Risk Assessment Flashcards

What is the standard accuracy-related penalty rate under IRC Section 6662 for negligence or a substantial understatement of income tax?

Answer: 20% of the underpayment

IRC 6662 imposes a 20% penalty on the portion of the underpayment attributable to negligence or substantial understatement.

For an individual taxpayer, an understatement of income tax is 'substantial' when it exceeds which threshold?

Answer: The greater of 10% of the correct tax or $5,000

For individuals, a substantial understatement exceeds the greater of 10% of the tax required to be shown or $5,000.

Absent fraud or a substantial omission, how long does the IRS generally have to assess additional tax after a return is filed?

Answer: 3 years

Under IRC 6501(a), the general assessment period is 3 years from the later of the filing date or due date.

If a taxpayer omits more than 25% of the gross income stated on the return, the assessment statute of limitations extends to how many years?

Answer: 6 years

IRC 6501(e) extends the assessment period to 6 years for a substantial omission of gross income over 25%.

What penalty rate applies to an underpayment from a transaction lacking economic substance that was NOT adequately disclosed on the return?

Answer: 40%

IRC 6662(i) raises the economic substance penalty from 20% to 40% when the transaction is not adequately disclosed.

What is the civil fraud penalty rate under IRC Section 6663?

Answer: 75% of the underpayment attributable to fraud

IRC 6663 imposes a 75% penalty on the portion of an underpayment attributable to fraud.

In which situation does the IRS have NO time limit to assess tax?

Answer: The taxpayer filed a false or fraudulent return with intent to evade tax

Under IRC 6501(c), tax may be assessed at any time when a fraudulent return is filed or no return is filed.