Practice, ethics, and professional duties
The Procedure Clock
Assessment runs 3, 6, or unlimited; collection runs 10 from assessment; and only the Tax Court lets you fight before you pay.
How the exam words it
- -The stem gives reported versus omitted gross income and asks how long the IRS has to assess.
- -It gives a balance due and the months late and asks for the failure-to-file and failure-to-pay penalties.
- -It alleges negligence or fraud and asks whether the 20 percent or 75 percent penalty applies.
- -A 90-day letter is issued and it asks which court hears the case without prepayment.
The playbook
- 1Pick the assessment clock: 3 years generally, 6 years if more than 25 percent of gross income is omitted, unlimited for fraud or a missing return, then 10 years to collect from the assessment date.
- 2Stack the late penalties: 5 percent per month to file and 0.5 percent per month to pay, but the file penalty is reduced by the pay penalty in overlapping months, so the combined first-month rate is 5 percent.
- 3Grade the fault: negligence or a substantial understatement draws 20 percent; fraud draws 75 percent, and the two never stack on the same dollars.
- 4For the forum, only the Tax Court hears a case without prepaying; District Court and the Court of Federal Claims require pay-first then sue for refund.
The trap
Triggering the 6-year statute with overstated deductions. The 6-year rule is keyed to omitted gross income, not to understated tax generally.
How the exam varies it
The same pattern, re-skinned along these axes:
Assessment clock versus collection clock versus penalty computationWhich penalty: failure-to-file, failure-to-pay, accuracy, or fraudWhich court, and whether prepayment is required
Drill this pattern
8 questions of The Procedure Clock from across the AUD topics. Clear it by getting 5 right with a streak of 3.