Transferable Life-insurance policies, a type of life insurance policy that allows the policy owner to transfer the ownership of the policy to someone else. Generally, a permanent whole-life insurance policy has a face value and a cash value, with any portion of the premiums used to purchase additional insurance called a death benefit. The cash value increases over time as dividends are added to the account value. The policy can be bought for a face value and remains in force as long as premiums are paid. The owner of the policy has the right to surrender the policy and receive the total cash value. The owner can name beneficiaries or transfer the ownership to another person who can make decisions regarding the policy. Transfer Tax: (See also Capital Gains Tax and Death Tax) An annual tax imposed on a transfer of property from one person to another person, even when there is no consideration. The tax was once required in some situations where the transfer was considered to be an "assignment" of the property, which was taxed as a sale. There are many exceptions to the rule, and the tax was only intended to be a tax on gifts. If property is transferred as an inheritance, it is not subject to the transfer tax. Transition-related expenses: Certain expenses that a company incurs during a change in ownership, but that the IRS does not expect to be deductible as an ordinary and necessary business expense under current tax law. These expenses include legal and accounting fees, legal opinion preparation, employee severance pay, and legal fees relating to acquisition financing. In determining whether transition-related expenses are deductible, the facts and circumstances must be examined. The IRS has the burden of proving that these expenses were incurred in a way that does not fall within the exception. See also Employee bonus. Trustee: One who holds, manages, or otherwise controls property for the benefit of others. A trust is generally used to hold and manage assets for other people or companies. It gives control over trust assets to someone else who is named in the trust agreement as the trustee. If there are no other beneficiaries, the trust is called a "dry trust." Unearned income: A term used to describe money or property received by an employee or independent contractor for work that he or she has completed. An individual who does not have control over the disposition of his or her labor can receive payments from a taxpayer or company even if he or she has not provided any services to the company for that compensation. If the individual does not have substantial control over the income-producing activity, then the payment is considered to be unearned income. For instance, if a worker receives rental income from an apartment, he or she would not be taxed because the individual has control over the rental property. U.S. citizen: The term means that a person who resides in the United States is a U.S. citizen. The U.S. tax system does not tax citizens of foreign countries, but it does assess taxes on income earned by U.S. citizens who reside abroad. Vehicle: Any self-propelled, wheeled, powered, or motive machine that travels on land or water and that has four or more wheels. Voluntary Compliance Policy: A set of rules, rules that an IRS official makes and enforces to determine whether or not a taxpayer meets the rules for voluntary compliance, whereby a taxpayer enters into a payment agreement with the IRS to avoid litigation or criminal prosecution. Generally, taxpayers must enter into a payment agreement before they may be sued or prosecuted for civil or criminal penalties. A payment agreement allows the taxpayer to pay the debt owed without going to court or paying through a criminal process. A taxpayer entering into a voluntary compliance agreement is free to contest the settlement's validity at a later date. The voluntary compliance provisions affect only the legal position of a taxpayer who has not previously taken an affirmative act to avoid the imposition of a penalty or other sanction. The taxpayer may voluntarily enter into an agreement by signing a settlement offer, paying a penalty, or filing a report to avoid prosecution. Generally, the voluntary compliance policy has been amended, but it remains a factor in voluntary compliance agreements and settlements for penalties that are not based on tax. The Taxpayer Bill of Rights 3 (TBOR 3) has also placed a greater emphasis on the voluntary compliance policy. Voluntary Reduction in Rate Agreement: An IRS payment offer used when a taxpayer can demonstrate, in the IRS's reasonable opinion, that his or her liability for unpaid tax for a given tax year exceeds a threshold amount set by the IRS (either dollar-for-dollar or percentage-of-tax-liability). The IRS then offers to settle the taxpayer's case at a lower rate. The amount the IRS is willing to settle for is determined by the taxpayer's liability for the unpaid tax. Voluntary Obligations: An agreement signed with the Internal Revenue Service in which a taxpayer acknowledges the existence of unpaid tax. For example, some taxpayers sign an installment agreement in which they promise to pay future taxes in installments. A taxpayer can also sign a voluntary agreement in which he or she agrees to waive the statute of limitations and other limitations on collection of a tax, as well as the right to a tax hearing. Waiver of an Overpayment: The IRS allows a taxpayer to agree to a refund that is greater than the amount of the overpayment, if the overpayment is applied to a specific tax liability, which includes: (1) a deficiency; (2) the taxpayer's liability for any addition to tax; or (3) any additional amount related to an underpayment that the taxpayer owes. Under certain conditions, the IRS may waive the requirement that a taxpayer pay all or a portion of an overpayment to the IRS. Withdrawal liability: The obligation to pay certain withdrawal amounts of an employer who has been determined by the IRS to have an excess amount of contributions in the employer's employee benefit plan (also known as a multiemployer plan). A multiemployer plan is one that is jointly established or administered by two or more "employers" that have substantially common ownership. The IRS may also require an employer to withdraw in order to satisfy the withdrawal liability, depending on the rules of the plan. The employer also may be liable for amounts that it was not required to contribute to the plan. Withholding tax: A federal withholding tax imposed on individuals on payments that they receive. The amount of the withholding tax depends on whether the taxpayer is single, married filing jointly, married filing separately, or married filing separately and claiming a dependency exemption for a spouse or child. Withholding tax credit: A tax credit (also called a refundable credit) for federal income taxes paid during the year. Withholding taxes are paid by employers and other tax payers on behalf of individuals who have income. The withholding tax credit allows a taxpayer to claim a credit on his or her tax return that is equal to the amount of income tax withheld by the payer. ## APPENDIX B ## About the IRS Offices The IRS has many offices that administer the different tax laws. A full listing of the IRS Offices can be found at www.irs.gov/taxpros/article/0. Individual tax returns are sent to the Cincinnati, Ohio office. IRS National Processing Center Phone: (800) 829-4933 Address: P.O. Box 12192, Culpeper, VA 22701 Fax: (540) 675-4200 Website: IRS E-File Phone: (866) 350-0656 Taxpayer Outreach Phone: (800) 829-4933 Address: P.O. Box 12192, Culpeper, VA 22701 Fax: (540) 675-4200 Website: www.irs.gov/e-file-taxpayer-outreach IRS Tax Exempt Organizations Phone: (866) 804-8992 Fax: (804) 892-2192 Website: www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Exempt-Organizations IRS Criminal Investigation Division Phone: (800) 829-4933 Fax: (804) 892-7222 Address: Internal Revenue Service, 840 North Rush Street, Baltimore, Maryland 21202 Website: www.irs.gov/uac/IRS-Criminal-Investigation-Division IRS Examination Phone: (800) 829-4933 Fax: (804) 892-7727 Address: Internal Revenue Service, 840 North Rush Street, Baltimore, Maryland 21202 Website: www.irs.gov/uac/IRS-Examination IRS Business and Special Processing Services (BUS) Phone: (800) 829-4933 Fax: (804) 892-7727 Website: www.irs.gov/businesses/small-businesses-&-self-employed/IRS-Business-and-Special-Processing-Services IRS Collection Phone: (800) 829-4933 Fax: (804) 892-7727 Website: www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Collection IRS Criminal Investigation Division Phone: (800) 829-4933 F