Week 10

Under a guaranteed installment agreement between the IRS and a taxpayer, the taxpayer must agree to pay in full within how many years?

3 years.

When dealing with IRS employees, taxpayers have certain rights. Which of the following most accurately reflects those rights?

A right of appeal is available for most collection actions.

Late payments by a taxpayer on an installment agreement to pay a tax liability will

Generate a 30-day notice as to the cessation of the agreement.

Which of the following disqualifies a taxpayer's income tax liability from being discharged in bankruptcy? (I) Being charged of tax evasion or fraudulent tax activities (II)Being convicted of tax evasion or fraudulent tax activities

II only.

Mr. Alomar's income tax return was examined by the IRS, and he agreed with the proposed changes. He has several ways by which he may settle his account and pay any additional tax that is due. Which of the following statements with respect to this situation is false?

If the bill is delayed, he will not be billed for additional interest for more than 60 days from the date he signed the agreement.

Mr. Smith's 2012 income tax return, which he filed on May 3, 2013, was examined by the IRS. Smith did not have an extension of time to file. On October 20, 2014, he signed a report agreeing to a deficiency of $10,000. He received a notice and demand showing additional tax, interest, and penalties. The notice was dated November 7, 2014. If Mr. Smith paid the bill on November 12, 2014, which of the following reflects the date interest started accruing and the date it stopped?

Interest Started 5/3/13 Interest Ended 11/07/14

What is the type of collection that allows the IRS to waive the 10-day period of Notice and Demand for Tax?

Jeopardy levy.

After assessment, as a general rule, the Internal Revenue Service has the authority to collect outstanding federal taxes for which of the following?

Ten years.

A taxpayer's business real property may not be seized and sold by the IRS unless the collection of the tax is in jeopardy or approval has been secured from

The IRS area director or assistant area director.

With regard to the trust fund recovery penalty assessments for employers, which of the following statements is false?

The amount of the penalty is equal to the unpaid income taxes withheld.

Select the correct statement concerning a taxpayer's appeal of the filing of a Notice of Federal Tax Lien.

Upon the conclusion of the CDP hearing, the IRS will issue a determination.

The trust fund recovery penalty was enacted to encourage prompt payment of which taxes?

Collected excise taxes.

What is the name given to the last date the IRS can collect unpaid tax from the taxpayer?

Collection Statute Expiration Date (CSED).

Which statement is true about the IRS providing notice and demand relating to a tax levy?

All of the answers are correct. -The notice must be left at the person's home or usual place of business. -Taxpayers may use the IRS Problem Resolution Program to solve problems with an IRS employee. -The notice is accompanied by a publication outlining the taxpayer's rights.

During the period of an installment agreement

All payments must be made timely, and interest and penalties must continue to accrue.

Until the IRS files a Notice of Federal Tax Lien, the lien is ineffective against certain parties. Which of the following is not one of these parties?

Answer: A holder of an artisan's lien. The lien is ineffective against these parties: -A purchaser. -A holder of a security interest. -A judgment lien creditor.

Which of the following statements with respect to a continuous levy is false?

Answer: A levy does not apply to wages and salaries received after the date of levy. These statements are true: -A levy of up to 15% may apply to all specified payments received after the date of levy. -A levy applies to all property acquired prior to the date of levy. -A levy does not apply to property acquired by a taxpayer after the date of levy.

Which of the following may the Internal Revenue Service settle by accepting an Offer in Compromise for less than the full amount of the balance due?

Answer: A tax deficiency plus penalties and accrued interest. These may not be settled by accepting an Offer in Compromise for less than the full amount of the balance due: -A tax deficiency plus penalties, but not accrued interest. -A tax deficiency plus accrued interest, but not penalties. -A tax deficiency, but not penalties and accrued interest.

Which of the following statements is false in respect to a Notice of Federal Tax Lien?

Answer: A taxpayer cannot sue the federal government for damages if the IRS knowingly or negligently fails to release a Notice of Federal Tax Lien when a release is warranted. These statements are true: -It is a public notice to the taxpayer's creditors that the government has a claim against all of the taxpayer's real, personal, and/or business property, including property that was acquired after the lien came into existence. -The IRS will issue a Release of the Notice of Federal Tax Lien within 30 days after acceptance of a bond guaranteeing payment of the liability. -All fees charged by the state or other jurisdiction for both filing and releasing the lien will be added to the balance owed.

Which of the following statements in respect to IRS seizure and sale of a taxpayer's property to satisfy his or her federal tax bill is false?

Answer: A taxpayer does not have the right to redeem any property seized once the IRS has sold it. These statements are true: -Unless the property is perishable and must be sold immediately, the IRS will wait at least 10 days after seizure before conducting the sale. -The taxpayer may request a recomputation if (s)he is in disagreement with the minimum price the IRS has determined it will accept for the property. -Before the date of sale, the IRS may release the property to the taxpayer if (s)he pays the amount equal to the amount of the government's interest in the property.

Which of the following statements regarding a Notice of Federal Tax Lien is true?

Answer: All fees charged by the state or other jurisdiction for both filing and releasing the lien will be added to the balance the taxpayer owes. These statements are false: -A taxpayer cannot sue the federal government for damages if the IRS negligently fails to release a Notice of Federal Tax Lien when a release is warranted. -The IRS will issue a Release of the Notice of Federal Tax Lien within 10 days after acceptance of a bond guaranteeing payment of the liability. -It is a public notice to the taxpayer's creditors that the government has a claim against all of the taxpayer's property, not including property that is acquired after the lien came into existence.

The collection process begins

At the IRS service center where notices are generated requesting payment.

With regard to seizure of property in satisfaction of a tax liability, all of the following are true except

Answer: If the proceeds of a sale by the IRS are less than the total of the tax bill and the expenses of the levy and sale, the taxpayer will not have to pay the balance. These statements are true: -The taxpayer's principal residence may not be seized without the written approval of a U.S. District Court judge or magistrate. -Any real property used as a residence by the taxpayer may not be seized to satisfy a levy of $5,000 or less. -Before the sale of property, the IRS will compute a minimum bid price. If the minimum is not offered at the sale, the IRS may buy the property.

All of the following are types of offer in compromise payment terms, except

Answer: Lump sum cash payments must be paid within 24 months. These are types of offer in compromise payment terms: -Deferred periodic payments may be paid within a period longer than 24 months but no longer than the 10-year period for collection. -Short-term periodic payments must be paid within 24 months. -Lump sum cash payments must be paid within five or fewer installments.

With regard to an installment agreement with the IRS to pay a federal tax debt, which of the following statements is false?

Answer: Once an installment payment plan has been approved, the IRS will not continue to charge the taxpayer's account with interest on the taxpayer's unpaid balance of penalties and interest. These statements are true: -While the taxpayer is making installment payments, the IRS may require the taxpayer to provide financial information on his or her financial condition to determine any change in his or her ability to pay. -Installment payments may be paid by electronic transfers from the taxpayer's bank account. -The IRS may file a Notice of Federal Tax Lien to secure the government's interest until the taxpayer makes the final payment.

A guaranteed installment agreement is one of the acceptable methods of paying off a tax debt to the United States Treasury. The IRS must enter into an installment agreement provided all of the following requirements are met, except the taxpayer

Answer: Previously entered into a nonguaranteed installment agreement. These requirements must be met: -Did not fail to pay any income tax. -Must not owe more than $10,000. -Filed income tax returns without fail.

If the IRS must seize (levy) a taxpayer's property, the taxpayer has the right by federal law to keep all of the following except

Answer: Tangible personal business property if the collection of tax is in jeopardy. The taxpayer has the right to keep: -Unemployment and job training benefits and workers compensation. -Salary or wages that have been included in a judgment for court-ordered child support payments. -A limited amount of personal belongings, furniture, and business or professional books and tools.

With regard to the levy method used by the IRS to collect tax that has not been paid voluntarily, which of the following statements is false?

Answer: The IRS cannot levy any state income tax refund checks and apply the state refund to a federal tax debt. These statements are true: -The IRS will release a levy if the IRS determines the levy is creating an economic hardship for the taxpayer. -Levies can be made on property that is the taxpayer's but is held by third parties. -If the IRS levies a taxpayer's bank account, the bank is required to hold the funds the taxpayer has on deposit, up to the amount the taxpayer owes, for 21 days.

With regard to the IRS filing a Notice of Federal Tax Lien, which of the following statements is not a requirement?

Answer: The IRS must give individual notices to all of the taxpayer's creditors. These statements are required: -The IRS must send the taxpayer a notice and demand for payment. -The IRS must assess the tax. -The taxpayer must neglect or refuse to pay the tax or otherwise neglect or refuse to resolve his or her tax liability problems.

Which of the following statements with respect to IRS seizure and sale of a taxpayer's property to satisfy the taxpayer's tax bill is false?

Answer: The IRS must wait 30 days after seizure before conducting a sale. These statements are true: -A seizure may not be made on any property if the estimated cost of the seizure and sale exceeds the fair market value of the property to be seized. -After the sale, proceeds are applied first to the expenses of the levy and sale. -A taxpayer has the right to an administrative review of a seizure action when the IRS has taken personal property that is necessary to the maintenance of the taxpayer's business.

Once a notice of federal tax lien has been filed, all of the following are true except

Answer: The IRS will issue a release of the notice of federal tax lien within 15 business days after the taxpayer satisfies the tax due (including interest and other additions) by paying the debt, by having it adjusted, or if the IRS accepts a bond that the taxpayer submits, by guaranteeing a payment of the debt. These statements are true: -By law, a filed notice of tax lien can be withdrawn if withdrawal will speed collecting the tax. -The law requires the IRS to notify the taxpayer in writing within 5 business days after the filing of a lien. -The lien applies to all of the taxpayer's real and personal property and to all of his or her rights to property until the tax is paid or the lien is removed.

A levy on wages ends under all of the following circumstances, except

Answer: The penalties and interest on the tax liability are satisfied. A levy on wages ends under these circumstances: -The IRS determines the levy is creating an economic hardship for the taxpayer. -The levy is released. -The levy becomes unenforceable due to lapse of time.

Which of the following statements regarding the use of the national and local expense standards to determine whether the taxpayer can provide for basic living expenses is false?

Answer: The taxpayer should not consider the taxpayer's family to determine whether or not the taxpayer can provide for basic living expenses. These statements are true: -The necessary expense test is met by expenses that are necessary to provide for a taxpayer's health and welfare and/or production of income. -Taxpayers must prove that using national and local expense standards would leave them an inadequate means of providing for basic living expenses. -The IRS may allow actual expenses to be used.

Which of the following statements with respect to resolving tax problems involving the collection process is false?

Answer: While a taxpayer is making installment payments, interest will continue to accrue only on the tax liability due. These statements are true: -If a taxpayer suffers a significant hardship because of the collection of the tax liability, (s)he may request assistance from the IRS on Form 911, Application for Taxpayer Assistance Order (ATAO). -A taxpayer may be entitled to a reimbursement for fees charged by his or her bank if the IRS has erroneously levied his or her account. -A taxpayer should first request assistance from IRS collection employees or their managers before seeking assistance from the problem resolution officer.

Sam timely filed his U.S. individual income tax return for calendar year 2014 without any extensions. The return showed a balance of income taxes due in the amount of $75,000. Sam has not paid his IRS liability, nor has he entered into any installment agreement extending the statute of limitations or submitted any offer in compromise. The statute of limitations for collection of Sam's tax liability expires on which of the following dates?

April 15, 2025.