CTA Tax Compliance and Procedure 2

Question 1

Which IRS collection tool allows the IRS to seize a taxpayer's wages, bank accounts, or other financial assets to satisfy a tax debt?

Accepted Answer

Tax Levy

Answer

A tax levy under IRC Section 6331 is the IRS's legal seizure of a taxpayer's property — including wages, bank accounts, and assets — to satisfy an unpaid tax liability.

Question 2

What is the minimum penalty for failure to file a tax return that is more than 60 days late (for returns due after 2015)?

Accepted Answer

The lesser of $485 (indexed for inflation) or 100% of the tax owed

Answer

Under IRC Section 6651, if a return is more than 60 days late, the minimum failure-to-file penalty is the lesser of the indexed minimum amount (approximately $485 for 2024) or 100% of the unpaid tax.

Question 3

An Offer in Compromise (OIC) based on 'Doubt as to Collectibility' is appropriate when:

Accepted Answer

The taxpayer's assets and future income are insufficient to fully pay the liability

Answer

An OIC based on Doubt as to Collectibility is filed when a taxpayer's reasonable collection potential (assets plus future income) is less than the full tax liability owed.

Question 4

Under the IRS installment agreement provisions, what type of agreement allows taxpayers who owe $50,000 or less to establish a payment plan without providing detailed financial information?

Accepted Answer

Streamlined Installment Agreement

Answer

The Streamlined Installment Agreement allows taxpayers owing $50,000 or less in combined tax, penalties, and interest to enter a payment plan without providing detailed Collection Information Statements (Forms 433-A or 433-B).

Question 5

What IRS form is used to authorize a tax professional to represent a taxpayer before the IRS?

Accepted Answer

Form 2848 (Power of Attorney and Declaration of Representative)

Answer

Form 2848, Power of Attorney and Declaration of Representative, authorizes a qualified representative (such as a CPA, attorney, or enrolled agent) to represent a taxpayer before the IRS in examinations, appeals, and collections.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Tax Compliance and Procedure 2