CTC CTC Tax Controversy & Audit Procedures 2

Question 1

What is the primary purpose of IRS Form 2848 in a tax controversy matter?

Accepted Answer

To authorize a representative to act on a taxpayer's behalf before the IRS

Answer

Form 2848 (Power of Attorney and Declaration of Representative) authorizes a qualified individual such as a CPA or attorney to represent the taxpayer before the IRS.

Question 2

What is a 'closing agreement' under IRC §7121 in IRS practice?

Accepted Answer

A final and conclusive written agreement between the IRS and a taxpayer resolving a tax matter

Answer

A closing agreement under IRC §7121 is a binding, final agreement between the IRS and a taxpayer that resolves specific tax matters and is conclusive on both parties.

Question 3

Under the 'hazards of litigation' standard, when will IRS Appeals settle a case?

Accepted Answer

When both parties face uncertainty about the outcome if litigated

Answer

IRS Appeals uses the 'hazards of litigation' standard to settle cases by weighing the probability of each side prevailing in court and reaching a mutually acceptable resolution.

Question 4

What is an Offer in Compromise (OIC) and what is its primary purpose?

Accepted Answer

An agreement allowing a taxpayer to settle a tax liability for less than the full amount owed

Answer

An Offer in Compromise allows eligible taxpayers to settle their federal tax liability for less than the full amount when full payment would cause financial hardship or there is doubt as to collectibility.

Question 5

Which of the following is NOT a basis for an Offer in Compromise submission?

Accepted Answer

Doubt as to statute of limitations expiration

Answer

The three valid bases for an OIC are doubt as to collectibility, doubt as to liability, and effective tax administration — statute of limitations expiration is not a recognized OIC basis.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC CTC Tax Controversy & Audit Procedures 2