Exam 17: Tax Practice and Ethics

Which statement is correct as to the conduct of IRS income tax audits?

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. -Fraudulent failure to file a tax return.

Concerning the penalty for civil tax fraud:

If the taxpayer refuses to pay an assessed tax, the IRS can seize taxpayer property under the ____________________ process.

Circular 230 requires that a paid tax preparer apply a thorough quality review system in preparing tax returns for her clients.

A negligence penalty is assessed when the taxpayer is found to have not made a reasonable attempt to comply with the tax law.

In taking a dispute to the Appeals Division, a written protest is required of the taxpayer when the proposed deficiency exceeds $____________________.

The tax ____________________ workpapers prepared as part of an independent financial audit are not privileged communications that can be kept confidential from an IRS subpoena.

The IRS is a subsidiary agency of the Department of the ____________________.

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ____________________ for the taxpayer's position.

Quon filed an amended return, claiming a $100,000 refund. The IRS disallowed the refund, and it can assess a penalty if there was no reasonable basis of support for the refund claim, in the amount of ____________________% of the disallowed amount.

The Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Jenny prepared Steve's income tax returns for no compensation for 2013 and 2014. Jenny is Steve's mother. In 2016, the IRS notifies Steve that it will audit his returns for 2013 and 2014. Jenny cannot represent Steve during the audit of the returns, as she is not a "registered tax return preparer."

The Statements on Standards for Tax Services are issued by the:

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

When a tax issue is taken to court, the burden of proof is on the IRS to show that its audit adjustments are correct.

Lola, a calendar year taxpayer subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $70,000. The IRS later valued the gift at $100,000. The applicable undervaluation penalty is:

In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?

About ____________________% of all Forms 1040 are audited each year. The rate is about ____________________% for large corporations.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. -Substantial understatement of a tax.