Federal tax procedures

Area 1: Ethics, Professional Responsibilities, and Federal Tax Procedures (10-20%)

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Topics

Statute of limitations and assessment
IRS audit and appeals process
Penalties and interest provisions

Lessons

Federal Tax Procedures

Study Frameworks

Circular 230 — Enforcement and Penalties

IRS Enforcement Framework

Practitioner Sanctions (OPR)

Censure (public reprimand)

Suspension from practice

Disbarment from practice

Monetary penalty

Preparer Penalties

§6694(a): Unreasonable position — $1,000 or 50% of income

§6694(b): Willful/reckless — $5,000 or 75% of income

§6695: Failure to sign/PTIN — $50 per return

Statute of Limitations

General: 3 years from filing/due date

25% omission: 6 years

Fraud or no return filed: unlimited

Which Court to File In — Tax Litigation

Can the taxpayer pay the full disputed tax amount before filing suit?

Yes

Does the taxpayer want a jury trial?

Yes

File in U.S. District Court (only court offering jury trials; appeals to geographic circuit)

Is there favorable precedent in the Federal Circuit (as opposed to the taxpayer's geographic circuit)?

Yes

File in Court of Federal Claims (Washington, D.C. only; appeals to Federal Circuit)

File in U.S. District Court (local venue; appeals to geographic circuit) or Court of Federal Claims based on strategic preference

Is the disputed amount $50,000 or less and the taxpayer willing to waive appeal rights?

Yes

File in Tax Court — Small Case Division (simplified procedures, no appeal, no prepayment required)

File in U.S. Tax Court — Regular Division (no prepayment required; specialized judges; appeals to geographic circuit)

Statute of Limitations — Assessment Periods

Scenario	Period	Key Rule
General rule	3 years	From later of filing date or due date (with extensions)
Early-filed return	3 years from due date	Statute runs from due date, not early filing date
>25% gross income omission	6 years	Gross income = gross receipts for business; adequate disclosure prevents extension
Fraudulent return filed	Unlimited	Intent to evade tax — IRS can assess at any time
No return filed	Unlimited	Statute never begins to run
Refund claim by taxpayer	Later of 3 years from filing or 2 years from payment	Refund limited to tax paid within applicable lookback period
Collection after assessment	10 years	From date of assessment

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