remedies have a very clear procedural order.

Dissatisfaction with assessed taxes or related fines is usually not:

• Write a petition directly;
• File an appeal directly;

Or go directly to the administrative court.

Instead, we must first determine: what kind of punishment is this?

When will it be delivered?

Should I apply for a re-examination first?

How is the follow-up examination period calculated?

If the review is still unsatisfactory, when is the next step to file an appeal?

If you're still not satisfied, when is the statute of limitations for administrative litigation?

It is also necessary to confirm whether the tax payment will be transferred for enforcement during the administrative remedy process.

First, the first thing to do is not to write down the reasons, but to confirm "what punishment was received".

There are many IRS documents.

Not every official document provides the same form of relief.

Commonly included:

• Tax Amount Assessment Notice;
• Tax payment receipt;
• Ruling;
• Fine payment receipt;
• Review decision;
• Deny tax refund;

Other administrative penalties.

Therefore, after receiving the document, make one first:List of administrative penalties.At least:

• File name;
• Disciplinary authority;
• Document number;
• Delivery date;
• Payment deadline;
• Amount of tax to be paid;
• Fine amount;

Relief instruction.

Don't just say, "The IRS sent me a ticket."

When it comes to specific disciplinary actions, it should be decided by [the relevant authority/organization].Tax lawyers, back taxes and penalties, and tax administrative remediesFrom this perspective, first confirm the applicable procedures and timeframes.

Second, paying back taxes and imposing fines are not the same thing.

Many cases involve receiving both back taxes and fines simultaneously.

However, the two have different legal natures.

pay an overdue tax

The core issue is: how much tax should have been paid according to the law?

fine

The core issue then goes on to involve:

• Does it violate tax law obligations?
• Was there any intent or negligence?
• Basis for penalties;
• Degree of responsibility;

And whether the calculation of the fine is legal.

Therefore, even if the tax payment is justified, it does not mean that all fines will necessarily be imposed.

Conversely, if there is a dispute over the amount of tax to be paid, it is not acceptable to simply state: "The company did not intentionally evade taxes."

Because tax disputes and penalties must be handled separately.

3. What should a company pay attention to if tax payment penalties and fines are separated?

If the IRS issues two separate administrative actions: an assessed tax penalty and a fine, they may be different administrative actions.

If a company is dissatisfied with both penalties, it cannot apply for a review of only one penalty and assume that the other penalty will also be rectified.

Therefore, after receiving the file, you must create:

A. Tax treatment

How much should I pay?

What is the reason?

B. Penalties and disciplinary actions

How much is the fine?

What are the grounds for the penalty?

Confirm separately:

• service;
• the term;

Relief procedures.

Do not confuse two different disciplinary actions as "one IRS case".

And ignore the program.

Fourth, if you disagree with the tax assessment by the State Taxation Administration, the first step is usually a "re-examination".

according to"Tax Collection LawArticle 35 states that if a taxpayer disagrees with a tax assessment decision, they should, in accordance with the law:

• state reasons;
• Attach supporting documents;

Apply to the tax collection authority for a review.

so:The review is a very important first step in the process of tax administrative remedies.You can't assume that "the IRS will never change it on its own."

They can skip the review process and directly file an administrative lawsuit.

If the procedure is not followed correctly, even if the entity's claims are very strong, it may be unable to enter into the real legal dispute due to procedural issues.

5. How many days does the follow-up examination take?

This is one of the most important deadlines in the entire document:30th.But you can't just memorize: "30 days after receipt".

Because of different verification methods, the starting point may be different.

According to Article 35 of the current Tax Collection Law: If the notice of tax assessment states: tax payable or tax to be supplemented, it shall, in principle, be paid within the following timeframes:Within 30 days from the day following the expiration of the payment periodRequest a review.

If the assessment notice does not specify the amount of tax payable or the amount of tax to be supplemented, then in principle:Within 30 days from the day following the delivery of the notice of tax assessmentRequest a review.

Therefore, after receiving a document, do not only look at the date on the document.

What really matters is:Delivery date + payment period.

6. Why is it essential to keep evidence of the "date of service"?

Because the time limit for administrative relief is not calculated based on when the company holds a meeting to discuss it.

It's not about asking: When will the chairman actually see the calculation?

First, we should confirm the legal aspect: service of process.

Therefore, when a company receives important documents from the IRS, it should keep them safe:

• envelope;
• Registration records;
• Electronic delivery of documents;
• Receive articles;

Internal receipt date.

And write directly on the first page of the case file:When does the relief period end?Do not wait until the day before you are to file the lawsuit to recalculate.

7. Does a review application only count if the IRS "receives" it, or if it is sent out?

According to Article 35 of the Tax Collection Law, the date on which the tax collection authority receives the application for review shall, in principle, be the date of receipt.

However, if it is sent through a postal agency, then:Date printed on the postmarkAs the standard.

Therefore, when a case is nearing its deadline, you can't simply say, "We've already asked a colleague to send it."

Should be retained:

• Post office receipt;
• Postmark;

Proof of delivery.

8. What should be written for the review? It's not about simply copying the explanation from the tax audit stage.

The formal re-examination should target:The IRS has already made specific determinations.Refute each point one by one.

At least establish:

National Taxation Bureau

What does the IRS think happened?

Our position

What are the real facts of the transaction?

evidence

What documents can prove this?

Legal issues

Where is the IRS applying the law incorrectly?

Tax impact

If our claim is valid, how should the correct tax amount be adjusted?

For example: "The IRS believes that a certain expenditure is not a genuine transaction."

You can't just answer, "It's true."

Instead, it should be sorted out:

• contract;
• Payment;
• Performance of obligations;
• Information about the other party;
• Accounting entries;
• Work results;

Purpose of the transaction.

9. One of the most common reasons for tax audit failures: focusing only on the law without reconstructing the transaction.

Major corporate tax disputes typically include:

• Business facts;
• Accounting;

Tax law.

For example, the IRS may argue that a certain consultant fee does not exist.

If the company only writes: "According to the provisions of the Income Tax Law, this expense should be recognized and listed."

However, no proof was provided:

• Who provides the service;
• What did you do?
• When will it be completed?
• What does the company get?

Without a factual basis, legal disputes regarding how the payment should be made lack a solid foundation.

Therefore, the real work of the follow-up examination is:Reconstruct the transaction. If the income is recognized as originating from funds between the company and its shareholders, further investigation is needed.How to reconstruct the nature of funds when shareholder transactions and accrued interest are subject to supplementary taxation.

If the dispute involves the content of the vouchers, they must also be compared.Disputes over the authenticity of ledgers, vouchers and transactionsWhen a transaction is questioned, it should also be clarified.Why can't cases involving fake transactions and false invoices only be handled by paying back taxes and fines?.

10. If the IRS already has complete accounting records, is it necessary to provide additional evidence for a review?

It needs to be judged on a case-by-case basis.

The IRS has: accounting records do not mean that it has a complete grasp of the facts of the transactions.

Perhaps more needs to be added:

• contract;
• Board of Directors Information;
• Email;
• Work results;
• Third-party information;
• Bank cash flow;
• acceptance;
• Industry practice;

Professional opinion.

The review is not just about confirming: "Did the IRS make a mistake?"

This may be the first time that a complete chain of evidence has been systematically presented that the IRS had not previously understood.

11. Do I need to pay all the outstanding taxes before applying for a review?

Paying all taxes in full should not be considered a prerequisite for applying for a review.

Even if a taxpayer disagrees with the assessed tax amount, they can still apply for a review within the statutory time limit.

According to Article 39 of the Tax Collection Law, if a taxpayer has applied for a review in accordance with the law, the transfer for compulsory enforcement may be temporarily suspended within the scope of the law.

However, whether or not all or part of the tax is paid first may still have an impact:

• Interest;
• Corporate cash flow;

The enforcement arrangements for the subsequent appeal stage.

Therefore, one cannot simply ask, "Is it legal to pay first?"

Another question:How should companies arrange their funding and subsequent relief strategies?

12. How long does it take to get the results of the follow-up examination?

According to Article 35 of the Tax Collection Law, the tax collection authority should, in principle, begin reviewing the application for review from the day following receipt of the application:Within 2 monthsA decision to review the case was made.

If no review decision is made by the expiration of the statutory period, the law provides for a system in which an appeal may be filed directly.

Therefore, reviewing cases cannot simply involve sending them out and waiting indefinitely.

The following should be established:

• Delivery date;
• During the 2-month period;
• Progress of undertaking;

Timing of subsequent appeals.

Thirteen, if you are still dissatisfied with the review decision, the next step is to appeal.

If the review decision remains unchanged:

• pay an overdue tax;
• Fine;

If other unfavorable assessments are made, the process needs to proceed to the next stage:Appeals.according to"Appeals LawArticle 14 states that, in principle, appeals should commence on the day following the date the administrative penalty is imposed.Within 30 daysMention it.

Tax cases typically involve receiving a review decision and then filing an appeal within the legally mandated timeframe.

Therefore, the second deadline you must remember is:The appeal was filed on the 30th.

Fourteen, appealing is not simply changing the cover of Charlie Hebdo.

If the review has failed, the appeal stage should first re-examine: what claims did the review decision actually answer?

Which types of evidence are accepted?

What evidence was ignored?

What reasons did the IRS use to reject the application?

The real point of contention is: the facts?

Accounting?

law?

Degree of proof?

program?

Therefore, the appeal should target:The reasons for the review decision itselfFurther offensive and defensive maneuvers.

Instead of copying the entire document: Application for Review.

15. After filing an appeal, will the enforcement of tax payment be automatically suspended?

This is a very important practical issue.

The answer is:Just because an appeal has been filed does not mean that the tax payment will not be transferred for enforcement.According to Article 39 of the Tax Collection Law, if one is still dissatisfied with the review decision and files an appeal in accordance with the law, in order to meet one of the conditions for suspending the transfer for enforcement, one can: first pay the tax payable under the review decision;one thirdAnd filed an appeal in accordance with the law.

If paying one-third is truly difficult, the law also provides for systems such as providing adequate guarantees.

Therefore, after receiving the review decision, companies cannot simply hand it over to their lawyers to write an appeal.

The finance department should also conduct a simultaneous assessment:

• One-third of the tax amount;
• Company cash flow;
• guarantee;

Is it possible that the case will be transferred to administrative enforcement?

16. Do not directly apply the "one-third" rule of this tax to penalties.

This point must be clearly distinguished.

For fines cases for which administrative remedies have been initiated in accordance with the law, the enforcement procedures before the conclusion of the administrative remedy process differ from those of this tax.

According to Article 50-2 of the Tax Collection Act and related provisions, fines are generally exempt from enforcement until the administrative remedy procedure is concluded.

Therefore, do not tell clients, "You must pay one-third of the back taxes and fines before you can continue with the relief efforts."

This is inaccurate.

Should be separated:

This tax

Note the enforcement and one-third provisions in Article 39.

fine

It shall be handled separately in accordance with its administrative remedies and enforcement provisions.

17. If you disagree with both the tax payment and the fine, why should the written complaint be considered separately?

Because the points of contention are completely different.

For example:

Tax Supplement

The point of contention is: should this income be taxed?

Can the fees be recognized?

Is the transaction genuine?

Year right?

How are tax rates and tax amounts calculated?

Fine

In addition to the facts mentioned above, we should ask further: Did the company act intentionally?

Was there any fault?

Is it reasonable to rely on professional advice?

Are the application materials complete?

How serious is the violation?

Is the penalty multiplier reasonable?

Therefore, even if two programs run simultaneously, the analysis architecture cannot be completely mixed together.

18. If the State Taxation Administration believes that taxes should be paid, will the court necessarily find that the company was guilty of intentional negligence?

no.

Taxes owed and administrative penalties have different legal analyses.

For example, the transaction process is complex:

• Accounting judgment;
• Tax law interpretation;
• Industry practice;

Even if the court or the IRS ultimately determines that taxes should still be paid, it does not necessarily mean that the taxpayer has committed the same degree of intent or negligence.

Therefore, when handling fine cases, a separate procedure should be followed:

• What information did the company possess at that time?
• How to make tax judgments;
• Should we consult an accountant?
• Whether the full facts are revealed;
• Previous application methods;

Is there a legitimate legal dispute?

19. Are the opinions of external accountants useful in a review or appeal process?

It could be very important.

But you can't just write, "This was done by the accountant."

It should be confirmed that:

• Did the company disclose the complete facts of the transaction to the accountant?
• What issues do accountants actually handle?
• Do you have any emails, work documents, or comments?
• Did the company submit its application based on professional advice?

The dispute is about whether it is a matter of fact or a matter of legal interpretation.

Professional advice may involve:

• The company's understanding at the time;
• Duty of care;
• Intentional negligence;

Reasonable reliance.

But no: as long as there is an accountant, all responsibilities automatically disappear.

20. Can new evidence be submitted during a review or appeal?

Truly important evidence should be presented as early as possible.

Tax administrative remedies are not just about what was submitted during the first audit phase.

If found later:

• Original contract;
• Proof of payment;
• Information on the counterparty in the transaction;
• Work results;
• Board of Directors Information;

Third-party certification should be assessed and submitted in accordance with the law.

However, the later the evidence appears, the more likely it is to be questioned: Why wasn't it there before?

Therefore, it must be kept:

• Original formation time;
• source;

The acquisition process.

Do not attempt to create a document that appears to exist after the fact, in order to seek administrative relief.

21. If the appeal fails again, the next step is administrative litigation.

If you are still dissatisfied with the decision to appeal, you can proceed to the Administrative Court.

According to the current lawAdministrative Litigation LawArticle 106 stipulates that cases involving the withdrawal of lawsuits should, in principle, be handled by:The two-month fixed period after the service of the decision on the appealIt was mentioned internally.

Therefore, the third important deadline is:The administrative lawsuit lasted for 2 months.This is not 60 days.

Legally, the period used is 2 months.

The calculation of time limits must be handled in accordance with legal provisions.

22. Administrative litigation is not "asking the court to calculate my taxes again".

Once the case enters the administrative court, the real points of contention may include:

• Does the State Taxation Administration have evidence to support its factual findings?
• Whether the judgment on the substance of the transaction was incorrect;
• Is the tax law being applied correctly?
• Was the penalty imposed due to intent or negligence?
• Is the procedure legal?
• Does it violate the principle of proportionality?

Whether the burden of proof was properly fulfilled.

Therefore, administrative litigation should begin with:How do courts review the legality of administrative sanctions?The case was reorganized from a different perspective.

It's not simply: "I disagree with the IRS, so I'm saying it again."

23. Which stage is most important: review, appeal, or administrative litigation?

No stage can be ignored.

The mature approach is:

Verification phase

Establish transactions and evidence.

Re-examination

The IRS disciplinary actions were formally broken down item by item.

Appeal

The review decision was re-examined.

Administrative litigation

Transform the points of contention into those that the court can examine:

• fact;
• evidence;

Legal issues.

The later the evidence is first compiled, the higher the cost usually is.

If the case is still under investigation, you can first learn about it.This is the first explanation of how to prepare after receiving a tax audit or tax adjustment notice from the State Taxation Administration..

24. Not all IRS administrative penalties necessarily require a prior review.

This should not be oversimplified.

Cases involving "assessed taxes" are typically subject to the pre-review procedure under the Tax Collection Act.

However, the IRS may also take other administrative actions that are not part of the assessed tax.

These types of cases may involve filing a lawsuit directly in accordance with the law, without necessarily undergoing a review first.

Therefore, the first step upon receiving any IRS document should always be:First, identify the type of treatment.The 30-day review period should not be mechanically applied to all administrative penalties.

25. During the period of administrative remedies, the company should establish a "timetable".

At least:

• Name of disciplinary action;
• Delivery date;
• Payment deadline;
• Deadline for re-examination;
• Recheck the submission date;
• The review decision has been delivered;
• Deadline for appeal;
• Date of filing of the appeal;
• Service of the appeal decision;
• Deadline for administrative litigation;
• Is this tax payable?
• One-third of the tax amount;
• guarantee;

Enforcement status.

In cases involving large corporations, the worst thing that can happen is that the legal grounds are well-prepared, but the deadline is missed due to administrative procedural errors.

26. After receiving a tax payment penalty, should you consult an accountant or a lawyer first?

Major cases usually require cooperation from both sides.

accountant

We can assist with:

• Tax calculation;
• Reporting discrepancies;
• Accounting;
• Financial statements;
• Accounting subjects;

Tax calculation.

lawyer

Main processing:

• Legality of the disciplinary action;
• evidence;
• Re-examination;
• Appeals;
• Administrative litigation;
• Penalty liability;
• Enforcement;
• program;

Criminal risk.

Truly effective tax administrative remedies typically require:Accounting facts + tax calculation + legal justificationLet's do it together.

27. In what cases is it particularly appropriate for a lawyer to get involved during the review stage?

For example:

• The amount of tax to be paid is substantial;
• The fine was very high;
• Multi-year period;
• Listed companies;
• Related companies;
• Cross-border transactions;
• Equity transactions;
• Land or asset transactions;
• High costs and expenses;
• Disputes over false invoices;
• Transaction authenticity;
• The person in charge may be subject to criminal liability;

The IRS and the company have completely different views on the nature of the transaction.

If these cases are only processed at the very end of the administrative litigation process, a large number of preliminary issues that need to be corrected have already accumulated.

Cases involving potential prosecution of the responsible parties should be assessed separately.Corporate Criminal Law and Liability of Company HeadsThis should not be confused with supplementary taxes or fines.

28. If the relief is ultimately successful, what happens to the taxes already paid?

According to Article 38 of the Tax Collection Law, if the result of a review, appeal, or administrative litigation is that the tax should be refunded, the tax collection authority shall process the refund in accordance with the law and handle interest in accordance with the law.

Conversely, if additional taxes are still payable in the end, the outstanding taxes and related interest will be handled in accordance with the law.

Therefore, paying taxes first does not mean giving up administrative remedies.

Administrative remedies and payment arrangements are two issues that need to be planned together.

29. How does Fidelity Law Firm handle back taxes, fines, and administrative remedies?

Significant tax administrative remedies cannot be achieved simply by handing over the IRS penalty notice to a lawyer and then starting to research the relevant legal provisions.

What really needs to be reorganized is:

• Original transaction;
• contract;
• bill;
• Account books;
• Cash flow;
• Financial statements;
• Company decision-making;
• declare;
• National Taxation Bureau verification;
• First explanation;
• Reasons for approval;

Reasons for the fine.

When handling tax reviews, appeals, and administrative litigation, Fidelity Law Firm will first:

1. Transaction facts
2. Accounting treatment
3. Tax amount determination
4. Penalty
5. Administrative procedures

Stratified analysis.

Attorney Li Yusheng previously served as the assistant manager of the legal department at Deloitte Touche Tohmatsu, where he worked extensively with accountants and corporate finance teams on financial, corporate, tax, and legal issues.

The value of this kind of background lies in the fact that administrative remedies cannot simply ask, "Which tax law is in the company's best interest?"

Instead, we should let:

• The company's genuine transactions;
• Accounting records;
• evidence;

The legal arguments are consistent with each other.

It can also be used normally.Corporate daily tax and legal risk managementThe application, professional opinions, and decision-making basis should be retained.

IRS Tax Payments, Fines, and Administrative Remedies: Frequently Asked Questions