Exam 18: The Tax Compliance Process

Mr.Braco is an enrolled agent who prepares tax returns for a living.In preparing Mr.and Mrs.Colter's Form 1040,Mr.Braco claimed a deduction based on an unreasonable legal position.Mr.Braco's compensation for the return was $3,800.What is the consequence to Mr.Braco if the IRS disallows the deduction?

If a taxpayer has insufficient financial means to pay a deficiency,the IRS may accept the taxpayer's offer in compromise to settle the deficiency for a lesser amount.

A special agent is assigned to a tax investigation to determine if the government has enough evidence to indict the taxpayer for criminal fraud.

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule if that person enjoyed significant financial benefit from taxable income omitted from the return.

Mr.Boyd is a bookkeeper for a local auto repair company.Several years ago,he began to prepare federal income tax returns for his friends and relatives and has developed this sideline into a profitable business.Which of the following statements is false?

The IRS determined that Ernie Bledsoe underpaid his 2017 income tax by $11,200.Ernie's Form 1040 for that year reported an income tax liability of $31,800,so his correct 2017 income tax was $43,000 ($11,200 deficiency + $31,800 reported tax).Compute Ernie's penalty for a substantial understatement of income tax.

Only the government may appeal a tax case to the U.S.Supreme Court.

Who of the following cannot represent a taxpayer during an interview with the IRS?