United States Government Accountability Office GAO November 2010 Report to the Secretary of the Treasury _part7 doc

Financial Statements Page 75 GAO-11-142 IRS’s Fiscal Years 2010 and 2009 Financial Statements INTERNAL REVENUE SERVICE Notes to the Financial Statements For the Years Ended September 30, 2010 and 2009 21 Note 10. Commitments and Contingencies The IRS is a party to legal actions whose outcome, if unfavorable, could materially affect the financial statements. For some of these actions, management and legal counsel have determined the likelihood of an unfavorable outcome is remote. As of September 30, 2010 and 2009, there were no estimated contingent liabilities arising from these actions. For some of the legal actions to which the IRS is a party, management and legal counsel cannot determine the likelihood of an unfavorable outcome nor can any related loss be reasonably estimated. The IRS does not accrue for possible losses related to cases where the potential loss cannot be estimated or the likelihood of an unfavorable outcome is less than probable. As of September 30, 2010 and 2009, there were three cases and two cases, respectively, for which management and legal counsel are unable to determine the likelihood of an unfavorable outcome or establish a range of potential losses. The IRS has pending refund claims and lawsuits relating to whether the FICA tax is owed on stipends paid to medical residents for their services prior to April 1, 2005. It is probable these claims and lawsuits will result in a loss to the Federal government. An estimate of the potential loss cannot be made. As of September 30, 2010 and 2009, the IRS does not have contractual commitments for payments on obligations related to canceled appropriations. This is trial version www.adultpdf.com . of an unfavorable outcome is remote. As of September 30, 2010 and 2009, there were no estimated contingent liabilities arising from these actions. For some of the legal actions to which the. stipends paid to medical residents for their services prior to April 1, 2005. It is probable these claims and lawsuits will result in a loss to the Federal government. An estimate of the potential. counsel are unable to determine the likelihood of an unfavorable outcome or establish a range of potential losses. The IRS has pending refund claims and lawsuits relating to whether the FICA tax