Tax Compliance and Audit Procedures Flashcards

Which IRS notice informs a taxpayer that their return has been selected for examination?

Answer: Letter 2205

IRS Letter 2205 is the initial contact letter notifying a taxpayer their return has been selected for examination.

What is the standard statute of limitations for the IRS to assess additional tax on a filed return?

Answer: 3 years from the later of the filing date or due date

The IRS generally has 3 years from the later of when the return was filed or its due date to assess additional tax.

When a taxpayer omits more than 25% of gross income from their return, what is the statute of limitations for IRS assessment?

Answer: 6 years

When gross income is understated by more than 25%, the IRS has 6 years to assess additional tax under IRC Section 6501(e).

Which type of IRS audit is conducted entirely by mail without requiring the taxpayer to appear in person?

Answer: Correspondence audit

A correspondence audit is conducted by mail, with the IRS requesting specific documentation through written correspondence.

What IRS form is used by a taxpayer to formally agree to extend the statute of limitations for assessment?

Answer: Form 872

Form 872, Consent to Extend the Time to Assess Tax, is used to voluntarily extend the statute of limitations for assessment.

During an IRS field audit, who typically conducts the examination at the taxpayer's place of business?

Answer: Revenue Agent

Revenue Agents conduct field examinations (audits) of tax returns, typically at the taxpayer's place of business or representative's office.

What is the primary purpose of an IRS CP2000 notice?

Answer: To propose changes to a return based on information received from third parties

A CP2000 notice proposes changes to a return when information from employers, banks, or other payers does not match what the taxpayer reported.