A taxpayer brings you a Letter 525 dated April 14, 2026, attaching a Form 4549 proposing $18,400 in additional 2024 tax plus a $3,680 accuracy-related penalty. She has 30 days to respond. She also brings a CP-2000 for 2023 proposing $2,100 of unreported brokerage income, dated three weeks earlier. Different notices, different procedures, different deadlines, and one shared question: what does she do next?
Congress gave the IRS sweeping investigative reach because self-assessment only works if the Service can verify what taxpayers report. Think of these three statutes as the legal toolbox: the right to look, the right to ask, and the right to serve.
- §7601 directs the Secretary to canvass internal revenue districts and inquire after every person liable to tax. This is the broad mandate to look for noncompliance.
- §7602(a) authorizes the IRS to examine any books, papers, records, or other data relevant to ascertaining the correctness of any return, to summon the taxpayer (or any third party with...
Common mistakes
- Treating a CP-2000 as an audit for §7605(b) purposes. CP-2000 is a matching notice, not an examination. A later field audit of the same year is not a second inspection. Trap answer: "the IRS cannot examine 2024 because a CP-2000 already issued."
- Assuming §7525 covers criminal cases. §7525 dies the moment a matter becomes criminal. Communications previously privileged can be summoned in a grand jury proceeding. Trap answer: "EA can refuse the IRS-CI summons under §7525."
- Missing the 30-day letter and assuming Tax Court is lost. The 30-day letter forfeits Appeals, not Tax Court. The 90-day letter still arrives. Trap answer: "Failure to respond to Letter 525 ends all rights."
Bottom line
- IRC §7602 grants the IRS authority to examine records, summon witnesses, and take testimony; §7605 caps inspection to one per year at a reasonable time and place.
- IRC §7525 privilege covers tax advice in NONcriminal federal tax matters only; it excludes criminal matters, state proceedings, and tax-shelter promotion.
- §6001 requires records substantiating every entry; §274(d) demands contemporaneous records for travel, meals, gifts, and listed property, with no Cohan estimation allowed.
- CP-2000 is the AUR document-matching notice, not a formal examination; respond within 30 days agreeing, disagreeing, or partially agreeing. CP-3219A is its statutory-notice analog.
Exam shortcut
"CP-2000 = matching, RAR = examining." Different procedural buckets, both share a 30-day response clock, both can dead-end in a statutory notice of deficiency. "30-day = Appeals door, 90-day = Tax Court door." Miss the 30-day letter and you still get the 90-day letter. Miss the 90-day letter and you only get refund litigation (pay first, sue later).
The full lesson (about 3,896 words, 26 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 3
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