Tax Compliance and Audit Procedures Flashcards

Which IRS document outlines the proposed changes after an audit and gives the taxpayer the right to appeal?

Answer: 30-day letter

The 30-day letter, which accompanies the Revenue Agent Report, gives taxpayers 30 days to agree to the changes or request an Appeals conference.

What is another name for the IRS 90-day letter?

Answer: Statutory Notice of Deficiency

The 90-day letter is formally called the Statutory Notice of Deficiency, which gives taxpayers 90 days to petition the Tax Court before assessment.

A taxpayer who disagrees with an IRS audit finding can request a conference with which office before going to court?

Answer: IRS Independent Office of Appeals

The IRS Independent Office of Appeals provides an impartial review of tax disputes between taxpayers and the IRS without litigation.

What is the penalty rate for failing to pay tax shown on a return, per month or part of a month?

Answer: 0.5%

The failure-to-pay penalty is 0.5% of the unpaid tax per month or part of a month, up to a maximum of 25% under IRC Section 6651.

What penalty applies when a taxpayer files a return more than 60 days late?

Answer: The lesser of $485 or 100% of unpaid tax

When a return is filed more than 60 days after the due date, the minimum penalty is the lesser of $485 (adjusted for inflation) or 100% of the tax due.

Which IRS program allows taxpayers to come forward voluntarily to correct unreported offshore accounts?

Answer: Streamlined Filing Compliance Procedures

The Streamlined Filing Compliance Procedures allow eligible taxpayers to voluntarily disclose unreported foreign financial accounts and income with reduced penalties.

What is the accuracy-related penalty percentage for a substantial understatement of income tax?

Answer: 20%

The accuracy-related penalty for a substantial understatement of income tax is 20% of the underpayment under IRC Section 6662.