CTRS Taxpayer Representation and Advocacy 3 — Questions and Answers
Question 1: A taxpayer in an active installment agreement defaults by missing two payments. What IRS notice will the taxpayer typically receive before the agreement is terminated?
- CP503
- CP523 (Correct answer)
- CP2000
- LT11
Correct answer: CP523
IRS Notice CP523 informs the taxpayer of an impending installment agreement termination due to default and provides an opportunity to cure.
Question 2: The Taxpayer Advocate Service (TAS) can issue a Taxpayer Assistance Order (TAO) when the taxpayer is experiencing which of the following?
- Any delay of more than 30 days in resolving a tax matter
- Significant hardship resulting from IRS actions or inactions (Correct answer)
- A disagreement with an IRS Appeals decision
- A criminal investigation by the IRS Criminal Investigation division
Correct answer: Significant hardship resulting from IRS actions or inactions
TAS can issue a TAO when a taxpayer is suffering or about to suffer significant hardship due to IRS action or inaction under IRC §7811.
Question 3: A practitioner representing a taxpayer in an Offer in Compromise receives a settlement offer from the IRS that the practitioner believes is not in the client's best interest. What should the practitioner do?
- Accept the offer on the client's behalf since they have POA
- Reject the offer on the client's behalf without consultation
- Present the offer to the client and advise on the pros and cons (Correct answer)
- Immediately file a Tax Court petition to preserve rights
Correct answer: Present the offer to the client and advise on the pros and cons
The practitioner must present all settlement offers to the client and provide professional advice, but the client makes the final decision.
Question 4: Under the Taxpayer First Act of 2019, the IRS must provide which new protection before initiating a private debt collection referral?
- A 60-day advance notice letter
- Proof of debt verification upon taxpayer request
- Written notice at least 7 business days before first contact (Correct answer)
- A CDP hearing opportunity
Correct answer: Written notice at least 7 business days before first contact
The Taxpayer First Act requires the IRS to notify taxpayers at least 7 business days before their account is assigned to a private debt collector.
Question 5: Which practitioner action constitutes a conflict of interest requiring disclosure or withdrawal under Circular 230?
- Representing two taxpayers in unrelated matters
- Representing a corporation and its sole owner in the same tax dispute (Correct answer)
- Representing a client in both income tax and payroll tax matters
- Representing a client before both Examination and Appeals
Correct answer: Representing a corporation and its sole owner in the same tax dispute
Representing a corporation and its owner in the same dispute is a conflict because their interests may diverge, especially regarding trust fund recovery penalties.
Question 6: An IRS revenue officer serves a third-party levy on a taxpayer's bank account. How many days does the bank have before it must remit the levied funds to the IRS?
- 10 days
- 14 days
- 21 days (Correct answer)
- 30 days
Correct answer: 21 days
Banks must wait 21 days after receiving a levy before remitting funds, giving the taxpayer time to resolve the matter or claim exemptions.
Question 7: A taxpayer wants to appeal an IRS examination finding but cannot afford Tax Court litigation. Which option allows appeal without full payment of the assessed tax?
- Filing a refund claim in District Court
- Requesting a Collection Due Process hearing
- Filing a petition in U.S. Tax Court (Correct answer)
- Requesting Fast Track Settlement
Correct answer: Filing a petition in U.S. Tax Court
The U.S. Tax Court is the only judicial forum where a taxpayer can dispute an IRS assessment without first paying the tax in full.
CTRS Taxpayer Representation and Advocacy 3
A taxpayer in an active installment agreement defaults by missing two payments.
What IRS notice will the taxpayer typically receive before the agreement is terminated?