[Code of Federal Regulations]
[Title 26, Volume 20]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR601.103]

[Page 7-8]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 601_STATEMENT OF PROCEDURAL RULES--Table of Contents
 
                   Subpart A_General Procedural Rules
 
Sec. 601.103  Summary of general tax procedure.

    (a) Collection procedure. The Federal tax system is basically one of 
self-assessment. In general each taxpayer (or person required to collect 
and pay over the tax) is required to file a prescribed form of return 
which shows the facts upon which tax liability may be determined and 
assessed. Generally, the taxpayer must compute the tax due on the return 
and make payment thereof on or before the due date for filing the 
return. If the taxpayer fails to pay the tax when due, the district 
director of internal revenue, or the director of the regional service 
center after assessment issues a notice and demands payment within 10 
days from the date of the notice. In the case of wage earners, 
annuitants, pensioners, and nonresident aliens, the income tax is 
collected in large part through withholding at the source. Another means 
of collecting the income tax is through payments of estimated tax which 
are required by law to be paid by certain individual and corporate 
taxpayers. Neither withholding nor payments of estimated tax relieves a 
taxpayer from the duty of filing a return otherwise required. Certain 
excise taxes are collected by the sale of internal revenue stamps.
    (b) Examination and determination of tax liability. After the 
returns are filed and processed in internal revenue service centers, 
some returns are selected for examination. If adjustments are proposed 
with which the taxpayer does not agree, ordinarily the taxpayer is 
afforded certain appeal rights. If the taxpayer agrees to the proposed 
adjustments and the tax involved is an income, profits, estate, gift, 
generation-skipping transfer, or Chapter 41, 42, 43, or 44, tax, and if 
the taxpayer waives restrictions on the assessment and collection of the 
tax (see Sec. 601.105(b)(4)), the deficiency will be immediately 
assessed.
    (c) Disputed liability--(1) General. The taxpayer is given an 
opportunity to request that the case be considered by an Appeals Office 
provided that office has jurisdiction (see Sec. 601.106(a)(3)). If the 
taxpayer requests such consideration, the case will be referred to the 
Appeals Office, which will afford the taxpayer the opportunity for a 
conference. The determination of tax liability by the Appeals Office is 
final insofar as the taxpayer's appeal rights within the Service are 
concerned. Upon protest of cases under the jurisdiction of the Director, 
Foreign Operations District, exclusive settlement authority is vested in 
the Appeals Office having jurisdiction of the place where the taxpayer 
requests the conference. If the taxpayer does not specify a location for 
the conference, or if the location specified is outside the territorial 
limits of the United States, the Washington, D.C. Appeals Office of the 
Mid-Atlantic Region assumes jurisdiction.
    (2) Petition to the U.S. Tax Court. In the case of income, profits, 
estate, and gift taxes, imposed by Subtitles A and B, and excise taxes 
under Chapters 41 through 44 of the 1954 Code, before a deficiency may 
be assessed a statutory notice of deficiency (commonly called a ``90-day 
letter'') must be sent to the taxpayer by certified mail or registered 
mail unless the taxpayer waives this restriction on assessment. See, 
however, Sec. Sec. 601.105(h) and 601.109 for exceptions. The taxpayer 
may then file a petition for a redetermination of the proposed 
deficiency with the U.S. Tax

[[Page 8]]

Court within 90 days from the date of the mailing of the statutory 
notice. If the notice is addressed to a person outside the States of the 
Union and the District of Columbia, the period within which a petition 
may be filed in the Tax Court is 150 days in lieu of 90 days. In other 
words, the taxpayer has the right in respect of these taxes to contest 
any proposed deficiency before an independent tribunal prior to 
assessment or payment of the deficiency. Unless the taxpayer waives the 
restrictions on assessment and collection after the date of the mailing 
of the statutory notice, no assessment or collection of a deficiency 
(not including the correction of a mathematical error) may be made in 
respect of these taxes until the expiration of the applicable period or, 
if a petition is filed with the Tax Court, until the decision of the 
Court has become final. If, however, the taxpayer makes a payment with 
respect to a deficiency, the amount of such payment may be assessed. 
See, however, Sec. 601.105(h). If the taxpayer fails to file a petition 
with the Tax Court within the applicable period, the deficiency will be 
assessed upon the expiration of such period and notice and demand for 
payment of the amount thereof will be mailed to the taxpayer. If the 
taxpayer files a petition with the Tax Court, the entire amount 
redetermined as the deficiency by a final decision of the Tax Court will 
be assessed and is payable upon notice and demand. There are no 
restrictions on the timely assessment and collection of the amount of 
any deficiency determined by the Tax Court, and a notice of appeal of 
the Court's decision will not stay the assessment and collection of the 
deficiency so determined, unless on or before the time the notice of 
appeal is filed the taxpayer files with the Tax Court a bond in a sum 
fixed by the Court not exceeding twice the portion of the deficiency in 
respect of which the notice of appeal is filed. No part of an amount 
determined as a deficiency but disallowed as such by a decision of the 
Tax Court which has become final may be assessed or collected by levy or 
by proceeding in court with or without assessment.
    (3) Claims for refund. After payment of the tax a taxpayer may, 
within the applicable period of limitations, contest the assessment by 
filing with the district director a claim for refund of all or any part 
of the amount paid, except with respect to certain taxes determined by 
the Tax Court, the decision of which has become final. If the claim is 
allowed, the overpayment of tax and allowable interest thereon will be 
credited against other liabilities of the taxpayer, or will be refunded 
to the taxpayer. Generally, if the claim for refund is rejected in whole 
or in part, the taxpayer is notified of the rejection by certified mail 
or registered mail. The taxpayer may then bring suit in the United 
States District Court or in the United States Claims Court for recovery 
of the tax. Suit may not be commenced before the expiration of six 
months from the date of filing of the claim for refund, unless a 
decision is rendered thereon within that time, nor after the expiration 
of two years from the date of mailing by certified mail or registered 
mail to the taxpayer of a notice of the disallowance of the part of the 
claim to which the suit relates. Under the 1954 Code, the 2-year period 
of limitation for bringing suit may be extended for such period as may 
be agreed upon in a properly executed Form 907. Also, under the 1954 
Code, if the taxpayer files a written waiver of the requirement that the 
taxpayer be sent a notice of disallowance, the 2-year period for 
bringing suit begins to run on the date such waiver is filed. See 
section 6532(a) of the Code.

[32 FR 15990, Nov. 22, 1967, as amended at 38 FR 4955, Feb. 23, 1973; 43 
FR 44497, Sept. 28, 1978; 45 FR 7251, Feb. 1, 1980; 46 FR 26053, May 11, 
1981; 49 FR 36498, Sept. 18, 1984]