Question 1

The IRS provides advice concerning an issue that arises during an audit by issuing

Accepted Answer

A technical advice memorandum (TAM) is provided by the IRS to taxpayers who request advice on a specific tax issue that arises during an audit. TAMs are written by the IRS Office of Chief Counsel and provide guidance on how the tax law applies to the taxpayer's specific situation. TAMs are binding on the IRS and can be relied on by the taxpayer in future tax situations. Revenue rulings and private letter rulings are also issued by the IRS, but they are not specific to an audit and may not apply to the taxpayer's particular circumstances. Audit memorandums are internal documents used by the IRS during the audit process and are not provided to the taxpayer.

Question 2

The Internal Revenue Service is part of the

Accepted Answer

The Internal Revenue Service (IRS) is a branch of the U.S. Treasury Department responsible for collecting taxes and enforcing tax laws. Therefore, the correct choice is B. Congress is the legislative branch of the U.S. government, the Federal Bureau of Investigation (FBI) is the domestic intelligence and security service of the United States, and the U.S. Customs Department is responsible for enforcing customs regulations and protecting the borders. None of these entities are related to the IRS.

Question 3

The statute of limitations is unlimited for a tax return that is never filed.

Accepted Answer

For tax returns that are never filed, the IRS can technically pursue taxes owed indefinitely because the statute of limitations for assessing and collecting taxes does not begin until a return is filed.

Question 4

The program specifically designed to identify returns with a high potential for a deficiency assessment is the

Accepted Answer

The DIF program, or Discriminant Function System, is specifically designed to identify returns with a high potential for a deficiency assessment, by using a mathematical formula to assign scores to certain return characteristics, such as income and deductions. The TCMP program is a more comprehensive audit program that selects returns based on a statistical sampling method. The instant audit program and 1040 program are not specifically designed to identify returns with a high potential for a deficiency assessment.

Question 5

Identify which of the following statements is false.

Accepted Answer

If a taxpayer signs Form 870, they are not necessarily precluded from filing a refund suit. The form only applies to the particular tax deficiency being assessed in the audit. If the taxpayer discovers new information or errors later on, they may still be able to pursue a refund.

Question 6

Anyone who prepares a tax return is subject to the provisions of Circular 230.

Accepted Answer

The answer of Anyone who prepares a tax return is...

Question 7

Treasury Department Circular 230 regulates the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

Accepted Answer

Treasury Department Circular 230 sets forth rules and regulations governing the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

Question 8

In order to appeal to the Appeals Division, a taxpayer must submit a protest letter to the IRS

Accepted Answer

The answer of In order to appeal to the Appeals...

Question 9

The majority of the individual tax returns that are audited are selected under the DIF program.

Accepted Answer

The DIF program is only one of several methods used by the IRS to select returns for audit. Other factors like random selection, matching program, and whistleblower tips can also trigger an audit. Therefore, the majority of individual tax returns are not selected under the DIF program.

Question 10

The 90-day letter (Statutory Notice of Deficiency) gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

Accepted Answer

The 90-day letter (Statutory Notice of Deficiency) does indeed give the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax. If the taxpayer does not take either of these actions within the 90 days, the IRS can proceed with collections.

Question 11

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Accepted Answer

A letter ruling is indeed a written determination provided by the IRS that explains and applies tax laws to a taxpayer's unique circumstances. This ruling can be requested by a taxpayer to receive guidance on how to handle a specific transaction or tax situation.

Question 12

Identify which of the following statements is true.

Accepted Answer

Statement A is true. The special audit relief rule allows taxpayers who have been audited in the past with no resulting additional tax owed to be exempt from future audits. However, there are other requirements for this rule to apply. Statement B is incorrect, as taxpayers cannot simply request an exemption from an audit. Statement C is also incorrect, as Form 870 is a settlement agreement between the taxpayer and the IRS and does not provide for interest-free payment.

Question 13

If the taxpayer has credible evidence, the IRS bears the burden of proof in a tax dispute.

Accepted Answer

According to the Taxpayer Bill of Rights, if a taxpayer presents credible evidence in a tax dispute, the IRS bears the burden of proof to support their position. This means that the burden of proof shifts from the taxpayer to the IRS if the taxpayer presents evidence that raises questions about the accuracy of the IRS's position.

Question 14

The maximum failure to file penalty is a total of 25% of the underpayment.

Accepted Answer

The IRS imposes a failure-to-file penalty for late tax returns, which can accumulate until it reaches a maximum of 25% of the unpaid taxes.

Question 15

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 16

Identify which of the following statements is false.

Accepted Answer

B) is false because when dealing with an "appeals coordinated issue," an appeals officer does not have the authority to settle based on the "hazards of litigation" without getting further approval or following specific procedures, as these issues are of significant importance or complexity and require consistent treatment across different cases.

Question 17

The "automatic" extension period for filing an individual return is seven months.

Accepted Answer

The automatic extension period for filing an individual return is six months, extending the deadline from April 15 to October 15.

Question 18

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.

Accepted Answer

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment. This penalty can accumulate up to a maximum of 25% of the tax owed.

Question 19

The statute of limitations, which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due, usually expires 6 years after the date on which the return is filed.

Accepted Answer

The general statute of limitations for federal tax returns is 3 years from the date the return was filed or the due date of the return, whichever is later.

Question 20

The IRS will issue a 90-day letter (a Statutory Notice of Deficiency) if the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter.

Accepted Answer

This statement is true. If a taxpayer does not file a protest letter within 30 days of receiving a 30-day letter from the IRS, the IRS will issue a 90-day letter, which is also known as a Statutory Notice of Deficiency. The 90-day letter informs the taxpayer of the proposed tax deficiency and provides them with 90 days to file a petition in Tax Court if they wish to dispute the deficiency.

Quiz 15: Administrative Procedures

The IRS provides advice concerning an issue that arises during an audit by issuing

The Internal Revenue Service is part of the

The statute of limitations is unlimited for a tax return that is never filed.

The program specifically designed to identify returns with a high potential for a deficiency assessment is the

Identify which of the following statements is false.

Anyone who prepares a tax return is subject to the provisions of Circular 230.

Treasury Department Circular 230 regulates the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

In order to appeal to the Appeals Division, a taxpayer must submit a protest letter to the IRS

The majority of the individual tax returns that are audited are selected under the DIF program.

The 90-day letter (Statutory Notice of Deficiency) gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Identify which of the following statements is true.

If the taxpayer has credible evidence, the IRS bears the burden of proof in a tax dispute.

The maximum failure to file penalty is a total of 25% of the underpayment.

Identify which of the following statements is false.

Identify which of the following statements is false.

The "automatic" extension period for filing an individual return is seven months.

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.

The statute of limitations, which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due, usually expires 6 years after the date on which the return is filed.

The IRS will issue a 90-day letter (a Statutory Notice of Deficiency) if the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter.