CTP IRS Procedures, Audits & Controversy Resolution 2

Question 1

What is the primary function of the IRS Independent Office of Appeals?

Accepted Answer

To provide an impartial administrative forum for resolving tax disputes without litigation

Answer

To prosecute taxpayers for criminal tax fraud

Answer

To issue private letter rulings on proposed transactions

Answer

To conduct random audits of high-income taxpayers

Question 2

Under what circumstances can a taxpayer request a Collection Due Process (CDP) hearing?

Accepted Answer

Only after the IRS files a Notice of Federal Tax Lien or issues a levy notice

Answer

At any time during an IRS examination

Answer

Only before any tax is assessed

Answer

Whenever the taxpayer disagrees with a penalty

Question 3

An Offer in Compromise (OIC) allows a taxpayer to settle a tax liability for less than the full amount owed. Which of the following is NOT a valid basis for an OIC?

Accepted Answer

Disagreement with the tax rate applied

Answer

Doubt as to liability

Answer

Doubt as to collectibility

Answer

Effective tax administration

Question 4

What is the legal distinction between a federal tax lien and a federal tax levy?

Accepted Answer

A lien creates a legal claim against property; a levy is the actual seizure of property

Answer

A lien seizes property; a levy creates a legal claim against property

Answer

A lien applies only to real estate; a levy applies only to wages

Answer

There is no practical difference between a lien and a levy

Question 5

How long does the IRS generally have to collect taxes after they have been assessed?

Accepted Answer

10 years

Answer

3 years

Answer

5 years

Answer

20 years

Question 6

What is an installment agreement, and who has the right to request one from the IRS?

Accepted Answer

A voluntary payment arrangement where taxpayers pay their liability in monthly installments

Answer

A court-ordered payment plan available only to businesses

Answer

An IRS program available only to taxpayers in bankruptcy

Answer

A penalty waiver program for first-time filers

Question 7

Currently Not Collectible (CNC) status with the IRS means:

Accepted Answer

The IRS temporarily suspends collection efforts because the taxpayer cannot pay without significant hardship

Answer

The taxpayer's debt has been legally forgiven

Answer

The IRS has determined the statute of limitations has expired

Answer

The taxpayer's liability has been transferred to a collection agency