IRS Tax Compliance and Audit Procedures 3

Question 1

How long does the IRS generally have to collect tax after assessment?

Accepted Answer

10 years

Answer

Under IRC Section 6502, the IRS has 10 years from the date of assessment to collect unpaid tax through levy or court proceedings.

Question 2

Which IRS form does a taxpayer use to request an installment agreement to pay a tax liability over time?

Accepted Answer

Form 9465

Answer

Form 9465, Installment Agreement Request, is used by taxpayers to apply for a monthly payment plan to pay off their tax debt.

Question 3

What is the fraud penalty percentage applied to the portion of underpayment attributable to civil fraud?

Accepted Answer

75%

Answer

The civil fraud penalty under IRC Section 6663 is 75% of the underpayment attributable to fraud.

Question 4

A taxpayer who cannot pay their full tax liability and has no prospect of doing so may qualify for which IRS program?

Accepted Answer

Offer in Compromise

Answer

An Offer in Compromise allows qualifying taxpayers to settle their tax debt for less than the full amount owed based on doubt as to collectibility.

Question 5

Which basis does the IRS use to reconstruct income when a taxpayer has no books or records during an audit?

Accepted Answer

Indirect methods such as bank deposits or net worth analysis

Answer

When records are unavailable, the IRS may use indirect methods like the bank deposit method or net worth method to reconstruct a taxpayer's income.

(IRS) Internal Revenue Service Certified Practice Test