CTRS Taxpayer Representation and Advocacy 2 — Questions and Answers
Question 1: A taxpayer receives a Notice of Federal Tax Lien filing. As their representative, what is the FIRST action you should take to protect their interests?
- File for immediate lien discharge
- Request a Collection Due Process hearing within 30 days (Correct answer)
- Submit a lien subordination request
- File an Offer in Compromise
Correct answer: Request a Collection Due Process hearing within 30 days
A CDP hearing request must be filed within 30 days of the lien filing notice to preserve the taxpayer's appeal rights.
Question 2: Under IRC Section 7521, which of the following rights does a taxpayer have during an IRS interview?
- The right to refuse to answer any question
- The right to suspend the interview to consult with a representative (Correct answer)
- The right to have an attorney present at all criminal interviews
- The right to record the interview without notifying the IRS
Correct answer: The right to suspend the interview to consult with a representative
IRC §7521 gives taxpayers the right to suspend an interview at any time to consult with their authorized representative.
Question 3: A Power of Attorney (Form 2848) filed with the IRS generally remains valid for how long?
- One year from the date of signing
- Three years from the date of signing
- Until the matter is resolved or the taxpayer revokes it (Correct answer)
- Until the representative's PTIN expires
Correct answer: Until the matter is resolved or the taxpayer revokes it
A Form 2848 remains valid until the taxpayer revokes it, the representative withdraws, or the IRS receives a newer POA that revokes the prior one.
Question 4: Which IRS publication outlines the Taxpayer Bill of Rights that a CTRS practitioner must understand to advocate effectively?
- Publication 1 (Correct answer)
- Publication 17
- Publication 556
- Publication 594
Correct answer: Publication 1
IRS Publication 1 outlines the ten fundamental taxpayer rights that apply in all IRS interactions.
Question 5: A taxpayer disagrees with an IRS revenue officer's determination. Which office provides an independent review of collection actions without requiring the taxpayer to go to Tax Court?
- Office of Chief Counsel
- IRS Independent Office of Appeals (Correct answer)
- Taxpayer Advocate Service
- Department of Justice Tax Division
Correct answer: IRS Independent Office of Appeals
The IRS Independent Office of Appeals provides impartial review of collection disputes without litigation.
Question 6: When representing a taxpayer before the IRS, a practitioner discovers that a prior return contains a material error that increases tax liability. What is the practitioner's obligation?
- Immediately correct it without informing the client
- Inform the client of the error and recommend corrective action (Correct answer)
- Report the error directly to the IRS on the client's behalf
- Withdraw from representation immediately
Correct answer: Inform the client of the error and recommend corrective action
Circular 230 requires the practitioner to notify the client of the error and advise them to correct it, but the decision to file an amended return belongs to the client.
Question 7: A taxpayer's wages are subject to an IRS levy. Which exemption amount is the taxpayer entitled to retain from each paycheck?
- A flat $1,000 per pay period
- An amount based on the standard deduction plus personal exemptions divided by pay periods (Correct answer)
- 25% of disposable earnings as defined under the CCPA
- The federal minimum wage for 40 hours per week
Correct answer: An amount based on the standard deduction plus personal exemptions divided by pay periods
The IRS levy exemption is calculated using the taxpayer's standard deduction and personal exemption equivalents divided by the number of pay periods, as shown on Publication 1494.
CTRS Taxpayer Representation and Advocacy 2
A taxpayer receives a Notice of Federal Tax Lien filing.
As their representative, what is the FIRST action you should take to protect their interests?