CTA Tax Compliance and Procedure

Question 1

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

Accepted Answer

3 years from the date the return was filed or due, whichever is later

Answer

2 years from the date the return was filed

Answer

5 years from the date the return was filed

Answer

6 years from the date the return was filed

Question 2

Which IRS notice is typically the first formal notice that a taxpayer's return has been selected for examination?

Accepted Answer

Letter 566 (Initial Contact Letter)

Answer

CP2000 Notice

Answer

Notice of Deficiency (90-day letter)

Answer

Letter 525 (Revenue Agent's Report)

Question 3

A taxpayer who disagrees with an IRS examination decision may request an appeal. What is the typical deadline to file a protest for a large case (over $25,000 in dispute)?

Accepted Answer

30 days from the date of the examination report

Answer

15 days from the date of the examination report

Answer

60 days from the date of the examination report

Answer

90 days from the date of the examination report

Question 4

What is the penalty rate for failure to pay taxes by the due date under IRC Section 6651(a)(2)?

Accepted Answer

0.5% per month, up to 25% maximum

Answer

0.25% per month, up to 25% maximum

Answer

1% per month, up to 25% maximum

Answer

5% per month, up to 25% maximum

Question 5

Under which circumstance does the IRS statute of limitations extend to 6 years instead of the normal 3 years?

Accepted Answer

When the taxpayer omits more than 25% of gross income from the return

Answer

When the taxpayer files a late return

Answer

When the taxpayer claims a fraudulent deduction

Answer

When the taxpayer fails to report foreign income

Question 6

What IRS program allows taxpayers to voluntarily disclose previously unreported income to reduce penalties and avoid criminal prosecution?

Accepted Answer

Voluntary Disclosure Program (VDP)

Answer

Offer in Compromise (OIC)

Answer

Installment Agreement Program

Answer

Currently Not Collectible (CNC) Status

Question 7

What is a 'Notice of Deficiency' (also called a 90-day letter)?

Accepted Answer

A formal IRS notice giving the taxpayer 90 days to petition the U.S. Tax Court before the deficiency is assessed

Answer

A notice that the IRS has accepted the taxpayer's return as filed

Answer

A notice requiring the taxpayer to pay the disputed amount within 90 days

Answer

A notice that the IRS has referred the case to the Department of Justice