Tax Law & Compliance Flashcards

Under the general rule, how long does the IRS have to assess additional tax after a return is filed?

Answer: 3 years

IRC 6501(a) generally allows the IRS three years from the later of the filing date or due date to assess additional tax.

A taxpayer omits gross income exceeding 25% of the gross income reported on the return. What assessment period applies?

Answer: 6 years

A substantial omission of more than 25% of reported gross income extends the assessment period to six years.

What is the assessment statute of limitations when a taxpayer files a fraudulent return?

Answer: No limitation period

Under IRC 6501(c), tax may be assessed at any time when a return is false or fraudulent with intent to evade tax.

A refund claim generally must be filed within which period?

Answer: 3 years from filing or 2 years from payment, whichever is later

IRC 6511 allows a refund claim within the later of three years from filing or two years from payment.

What is the maximum failure-to-file penalty under IRC 6651(a)(1), not counting fraud?

Answer: 25% of unpaid tax

The failure-to-file penalty is 5% per month or part of a month, capped at 25% of the unpaid tax.

What is the monthly failure-to-pay penalty rate before any reduction for an installment agreement?

Answer: 0.5% per month

The failure-to-pay penalty is 0.5% of unpaid tax per month, capped at 25%.

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

Answer: 20%

IRC 6662 imposes a 20% penalty on the portion of an underpayment caused by negligence or a substantial understatement.