IRS Tax Compliance and Audit Procedures

Question 1

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

Accepted Answer

Letter 2205

Answer

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

Question 2

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

Accepted Answer

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

Answer

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

Question 3

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

Accepted Answer

6 years

Answer

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

Question 4

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

Accepted Answer

Correspondence audit

Answer

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

Question 5

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

Accepted Answer

Form 872

Answer

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

(IRS) Internal Revenue Service Certified Practice Test