CTA Tax Compliance and Procedure

Question 1

What is the general statute of limitations for the IRS to assess additional taxes on a filed return?

Accepted Answer

3 years from the date the return was filed or due, whichever is later

Answer

Under IRC Section 6501, the IRS generally has 3 years from the later of the filing date or the due date of the return to assess additional taxes.

Question 2

Which IRS notice is typically the first formal notice that a taxpayer's return has been selected for examination?

Accepted Answer

Letter 566 (Initial Contact Letter)

Answer

Letter 566 is the IRS's initial contact letter informing a taxpayer that their return has been selected for examination and identifying the items under review.

Question 3

A taxpayer who disagrees with an IRS examination decision may request an appeal. What is the typical deadline to file a protest for a large case (over $25,000 in dispute)?

Accepted Answer

30 days from the date of the examination report

Answer

For cases involving more than $25,000 in dispute, taxpayers must file a written protest within 30 days of the date of the examination report to request an Appeals conference.

Question 4

What is the penalty rate for failure to pay taxes by the due date under IRC Section 6651(a)(2)?

Accepted Answer

0.5% per month, up to 25% maximum

Answer

The failure-to-pay penalty under IRC Section 6651(a)(2) accrues at 0.5% of the unpaid tax per month (or partial month), with a maximum of 25%.

Question 5

Under which circumstance does the IRS statute of limitations extend to 6 years instead of the normal 3 years?

Accepted Answer

When the taxpayer omits more than 25% of gross income from the return

Answer

Under IRC Section 6501(e), the statute of limitations extends to 6 years when a taxpayer omits more than 25% of gross income from the return.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Tax Compliance and Procedure