CTRS Tax Law and Regulations 3

Question 1

An Offer in Compromise based on 'Effective Tax Administration' (ETA) is most appropriate when:

Accepted Answer

The taxpayer can pay the full liability but doing so would create economic hardship

Answer

ETA offers are appropriate when a taxpayer can technically pay in full but collection would create economic hardship or be inequitable given exceptional circumstances.

Question 2

What is the primary purpose of IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals)?

Accepted Answer

To document a taxpayer's financial condition for collection decisions

Answer

Form 433-A collects detailed financial information about a taxpayer's income, expenses, assets, and liabilities so the IRS can determine the appropriate collection resolution.

Question 3

Under IRC Section 7122, the IRS may reject an Offer in Compromise and return the offer fee under which circumstance?

Accepted Answer

The taxpayer is in an open bankruptcy proceeding

Answer

An open bankruptcy proceeding is a statutory bar that results in the return of the offer and fee, because the bankruptcy court controls the taxpayer's assets during that time.

Question 4

The Trust Fund Recovery Penalty (TFRP) under IRC Section 6672 can be assessed against which individuals?

Accepted Answer

Any responsible person who willfully failed to collect or pay over trust fund taxes

Answer

The TFRP applies to any 'responsible person' — determined by authority, not title — who willfully failed to collect, account for, or pay over withheld employment taxes.

Question 5

What is the Collection Due Process (CDP) hearing primarily designed to allow taxpayers to do?

Accepted Answer

Challenge IRS collection actions and propose collection alternatives before a levy takes effect

Answer

A CDP hearing under IRC Sections 6320 and 6330 gives taxpayers the right to challenge proposed levies or filed liens and propose alternatives such as installment agreements or OICs.

(CTRS) Certified Tax Resolution Specialist Practice Test

(CTRS) Certified Tax Resolution Specialist Practice Test

CTRS Tax Law and Regulations 3