CTRS Tax Law and Regulations 2 — Questions and Answers
Question 1: Under IRC Section 6651, what is the maximum combined penalty for both failure to file and failure to pay?
- 25%
- 47.5% (Correct answer)
- 50%
- 75%
Correct answer: 47.5%
The failure-to-file penalty (up to 22.5% after the 5% overlapping reduction) plus the failure-to-pay penalty (up to 25%) can reach a combined maximum of 47.5%.
Question 2: Which IRS collection method allows the government to legally seize a taxpayer's wages, bank accounts, or other property to satisfy a tax debt?
- Federal Tax Lien
- Notice of Levy (Correct answer)
- Summons
- Tax Warrant
Correct answer: Notice of Levy
A Notice of Levy (IRS Form 668-A or 668-W) is the legal mechanism that allows the IRS to seize and apply a taxpayer's assets or income to satisfy an unpaid tax liability.
Question 3: How long does the IRS generally have to collect a tax liability after assessment under IRC Section 6502?
- 3 years
- 5 years
- 7 years
- 10 years (Correct answer)
Correct answer: 10 years
IRC Section 6502 grants the IRS a 10-year statute of limitations from the date of assessment to collect a tax liability.
Question 4: A taxpayer files a tax return on April 15 but does not pay the tax owed. Under IRC Section 6651(a)(2), the failure-to-pay penalty accrues at what monthly rate?
- 0.25%
- 0.5% (Correct answer)
- 1%
- 5%
Correct answer: 0.5%
The failure-to-pay penalty under IRC Section 6651(a)(2) accrues at 0.5% per month on the unpaid balance, up to a maximum of 25%.
Question 5: What type of IRS agreement allows a taxpayer to pay a tax debt in full within 120 days without formal installment agreement paperwork?
- Partial Payment Installment Agreement
- Full-Pay Short-Term Extension (Correct answer)
- Streamlined Installment Agreement
- Currently Not Collectible Status
Correct answer: Full-Pay Short-Term Extension
A Full-Pay Short-Term Extension (also called a 120-day extension) lets taxpayers pay in full within 120 days without requiring a formal installment agreement.
Question 6: Under the Internal Revenue Code, which section governs the federal tax lien that arises upon assessment, demand, and neglect to pay?
- IRC Section 6320
- IRC Section 6321 (Correct answer)
- IRC Section 6330
- IRC Section 6331
Correct answer: IRC Section 6321
IRC Section 6321 establishes the federal tax lien that arises automatically when a taxpayer neglects or refuses to pay after assessment and demand.
Question 7: Which IRS relief program specifically addresses taxpayers who believe their spouse incorrectly reported items on a joint return, relieving them of joint and several liability?
- Innocent Spouse Relief
- Separation of Liability Relief
- Equitable Relief
- All of the above are forms of spousal relief (Correct answer)
Correct answer: All of the above are forms of spousal relief
IRC Section 6015 provides three distinct forms of spousal relief: Innocent Spouse Relief, Separation of Liability, and Equitable Relief, each with different eligibility criteria.
CTRS Tax Law and Regulations 2
Under IRC Section 6651, what is the maximum combined penalty for both failure to file and failure to pay?