Tax Compliance and Procedure Flashcards

Which IRS collection tool allows the IRS to seize a taxpayer's wages, bank accounts, or other financial assets to satisfy a tax debt?

Answer: Tax Levy

A tax levy under IRC Section 6331 is the IRS's legal seizure of a taxpayer's property — including wages, bank accounts, and assets — to satisfy an unpaid tax liability.

What is the minimum penalty for failure to file a tax return that is more than 60 days late (for returns due after 2015)?

Answer: The lesser of $485 (indexed for inflation) or 100% of the tax owed

Under IRC Section 6651, if a return is more than 60 days late, the minimum failure-to-file penalty is the lesser of the indexed minimum amount (approximately $485 for 2024) or 100% of the unpaid tax.

An Offer in Compromise (OIC) based on 'Doubt as to Collectibility' is appropriate when:

Answer: The taxpayer's assets and future income are insufficient to fully pay the liability

An OIC based on Doubt as to Collectibility is filed when a taxpayer's reasonable collection potential (assets plus future income) is less than the full tax liability owed.

Under the IRS installment agreement provisions, what type of agreement allows taxpayers who owe $50,000 or less to establish a payment plan without providing detailed financial information?

Answer: Streamlined Installment Agreement

The Streamlined Installment Agreement allows taxpayers owing $50,000 or less in combined tax, penalties, and interest to enter a payment plan without providing detailed Collection Information Statements (Forms 433-A or 433-B).

What IRS form is used to authorize a tax professional to represent a taxpayer before the IRS?

Answer: Form 2848 (Power of Attorney and Declaration of Representative)

Form 2848, Power of Attorney and Declaration of Representative, authorizes a qualified representative (such as a CPA, attorney, or enrolled agent) to represent a taxpayer before the IRS in examinations, appeals, and collections.

What is the accuracy-related penalty percentage imposed under IRC Section 6662 for a substantial understatement of income tax or negligence?

Answer: 20% of the underpayment attributable to the violation

IRC Section 6662 imposes an accuracy-related penalty of 20% of the portion of the underpayment attributable to negligence, disregard of rules, or a substantial understatement of income tax.

Which IRS document formally closes an examination at the field level and summarizes proposed adjustments, allowing the taxpayer to agree or disagree?

Answer: Revenue Agent's Report (RAR) / Form 4549

The Revenue Agent's Report (RAR), presented on Form 4549, summarizes the IRS examiner's proposed adjustments and is provided to the taxpayer at the close of a field examination, giving them the opportunity to agree or request Appeals.