SEE - Special Enrollment Exam Quiz: Examinations And Audit Responses

13 questions · exam conditions

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Examinations And Audit ResponsesQuestion 1 of 13

An enrolled agent represented a taxpayer whose 2022 individual income tax return was examined by the IRS in 2024. The examination was completed as a no-change case, and the taxpayer received a closing letter in December 2024. In September 2025, an IRS examiner telephones the taxpayer and schedules an appointment to inspect the same books and records for the 2022 tax year again. The taxpayer asks the enrolled agent whether the IRS may do this.

Which of the following is the correct advice to give the taxpayer regarding the scheduled second inspection?

The IRS may not inspect the taxpayer's books again for 2022 because the earlier examination was closed as a no-change case.

The IRS may conduct the second inspection because the first examination resulted in no change and no additional tax was assessed.

The IRS may conduct a second inspection only if it first notifies the taxpayer in writing that an additional inspection is necessary.

The IRS may conduct a second inspection only after the taxpayer is given an opportunity to present the matter to the Office of Appeals.

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SEE - Special Enrollment Exam Quiz

SEE - Special Enrollment Exam Quiz: Examinations And Audit Responses

Practice Examinations And Audit Responses in SEE - Special Enrollment Exam with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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This quiz focuses on Examinations And Audit Responses, giving you a quick way to practice the rules, question types, and explanations that matter most for SEE - Special Enrollment Exam.

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Question 1

Which of the following is the correct advice to give the taxpayer regarding the scheduled second inspection?

The IRS may not inspect the taxpayer's books again for 2022 because the earlier examination was closed as a no-change case.
The IRS may conduct the second inspection because the first examination resulted in no change and no additional tax was assessed.
The IRS may conduct a second inspection only if it first notifies the taxpayer in writing that an additional inspection is necessary. (correct answer)
The IRS may conduct a second inspection only after the taxpayer is given an opportunity to present the matter to the Office of Appeals.

Explanation: 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.

Question 2

On February 12, 2025, the IRS mailed a statutory notice of deficiency for the taxpayer's 2021 tax year to her last known address, her home in Texas, where she was living at the time. The taxpayer's enrolled agent holds a Form 2848 for 2021, but the IRS did not send the agent a copy of the notice. The taxpayer did not open the envelope until March 20, 2025, when she gave the notice to the agent.

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?

The petition must be filed by June 18, 2025, because the 90-day period runs from March 20, 2025, the date the taxpayer opened the notice.
The 90-day period has not begun to run, because the IRS did not send a copy of the notice to the enrolled agent named on the Form 2848.
The petition must be filed by March 14, 2025, because a taxpayer has 30 days after the notice is mailed to petition the Tax Court.
The petition must be filed by May 13, 2025, 90 days after the notice was mailed to the taxpayer's last known address. (correct answer)

Explanation: 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.

Question 3

In July 2025, during an examination of a taxpayer's 2021 individual income tax return, the assessment period will expire in October 2025. The examiner asks the taxpayer to sign Form 872 to extend the assessment period to December 31, 2026, for all issues. The taxpayer is willing to extend the period only with respect to the property-disposition issue under review. The taxpayer asks the enrolled agent what can be done.

Which of the following is correct advice regarding the request to extend the assessment period?

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. (correct answer)
Form 872 must be signed on an all-issues basis, and a consent limited to a single issue is not recognized under the Internal Revenue Code.
The taxpayer should sign Form 872-A, which automatically limits the extension to the items and amounts identified in the examination report.
The taxpayer may limit the consent to the property issue, and the IRS is required to accept the restricted consent once the taxpayer has offered it.

Explanation: 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.

Question 4

A taxpayer's 2024 return is under office audit. Two weeks before the first scheduled interview, the taxpayer mailed a written request to the examiner stating that she intends to make an audio recording of the interview using her own cell phone. At the interview, the examiner refuses to allow the recording, explaining that IRS policy permits only the IRS to record audit interviews. The taxpayer's enrolled agent is present.

Which of the following is correct regarding the taxpayer's right to record the interview?

The examiner's refusal is proper because the right to make an audio recording of an audit interview belongs only to the Internal Revenue Service.
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. (correct answer)
The taxpayer may make the recording only if the IRS is also permitted to record the interview without giving the taxpayer advance notice of its recording.
The taxpayer may make the recording only if the recording is made with equipment that the IRS has pre-approved.

Explanation: 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.

Question 5

An examination of a taxpayer's 2022 return proposes two adjustments: $9,500 of unreported wages, which the taxpayer agrees are taxable, and a $17,000 business expense deduction, which the taxpayer contests. The examiner has issued a 30-day letter covering the proposed adjustments and has asked the taxpayer to sign Form 870 for the agreed wages item. The taxpayer wants to contest the business expense adjustment.

Which of the following is correct regarding the taxpayer's options for the two adjustments?

The taxpayer must agree or disagree with the examination report as a whole, and a partial agreement for only the wages adjustment is not permitted.
The taxpayer should pay the agreed wages amount and file a Form 1040-X for it before signing anything, because a waiver signed before payment is void.
Signing Form 870 for the wages adjustment will stop the accrual of interest on that amount until the taxpayer pays the balance.
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. (correct answer)

Explanation: 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.

Question 6

A taxpayer's 2022 return was examined after she moved to another state. She never notified the IRS of her new address and filed no later return showing it, so the IRS mailed the examination notices and a statutory notice of deficiency to the address on her 2022 return. She never received them, did not petition the Tax Court, and the IRS assessed the deficiency in April 2024. In November 2025, she receives a balance-due notice and has not paid the assessment. She shows her enrolled agent a bank statement proving that the deposit the examiner treated as unreported income was a nontaxable gift from a family member. She asks how to challenge the assessment.

Which of the following is the correct advice regarding the taxpayer's ability to challenge the assessment?

The assessment became final when the statutory notice of deficiency was mailed, so the taxpayer's only remaining remedy is to pay the balance due in full.
The taxpayer may file a Tax Court petition because the 90-day period to petition did not begin until she actually received the statutory notice.
The taxpayer may request audit reconsideration and submit the bank statement as new information that the examiner did not consider. (correct answer)
The taxpayer's only option is to request a collection due process hearing and raise the underlying liability there, because the examination case has been closed by the IRS.

Explanation: 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.

Question 7

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?

The IRS must obtain the taxpayer's written consent or a court order before it may inspect the taxpayer's books a second time for the same year.
The IRS may make a second inspection without notifying the taxpayer if the examination group manager approves the additional inspection in writing.
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. (correct answer)
A taxpayer who signs Form 872 during the examination consents to any second inspection of the books for the year covered by the consent.

Explanation: 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.

Question 8

Which of the following is correct regarding a taxpayer's rights during an in-person interview with the IRS in connection with an examination?

The IRS may make an audio recording of the interview, but only if the taxpayer gives written consent to the recording before the interview begins.
The taxpayer may suspend the interview to consult with a representative only before substantive questions are asked, and the interview must then continue without further interruption.
The right to record the interview applies only to office examinations, not to interviews conducted at the taxpayer's home or place of business.
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. (correct answer)

Explanation: 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.

Question 9

Which of the following is correct regarding a statutory notice of deficiency issued after an examination?

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. (correct answer)
A taxpayer who is physically outside the United States when the notice is mailed has 150 days to petition the Tax Court regardless of the address to which the notice is sent.
The 90-day petition period begins on the day the taxpayer actually receives the notice, and the IRS must prove delivery before it may assess the deficiency.
If the 90-day petition period ends on a Saturday, Sunday, or a legal holiday, the taxpayer must file the petition on the last business day before that date.

Explanation: 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.

Question 10

Which of the following is correct regarding the 30-day letter issued after an unagreed examination?

The 30-day letter advises the taxpayer of the right to request consideration by the Independent Office of Appeals, but the request ordinarily must be made within 90 days of the date of the letter.
The 30-day letter is issued only when the proposed deficiency exceeds $10,000; smaller proposed deficiencies are assessed without any prior notice to the taxpayer.
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. (correct answer)
A taxpayer who wants to preserve the right to petition the Tax Court must file a written protest within 30 days of the date of the 30-day letter.

Explanation: 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.

Question 11

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?

The taxpayer has the right to be present when the bank produces the summoned records and to question bank employees about the accuracy of those records.
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. (correct answer)
Under no circumstances may the IRS serve a summons on a bank during an examination without first obtaining the approval of a federal district court for the summons.
The IRS must give the taxpayer at least 30 days' advance notice before a summons is served on the bank so that the taxpayer may file a protest with the IRS Independent Office of Appeals.

Explanation: 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.

Question 12

An enrolled agent represents a taxpayer during an examination of the taxpayer's 2024 return. The examiner issued an Information Document Request seeking the taxpayer's bank statements for a listed account. The enrolled agent responded that the request was not relevant to the issues under examination. The examiner then served a summons on the bank directing it to produce the statements, and a notice of the summons was mailed to the taxpayer. The bank has told the taxpayer it intends to provide the records within ten days.

Which of the following is correct regarding the summons?

The taxpayer's only remedy is to raise the relevance objection at an audit reconsideration after the bank has produced the records to the examiner.
The taxpayer may move to quash the summons in federal district court, and the bank may not comply before the 20-day period expires. (correct answer)
The taxpayer may appeal the summons to the IRS Office of Appeals, and the bank must hold the records until that administrative appeal has been resolved.
The examiner is barred from issuing the summons because the enrolled agent raised a timely relevance objection to the underlying Information Document Request.

Explanation: 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.

Question 13

Which of the following is correct regarding a consent or waiver signed by a taxpayer during an examination?

Signing Form 872 extends the period of limitations on assessment and also waives the taxpayer's right to petition the Tax Court for the year covered.
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. (correct answer)
Signing Form 870 extends the period of limitations on assessment by the number of days from the date of the waiver to the date the examination closes.
A Form 872 signed after the period of limitations on assessment has expired is effective if the IRS and the taxpayer both sign the form before any deficiency is assessed.

Explanation: 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.