SEE Part 3 specific areas of representation
Specific Areas of Representation is worth 20 of the 85 scored questions on SEE Part 3 (about 24%). It covers clients who owe tax (collection), are being examined (audits), disagree (appeals) or want penalties or interest removed (abatement). Most questions are about a sequence: which notice, which form, which deadline.
The collection process
| Stage | What happens | Your client’s options |
|---|---|---|
| Bill and notices | Balance due notices after assessment | Pay, request more time, set up a payment plan |
| Notice of Federal Tax Lien | Public claim against all the taxpayer’s property | CDP hearing on the lien filing; discharge, subordination or withdrawal requests |
| Notice of intent to levy | Final notice before seizure of property or wages | CDP hearing (Form 12153) within 30 days |
| Levy and seizure | Wages, bank accounts, property taken | Release of levy for hardship; CAP appeal |
The collection statute expiration date (CSED) is generally 10 years from assessment. Some actions suspend it, including a pending offer in compromise, a pending installment agreement request and a CDP hearing.
Collection Due Process versus the Collection Appeals Program
| CDP | CAP | |
|---|---|---|
| Request | Form 12153 | Form 9423 (or orally for some actions) |
| Deadline | Date in the notice — 30 days for a proposed levy | Quick; before or after action |
| Covers | Lien filing, proposed levy | Liens, levies, seizures, denied or terminated installment agreements |
| Tax Court review | Yes | No |
| Late request | Equivalent hearing within one year, no court review | — |
If a client might want to take the outcome to court, the CDP request must be on time.
Resolving a balance due
- Extension of time to pay — Form 1127, for undue hardship.
- Installment agreement — Form 9465 or online; the IRS may ask for a collection information statement (Form 433-F, 433-A or 433-B). A partial payment installment agreement pays less than the full balance before the CSED.
- Offer in compromise — Form 656 with Form 433-A (OIC) and/or 433-B (OIC). Three grounds: doubt as to collectibility, doubt as to liability (Form 656-L) and effective tax administration. An application fee and initial payment are required unless the taxpayer qualifies as low-income. The IRS measures reasonable collection potential against the Collection Financial Standards for allowable living expenses.
- Currently not collectible — collection is paused because paying would prevent the taxpayer meeting basic living expenses. Interest and penalties continue, refunds are still offset, the CSED keeps running, and the account can be reactivated if income rises.
Other collection topics
- Trust fund recovery penalty (§6672) — equal to the unpaid withheld income and employee FICA taxes, assessed personally against people who were responsible for paying them and willfully failed to.
- Passport certification — a seriously delinquent tax debt can be certified to the State Department, which generally will not issue or renew a passport and may revoke one.
- Collection summons — compels testimony or records from the taxpayer or a third party.
- Decedents — the executor acts for the estate; Form 56 notifies the IRS of the fiduciary.
- Refund claims — Form 1040-X or Form 843, within the refund statute.
Examinations
- The notice. Correspondence audits by mail; office and field audits in person. A CP2000 is not an audit — it is an automated under-reporting proposal comparing the return with information returns, and the taxpayer can agree or respond.
- The IRS’s authority to examine books and records and to fix a reasonable time and place for the examination.
- The practitioner privilege (§7525) — confidentiality similar to attorney-client privilege for tax advice from a federally authorised tax practitioner, but only in noncriminal matters, and not for written communications promoting tax shelters.
- The revenue agent’s report (RAR) with a 30-day letter: agree, or file a protest and go to Appeals.
- Burden of proof is generally on the taxpayer, who must substantiate entries on the return.
- Audit reconsideration — reopening a closed examination when the taxpayer has new information.
Appeals
The IRS Independent Office of Appeals settles disputes without litigation, weighing the hazards of litigation. Larger cases need a formal written protest stating the disputed adjustments, facts and law. Enrolled agents may represent clients at Appeals conferences.
If the case does not settle, the IRS issues a statutory notice of deficiency — the 90-day letter (150 days if addressed to someone outside the US). That is the taxpayer’s ticket to the Tax Court without paying first.
Penalty and interest abatement
| Ground | Applies to |
|---|---|
| Reasonable cause | Most failure-to-file, failure-to-pay and deposit penalties |
| First-time abatement | Administrative waiver for a clean prior compliance history |
| IRS error / written advice | Penalties caused by incorrect written IRS advice |
| Ministerial or managerial act (§6404(e)) | Interest attributable to unreasonable IRS delay |
Interest on tax is generally not abated for reasonable cause; it falls away only when the underlying penalty or tax is reduced, or under the specific interest abatement rules. Abatement is requested by letter, phone or Form 843.
Sample questions
Question 1. Appeals denied a client's request for an installment agreement through the Collection Appeals Program. The client now wants the Tax Court to review that decision. What is the result?
- A. The client can petition the Tax Court within 30 days
- B. The client can petition the Tax Court within 90 days
- C. CAP decisions cannot be reviewed by the Tax Court
- D. The client must first pay the balance, then petition the Tax Court
Show answer
Answer: C
Decisions under the Collection Appeals Program are final and cannot be taken to the Tax Court. Judicial review is available only after a timely Collection Due Process hearing. That is why a timely Form 12153 matters when a court challenge might be needed.
Question 2. After an examination, a client receives a revenue agent's report with a 30-day letter and disagrees with the adjustments. What is the usual next step to reach Appeals?
- A. File a protest requesting an Appeals conference
- B. File a Tax Court petition immediately
- C. File Form 12153 for a Collection Due Process hearing
- D. Submit Form 656-L
Show answer
Answer: A
The 30-day letter gives the taxpayer the chance to request an Appeals conference, generally by filing a written protest for larger amounts. Filing a Tax Court petition requires a notice of deficiency first, a CDP request applies to liens and levies, and an offer based on doubt as to liability is not the normal route for an open examination.
Question 3. Which of the following is TRUE about an account placed in currently not collectible status?
- A. Interest and penalties stop accruing
- B. Future refunds can still be offset against the balance
- C. The collection statute is suspended
- D. The debt is forgiven after one year
Show answer
Answer: B
Currently not collectible status pauses active collection, but penalties and interest keep accruing, refunds can still be offset against the debt and the collection statute keeps running. The debt is not forgiven, and the IRS can reactivate collection if the taxpayer’s finances improve.