Exam 17: Tax Practice and Ethics

Maria and Miguel Blanco are in the midst of negotiating a divorce. Because both parties are unwilling to share any current financial information, their joint Form 1040 for 2014 is not filed until October 31, 2015, when the respective divorce attorneys forced them to cooperate. The Blancos should not be subject to any Federal late-filing penalties, because the reasonable cause exception applies to their family discord.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Fraudulent failure to file a tax return.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Substantial understatement of tax liability.

Vera is audited by the IRS for three tax years. Her returns were prepared by the following parties, to each of whom Vera paid a professional fee. Vera wants help in appearing before the IRS Revenue Agent for the audit. Which of the following statements is correct?

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Negligence.

Some taxpayers must make quarterly estimated payments of their income tax. Describe the structure of these requirements. In your answer, include both corporate and non-corporate taxpayers.

In the context of civil tax fraud litigation, the burden of proof is on the taxpayer to show the court by a "preponderance of the evidence" that he or she was not acting with an intent to evade a tax.

Faye, a CPA, is preparing Judith's tax return. Last year, Judith's return included dividend income from the P&G Company. This year, Judith reports no such income. Faye should inquire as to whether Judith sold the P&G stock during the year.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Aiding in preparing an improper tax return.

Ling has hired CPA Gracie to complete this year's Form 1040. Ling uses online accounting software to keep the books for her interior design sole proprietorship. Ling tells Gracie that a $5,000 amount for business supplies is "close enough" to report for this year's deduction. Gracie can use this estimate in completing the Form 1040.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Improper refund claim.

The tax penalty imposed on appraisers:

The tax professional can do more than just tax compliance work. He or she can work with the client in consultation over the strategy and tactics of dealing with a Federal tax audit.

CPA Shearer is required by AICPA tax ethics rules to inform her client Martinez of significant changes in the Federal income tax laws.

Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

The penalty for substantial understatement of tax liability does not apply if:

The IRS employs about 90,000 personnel, making it one of the largest Federal agencies.

For purposes of tax penalties, a VITA volunteer is not classified as a tax return ____________________.

Mikel prepared for compensation a Federal income tax return for Mona. Mona's return included an aggressive interpretation of the rules concerning the home office deduction. Mikel is not liable for a preparer penalty for taking an unreasonable tax return position if:

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Failure to pay a tax.