- Which of the following is the correct advice regarding the taxpayer's ability to challenge the assessment?
Answer: The taxpayer may request audit reconsideration and submit the bank statement as new information that the examiner did not consider.
IRM 4.13.1 (Audit Reconsideration) and Pub. 3598; IRC §§ 6212(b) and 6213(a); Treas. Reg. § 301.6212-2. Audit reconsideration lets the IRS reevaluate an assessment from a closed examination when the taxpayer did not take part in the examination or has information that was not considered, and the assessment is unpaid. She did not take part and has new evidence, so Choice C is correct. Choice A is wrong because payment is not her only remedy; audit reconsideration is available for a defaulted assessment. Choice B is wrong because the notice was mailed to her last known address (she never gave the IRS notice of a new address), so it was valid even though she never received it, and the 90-day period ran from mailing and expired long ago. Choice D is wrong because a balance-due notice does not give CDP rights, which arise from a lien filing notice or a notice of intent to levy, and audit reconsideration does not depend on a CDP hearing.
- Which of the following is correct regarding a second inspection of a taxpayer's books and records for a tax year that was already examined?
Answer: The IRS may make a second inspection without the taxpayer's consent only if it notifies the taxpayer in writing, after investigation, that an additional inspection is necessary.
IRC § 7605(b) permits only one inspection of a taxpayer's books of account for each taxable year unless the taxpayer requests otherwise or the Secretary, after investigation, notifies the taxpayer in writing that an additional inspection is necessary. Choice C is correct. Choice A is too restrictive: the statute allows the second inspection on written notice alone; neither the taxpayer's written consent nor a court order is required. Choice B misstates the required condition: approval inside the IRS is not a substitute for written notice to the taxpayer. Choice D confuses two different documents: Form 872 only extends the period of limitations on assessment under IRC § 6501(c)(4); it does not consent to a second inspection of the books.
- Which of the following is the correct advice to give the taxpayer regarding the scheduled second inspection?
Answer: The IRS may conduct a second inspection only if it first notifies the taxpayer in writing that an additional inspection is necessary.
IRC § 7605(b). Choice C is correct: only one inspection of a taxpayer's books of account may be made for a taxable year unless the taxpayer requests another inspection or the IRS, after investigation, notifies the taxpayer in writing that an additional inspection is necessary. The earlier examination was completed as a no-change case, so the scheduled appointment is a second inspection of the same year's books, and the written notice requirement applies. Choice A is wrong because the statute is not an absolute bar; it permits a second inspection once the required written notice is given. Choice B is wrong because a no-change result does not exempt the year from the notice requirement. Choice D is wrong because a second inspection does not require a prior Appeals conference; the statutory condition is written notice, not an administrative appeal.
- Which of the following is correct advice regarding the request to extend the assessment period?
Answer: The taxpayer may sign a restricted consent extending the period only for the property issue, but the IRS may decline it and issue a statutory notice of deficiency to protect the assessment period.
IRC § 6501(c)(4); Pub. 556; Form 872 and Form 872-A instructions. Choice A is correct: a taxpayer may agree in writing to extend the assessment period, and the consent may be restricted to a particular issue; however, the IRS is not required to accept a restricted consent and, if the original period is about to expire, may issue a statutory notice of deficiency to protect its ability to assess. Choice B is wrong because restricted consents are recognized; acceptance is discretionary with the IRS. Choice C is wrong because Form 872-A is an open-ended special consent that does not terminate on a fixed date and does not limit the extension to particular issues. Choice D is wrong because the IRS is not required to accept a restricted consent; the consent is a voluntary agreement between the IRS and the taxpayer.
- Which of the following is correct regarding the deadline for filing a petition with the United States Tax Court to contest the deficiency before paying it?
Answer: The petition must be filed by May 13, 2025, 90 days after the notice was mailed to the taxpayer's last known address.
IRC §§ 6212(b) and 6213(a); 26 C.F.R. § 601.506(a)(3). A Tax Court petition must be filed within 90 days after a notice of deficiency is mailed (150 days if it is addressed to a person outside the United States), and a notice mailed to the taxpayer's last known address is valid. The notice went to her Texas home while she lived there, so the 90-day period runs from February 12, 2025, and ends on May 13, 2025, a Tuesday, so IRC § 7503 does not move it. Choice D is correct. Choice A is wrong because the period runs from mailing, not from when the taxpayer opened the notice. Choice B is wrong because failing to send a copy to a recognized representative does not affect the validity of a notice delivered to the taxpayer. Choice C is wrong because it confuses the petition period with the 30 days usually allowed to respond to a 30-day letter.
- Which of the following is correct regarding an IRS summons served on a bank for a taxpayer's financial records during an examination of the taxpayer?
Answer: The IRS must give the taxpayer notice of the summons within three days of serving it on the bank, and the taxpayer then has 20 days to begin a court proceeding to quash the summons.
Under IRC § 7609(a)(1), when the IRS serves a summons on a third-party recordkeeper such as a bank, it must serve notice of the summons on the person identified in the summons within three days of service on the recordkeeper, and IRC § 7609(b)(2)(A) gives that person 20 days after the notice is served to begin a proceeding to quash the summons. Choice B is correct. Choice A misstates the taxpayer's role: the third-party summons procedure gives the taxpayer notice and the right to quash, not a right to attend the records examination or examine the recordkeeper. Choice C misstates the scheme: an IRS summons is an administrative subpoena and needs no prior judicial approval; a court becomes involved only if the summoned party refuses to comply or the taxpayer moves to quash. Choice D misstates both the timing and the remedy: notice follows service of the summons, and the taxpayer's remedy is a court proceeding to quash, not an Appeals protest.
- Which of the following is correct regarding the taxpayer's right to record the interview?
Answer: The examiner must permit the recording because a taxpayer may make an audio recording of an in-person interview at her own expense upon advance request.
IRC § 7521(a)(1). An IRS employee who conducts an in-person interview must, upon advance request of the taxpayer, allow the taxpayer to make an audio recording of the interview at the taxpayer's own expense and with the taxpayer's own equipment. The decisive fact is the written request mailed two weeks before the interview, which is an advance request. Choice B is correct. Choice A is wrong because § 7521(a)(1) gives the recording right to the taxpayer, not only to the IRS. Choice C is wrong because § 7521(a)(2) lets the IRS record an interview only if it gives the taxpayer advance notice, and the taxpayer's right does not depend on the IRS recording. Choice D is wrong because the statute lets the taxpayer use her own equipment and does not require IRS approval of it.
- Which of the following is correct regarding the taxpayer's options for the two adjustments?
Answer: The taxpayer may sign a partial waiver for the agreed wages adjustment, allowing immediate assessment of that amount, while the contested adjustment follows the 30-day letter and Appeals process.
IRC § 6213(d); Form 870. Choice D is correct: the statute gives a taxpayer the right to waive the restrictions on the assessment and collection of the whole or any part of a deficiency. A partial waiver covering only the agreed wages adjustment lets the IRS assess that amount promptly, while the contested business expense adjustment remains an unagreed item that continues through the 30-day letter, possible Appeals consideration, and, if still unresolved, a statutory notice of deficiency. Choice A is wrong because a waiver may be executed for part of the deficiency. Choice B is wrong because a waiver is not conditioned on payment first, and the agreed adjustment is not the subject of a refund claim. Choice C is wrong because signing a waiver does not stop interest; interest accrues on an unassessed or assessed deficiency until it is paid.
- Which of the following is correct regarding a statutory notice of deficiency issued after an examination?
Answer: A notice mailed to the taxpayer's last known address is sufficient to start the 90-day petition period even if the taxpayer never actually receives the notice.
IRC § 6212(b)(1) provides that a notice of deficiency mailed to the taxpayer's last known address is sufficient, and IRC § 6213(a) gives the taxpayer 90 days from the mailing date to petition the Tax Court (150 days if the notice is addressed to a person outside the United States). Choice A is correct: actual receipt is not required for the notice to be valid or for the period to run. Choice B misstates the 150-day rule: it applies when the notice is addressed to a person outside the United States, not merely because the taxpayer is abroad when the notice is mailed. Choice C misstates the starting point: the period runs from the date of mailing, not from receipt, and mailing to the last known address is sufficient proof of notice. Choice D misstates IRC § 7503: when the last day falls on a Saturday, Sunday, or legal holiday, the act is timely if performed on the next succeeding business day, not the preceding business day.
- Which of the following is correct regarding the 30-day letter issued after an unagreed examination?
Answer: If the taxpayer does not respond to a 30-day letter, the IRS generally issues a statutory notice of deficiency, and the taxpayer then has 90 days from its mailing to petition the Tax Court.
Under the procedures described in IRS Publication 5, after an unagreed examination the IRS sends a 30-day letter explaining the proposed adjustments and giving the taxpayer 30 days to agree or to request consideration by the Independent Office of Appeals. If the taxpayer does not respond, the IRS generally issues the statutory notice of deficiency under IRC § 6212, which starts the 90-day period for filing a Tax Court petition under IRC § 6213(a). Choice C is correct. Choice A misstates the response window: a request for Appeals consideration is ordinarily due within 30 days of the letter, not 90. Choice B misstates the procedures: the 30-day letter process is not limited to proposed deficiencies exceeding $10,000, and a smaller unagreed deficiency may not be assessed without the required notice. Choice D misstates what preserves Tax Court rights: those rights arise from the statutory notice of deficiency that follows, and filing a written protest to the 30-day letter is not a prerequisite to petitioning the Tax Court.
- Which of the following is correct regarding the summons?
Answer: The taxpayer may move to quash the summons in federal district court, and the bank may not comply before the 20-day period expires.
IRC § 7609(a), (b)(2), (d) and (h). A bank is a third-party recordkeeper, so the taxpayer is entitled to notice of the summons and may begin a proceeding to quash it in the federal district court for the district where the bank resides or is found, no later than the 20th day after notice is given. Under § 7609(d), the IRS may not examine the summoned records before the close of the 23rd day after notice is given, and if a timely proceeding to quash is begun, it may examine them only as the court orders. Production by the bank within ten days would therefore come before the 20-day period ends. Choice B is correct. Choice A is wrong because the motion to quash is the remedy the statute provides, and it is available before the records are produced; audit reconsideration is not the taxpayer's only remedy. Choice C is wrong because there is no administrative appeal of a summons to the Office of Appeals; the challenge is made in district court. Choice D is wrong because a relevance objection to an Information Document Request does not bar the IRS from issuing a summons for the same records; relevance is tested in the court proceeding.
- Which of the following is correct regarding a taxpayer's rights during an in-person interview with the IRS in connection with an examination?
Answer: The taxpayer may make an audio recording of the interview at the taxpayer's own expense if the taxpayer requests to record in advance of the interview.
Under IRC § 7521(a), upon the taxpayer's advance request, the IRS must permit the taxpayer to make an audio recording of an in-person interview at the taxpayer's own expense. Choice D is correct. Choice A misstates the IRS's recording right: under IRC § 7521(a)(2) the IRS may record the interview with advance notice to the taxpayer; the taxpayer's consent is not required. Choice B misstates the suspension right: IRC § 7521(b)(2) allows the taxpayer, at any time during an interview not conducted under a summons, to suspend it to consult with a representative; the right is not limited to the period before questioning begins. Choice C invents a location limit: the recording right applies to any in-person interview described in § 7521, regardless of where the interview is held.
- Which of the following is correct regarding a consent or waiver signed by a taxpayer during an examination?
Answer: A taxpayer who signs Form 870 agrees to the immediate assessment of the deficiency, and the IRS may assess without issuing a statutory notice of deficiency.
IRC § 6213(d); IRC § 6501(c)(4). Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax, is the waiver § 6213(d) allows: by signing it, the taxpayer lets the IRS assess the deficiency immediately, without first mailing a statutory notice of deficiency. Form 872 is a different document: a consent under § 6501(c)(4) to extend the period for assessment, which must be signed before the period expires. Choice B is correct. Choice A is wrong because Form 872 only extends the assessment period; it does not waive the right to a notice of deficiency or to petition the Tax Court. Choice C is wrong because Form 870 does not extend the period of limitations on assessment; it waives the restrictions on assessment so the IRS can assess at once. Choice D is wrong because a consent under § 6501(c)(4) must be executed before the assessment period expires; a consent signed after expiration cannot revive the period, whether or not an assessment has been made.
