Question 1

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

Accepted Answer

A) Discriminant Function System selected audit 
B) Taxpayer Compliance Measurement Program selected audit 
C) Correspondence audit 
D) Office audit 
E) None of the above 
A) Discriminant Function System selected audit 
B) Taxpayer Compliance Measurement Program selected audit 
C) Correspondence audit 
D) Office audit 
E) None of the above

Question 3

The IRS has seven regional offices.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is the best definition of tax planning?

Accepted Answer

A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of the above are considered tax planning 
A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of the above are considered tax planning

Question 5

Beginning in 2011,all paid tax return preparers must sign up with the IRS,pay a fee,and obtain a preparer tax identification number.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a possible result of an audit by the IRS?

Accepted Answer

A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of the above are possible results 
A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of the above are possible results

Question 7

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 8

If a taxpayer has too much income tax withheld from his salary during the tax year,the IRS will pay interest on the excess amount.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a type of IRS audit?

Accepted Answer

A) Office audit 
B) Field audit 
C) Correspondence audit 
D) Operational audit 
E) All of the above are types of IRS audits 
A) Office audit 
B) Field audit 
C) Correspondence audit 
D) Operational audit 
E) All of the above are types of IRS audits

Question 10

The IRS may issue a summons for a taxpayer's bank account records.

Accepted Answer

A) True 
 B)False

Question 11

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

Accepted Answer

A) Enrolled Agents 
B) Registered Tax Return Preparers 
C) Attorneys 
D) CPAs 
A) Enrolled Agents 
B) Registered Tax Return Preparers 
C) Attorneys 
D) CPAs

Question 12

The tax law contains a penalty for filing a "frivolous" tax return.

Accepted Answer

A) True 
 B)False

Question 13

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following will not affect the statute of limitations on a tax return?

Accepted Answer

A) Omission of a significant amount of gross income 
B) Mutual consent of the IRS and the taxpayer 
C) Failure to pay the tax due with the tax return 
D) Failure to file a tax return 
E) Filing a fraudulent tax return 
A) Omission of a significant amount of gross income 
B) Mutual consent of the IRS and the taxpayer 
C) Failure to pay the tax due with the tax return 
D) Failure to file a tax return 
E) Filing a fraudulent tax return

Question 15

What is the difference between tax avoidance and tax evasion?

Accepted Answer

Tax avoidance consists of usin

Question 16

An "office audit" is an audit in which the revenue agent visits the taxpayer's office.

Accepted Answer

A) True 
 B)False

Question 17

If a taxpayer makes all of his income from his job and various investments,which office of the IRS would likely investigate his return if it were audited?

Accepted Answer

A) Wage & Investment Division W&I) 
B) Large & Midsize Business Office 
C) Small Business Office 
D) Criminal Investigation Office 
E) None of the above offices would perform the audit 
A) Wage & Investment Division W&I) 
B) Large & Midsize Business Office 
C) Small Business Office 
D) Criminal Investigation Office 
E) None of the above offices would perform the audit

Question 18

Interest paid on an underpayment of taxes other than an underpayment of estimated taxes)is not subject to the consumer interest limitation.

Accepted Answer

A) True 
 B)False

Question 19

Kendall is considering the purchase of a home.He has saved $20,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan.Kendall currently rents an apartment for $900 per month and does not anticipate an increase in his monthly income.He wants to make sure that the monthly payment on his new home does not exceed $900,after-tax.Kendall has a marginal tax rate of 28 percent and an average tax rate of 22 percent.Assuming the monthly mortgage payment before-tax)will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest,what is the maximum amount that Kendall can spend on a new home?

Accepted Answer

$145,000,determined as $20,000 down paym

Question 20

A tax return with a large casualty loss would be most likely selected for audit through:

Accepted Answer

A) The Discriminant Function System 
B) Information from an informant 
C) Information from another governmental agency 
D) The Taxpayer Compliance Measurement Program 
E) None of the above 
A) The Discriminant Function System 
B) Information from an informant 
C) Information from another governmental agency 
D) The Taxpayer Compliance Measurement Program 
E) None of the above

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

The IRS has seven regional offices.

Which of the following is the best definition of tax planning?

Beginning in 2011,all paid tax return preparers must sign up with the IRS,pay a fee,and obtain a preparer tax identification number.

Which of the following is not a possible result of an audit by the IRS?

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

If a taxpayer has too much income tax withheld from his salary during the tax year,the IRS will pay interest on the excess amount.

Which of the following is not a type of IRS audit?

The IRS may issue a summons for a taxpayer's bank account records.

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

The tax law contains a penalty for filing a "frivolous" tax return.

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

Which of the following will not affect the statute of limitations on a tax return?

What is the difference between tax avoidance and tax evasion?

An "office audit" is an audit in which the revenue agent visits the taxpayer's office.

If a taxpayer makes all of his income from his job and various investments,which office of the IRS would likely investigate his return if it were audited?

Interest paid on an underpayment of taxes other than an underpayment of estimated taxes)is not subject to the consumer interest limitation.

A tax return with a large casualty loss would be most likely selected for audit through:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Filters

Exam 12: Tax Administration and Tax Planning

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

The IRS has seven regional offices.

Which of the following is the best definition of tax planning?

Beginning in 2011,all paid tax return preparers must sign up with the IRS,pay a fee,and obtain a preparer tax identification number.

Which of the following is not a possible result of an audit by the IRS?

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

If a taxpayer has too much income tax withheld from his salary during the tax year,the IRS will pay interest on the excess amount.

Which of the following is not a type of IRS audit?

The IRS may issue a summons for a taxpayer's bank account records.

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

The tax law contains a penalty for filing a "frivolous" tax return.

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

Which of the following will not affect the statute of limitations on a tax return?

What is the difference between tax avoidance and tax evasion?

An "office audit" is an audit in which the revenue agent visits the taxpayer's office.

If a taxpayer makes all of his income from his job and various investments,which office of the IRS would likely investigate his return if it were audited?

Interest paid on an underpayment of taxes other than an underpayment of estimated taxes)is not subject to the consumer interest limitation.

A tax return with a large casualty loss would be most likely selected for audit through:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Filters