Exam 12: Tax Administration and Tax Planning

For each of the following situations, indicate the nature and amount of the penalty that could be imposed. (The penalties include both tax practitioner penalties and taxpayer penalties). Description of the Penalty a. Kyle files his tax return on the original due date and pays the entire balance of tax due of \ 5,000 . He did not pay any estimated tax during the year and had no withholding. His prior year tax \_\_\_ return showed a tax liability of \ 12,000 (do not calculate the penalty). b. Drew writes a check for \ 300 in payment of his income taxes. Drew knows he does not have sufficient funds in his account \_\_\_ to cover the check. c. Enrique has a \ 10,000 tax deficiency on his 2017 tax return due to civil fraud. \_\_\_ d. Vladimir prepares a tax return for Oscar but does \_\_\_ not keep a copy of the tax return. e. Friscilla, a self-employed accountant, prepares a tax return for Billy. She signs the return but does not include her preparer tax \_\_\_ identi fication number on the tax return as required. f. Manny prepares a tax return for his client who requests that Manny disregard a current tax law which would increase his tax tax liability by \ 17,000 . Manny agrees to do so since he \_\_\_ oes not want to lose this important client. ​

The Discriminant Function System is designed to identify tax returns that may contain errors.

Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be?

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?

Which of the following is false regarding the return audit process?

Patricia has taxable income of $40,000 on which she pays income tax of $4,664. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $440. What is Patricia's marginal tax rate?

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

Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.

If a calendar year taxpayer's 2019 individual income tax return is mailed on June 15, 2020, the statute of limitations would normally run out on:

Which of the following statements is the most correct regarding The Taxpayer Bill of Rights?

Linda filed her individual income tax return on its due date but failed to pay $1,000 in taxes that were due with the return. Linda promptly paid the taxes upon receipt of a notice and demand for payment. If Linda pays the taxes exactly 5 months late, calculate the amount of her failure-to-pay penalty.

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

Which of the following is not a characteristic around which tax planning is organized:

Tax evasion involves the use of illegal methods to reduce or avoid income tax.

Tax return preparers must enter the annual filing season program (AFSP).

List three different ways that a tax return may be selected for an audit.

Tax returns are processed at the IRS national office in Washington, DC.

Mike deducts a bad debt on his 2019 tax return. How many years is the statute of limitations for the bad debt deduction?

The Wage and Investment Office of the IRS handles small business taxpayers.