Federal tax procedure

When a taxpayer contests an IRS assessment, the proper initial response is to file a formal protest and then pursue the administrative appeals process or bring the case before Tax Court, because this preserves the right to challenge the determination and follow due process. Paying without protest ignores the dispute, and suing the commissioner directly bypasses the statutory remedies, making those options incorrect.

IRS penalties for a late return without reasonable cause include a failure‑to‑file penalty of 5% of the unpaid tax per month, up to 25%, plus interest on the unpaid balance. No penalty applies only when an extension is filed; thus answer A is wrong. Option C mischaracterizes the consequence as merely losing a refund, which is not the statutory penalty.

Under federal tax law, the IRS generally has a three-year window from the later of the filing date or the return's due date to assess additional tax. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.

• !Option D is incorrect because the ten-year limit applies to the collection of tax after it has already been assessed, not the assessment itself.
• !No penalty applies only when an extension is filed; thus answer A is wrong.
• !Paying without protest ignores the dispute, and suing the commissioner directly bypasses the statutory remedies, making those options incorrect.

Answer each from memory — you'll see instantly whether you're right and why.

Run a focused 10-question mini-mock on Federal tax procedure and see it stick.