How an examination runs and ends, the taxpayer's interview rights and the practitioner privilege, the burden of proof, the path from the 30-day letter through Appeals to the Tax Court, and the ways to remove penalties and interest: reasonable cause, first-time abatement, erroneous IRS advice and interest abatement. Expect deadline recall and failure-to-file computations.
Specific Areas of Representation·4 min read·6 sections
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Must-know for the exam
✓A taxpayer need not attend an interview with a representative holding a valid power of attorney unless summoned (IRC 7521(c); Pub. 5).
✓The section 7525 privilege covers tax advice from a federally authorized practitioner in noncriminal matters; not return preparation, criminal cases or written shelter promotion (IRC 7525).
✓The burden of proof shifts to the IRS on a factual issue if the taxpayer offers credible evidence, kept records, substantiated and cooperated (IRC 7491(a)).
✓After a 30-day letter, a formal written protest is needed when any period's proposed amount exceeds $25,000; otherwise a small case request (Pub. 5).
✓A notice of deficiency allows 90 days to petition the Tax Court, 150 days if addressed outside the US; small tax case procedures cover up to $50,000 per year (IRC 6213(a), 7463).
✓Failure to file is 5% a month and failure to pay 0.5% a month, each capped at 25%; overlapping months reduce the filing penalty by the payment penalty (IRC 6651(a), (c)(1)).
✓For returns due in 2026 filed over 60 days late, the minimum filing penalty is the smaller of $525 or 100% of the tax due (IRC 6651(a); Rev. Proc. 2024-40 sec. 3.53).
✓The failure-to-pay rate drops to 0.25% a month during an installment agreement for timely filers and rises to 1% after a notice of intent to levy (IRC 6651(h), (d)).
✓First-time abatement needs a clean 3-year penalty history, all required returns filed, and the tax paid or arranged (IRM 20.1.1.3.3.2.1).
✓Interest may be abated for unreasonable IRS error or delay in ministerial or managerial acts; penalties from erroneous written IRS advice must be abated (IRC 6404(e), (f)).
▸On this page · 6 sections
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Traps that cost marks
→Assuming the taxpayer must personally attend.
→Assuming the privilege covers criminal matters or return preparation.
→Thinking the burden shifts automatically.
→Assuming the taxpayer controls the location.
→Petitioning the Tax Court before a notice of deficiency.
→Requiring a formal protest for every disputed amount, however small.
→Confusing the 90-day letter with the 30-day letter.
→Using the $25,000 Appeals protest threshold.
Why it matters on the exam
Examination and appeals questions follow the life of a disputed return, so learn the sequence and the deadline at each step. Penalty relief questions ask which ground fits the facts. The arithmetic is mostly the failure-to-file and failure-to-pay interaction.
The IRS may examine books and records and summon witnesses under IRC 7602, at a time and place that is reasonable under the circumstances (IRC 7605(a)).
During the examination
•Correspondence, office and field exams: a CP2000 is an information-matching proposal; if the taxpayer agrees, sign and return the response and pay or arrange payment. No amended return is needed.
•Interviews: the representative may attend alone unless the taxpayer is summoned. Either side may audio record with 10 days' notice.
•Privilege: EAs share the section 7525 privilege for tax advice in noncriminal matters.
•Burden of proof: credible evidence plus records, substantiation and cooperation shifts the burden to the IRS on factual issues; the IRS bears the burden of production for individual penalties.
•Statute extensions: Form 872 extends to a fixed date; taxpayers may refuse or limit it, and refusal usually brings a prompt notice of deficiency (IRC 6501(c)(4)).
•Fast Track Settlement: an Appeals mediator helps resolve issues while the case stays in Examination; regular Appeals rights remain.
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