Exam 15: Administrative Procedures

A taxpayer's return is audited and additional taxes are assessed. The IRS also asserts that a negligence penalty should be assessed. The taxpayer concurs with the additional $15,000 tax liability; $7,000 of this amount is attributable to negligence. What is the amount of the penalty for negligence?

The innocent spouse relief provision from tax liability covers all of the following except

The "Statement on Practice in the Field of Federal Income Taxation" includes all of the following areas of mutual competence except

A six-year statute of limitation rule applies if the taxpayer

Identify which of the following statements is false.

Tax return preparers can be penalized for the following activities except

The IRS will issue a 90-day letter (a Statutory Notice of Deficiency) if the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter.

Your client wants to avoid any penalty for underpayment of estimated taxes by making timely deposits. Determine the amount of the minimum quarterly estimated tax payments required to avoid the penalty. Assume your client's adjusted gross income last year was $140,000.

Paul's tax liability for last year was $30,000. Paul projects that his tax for this year will be $40,000. Paul is self-employed and, thus, will have no withholding. His AGI for last year did not exceed $150,000. How much estimated tax should Paul pay for this year to avoid the penalty for underpayment of estimated taxes?

Explain the four conditions that must be met in civil cases for the burden of proving any factual issue relevant to the determination of taxpayer liability to rest with the IRS.

Identify which of the following statements is false.

A taxpayer can automatically escape the penalty for underpayment of taxes by

Jayne and Jon jointly file a tax return this year. Jayne fraudulently reports two expenses on Schedule C: $2,000 and $2,500. The IRS audits the return, assesses a $1,050 deficiency, and begins collection efforts two years after the timely filing by Jayne and Jon. What must Jon do to be relieved of the $1,050 tax liability?

For innocent spouse relief to apply, five conditions must be met. Explain them.

The 90-day letter (Statutory Notice of Deficiency) gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

In which of the situations below will a taxpayer not be assessed interest on the tax remitted?

Latka Novatny gave you the following information to use in the preparation of his current year's tax return: Salary $120,000 Dividends 20,000 Itemized deductions 35,000 In addition, he received $40,000 from a relative for whom he had worked previously. You have researched whether the $40,000 should be classified as a gift or compensation and are confident that substantial authority exists for classifying it as a gift. What tax compliance issues should you consider in deciding whether to report or exclude the $40,000?

Identify which of the following statements is true.

One of your corporate clients has recently filed for bankruptcy. In the course of the proceedings, you (a) prepare a plan of reorganization that alters the rights of preferred stockholders, (b) notify the company's creditors of an impending bulk transfer of the company's assets, (c) review IRS secured claims against these assets, (d) restructure the company's debt by reducing its principal amount and extending its maturity, and (e) advise the bankruptcy court as to how this restructuring will impact the company's NOLs. Which of these activities, if any, constitutes the unauthorized practice of law?

Lucy files her current-year individual income tax return on August 5 of the following year, without having requested an extension. Her total tax is $10,000. Lucy pays $7,500 in a timely manner and the $2,500 balance when she files the return. Lucy did not engage in fraud and has no reasonable cause for late filing and late payment. Compute Lucy's penalties.