Question 1

What is the difference between tax avoidance and tax evasion?

Accepted Answer

Tax avoidance consists of usin

Question 2

The IRS determined that John underpaid his 2017 tax liability by $6,000 due to negligence. In 2019, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS.
a.Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation.
b.What part of the deficiency, income taxes, interest, and penalty, is deductible by John on his current tax return? Explain.

Accepted Answer

The answer of The IRS determined that John underpaid his...

Question 3

Stephanie has taxable income of $48,200 and a tax liability of $6,468. If Stephanie's income increases by $4,000, her tax liability will be $7,348.
a. What is her average tax rate on the $48,200 of income?
b. What is her marginal tax rate?

Accepted Answer

a. 13.42%, calculate

Question 4

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Accepted Answer

A) True 
 B)False

Question 5

Tax penalties are not deductible by taxpayers.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is the most common type of audit for an individual taxpayer?

Accepted Answer

A) Office audit 
B) Telephone audit 
C) Correspondence audit 
D) Field audit 
E) None of these 
A) Office audit 
B) Telephone audit 
C) Correspondence audit 
D) Field audit 
E) None of these

Question 7

Which of the following is the best definition of tax planning?

Accepted Answer

A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of these is considered tax planning 
A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of these is considered tax planning

Question 8

Which of the following is not a possible result of an audit by the IRS?

Accepted Answer

A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of these are possible results 
A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of these are possible results

Question 9

Which of the following is not a preparer penalty?

Accepted Answer

A) Tax preparers may be assessed a penalty for failing to give the taxpayer the preparer's workpapers. 
B) Tax preparers may be assessed a penalty for failing to keep a copy of the prepared return. 
C) Tax preparers may be assessed a penalty for endorsing or cashing a refund check issued to a taxpayer. 
D) Tax preparers may be assessed a penalty for failing to sign a tax return. 
A) Tax preparers may be assessed a penalty for failing to give the taxpayer the preparer's workpapers. 
B) Tax preparers may be assessed a penalty for failing to keep a copy of the prepared return. 
C) Tax preparers may be assessed a penalty for endorsing or cashing a refund check issued to a taxpayer. 
D) Tax preparers may be assessed a penalty for failing to sign a tax return.

Question 10

What are the requirements that an unenrolled preparer needs to do in order to participate in the Annual Filing Season Program?

Accepted Answer

In order to participate in the Annual Fi

Question 11

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

Accepted Answer

A) True 
 B)False

Question 12

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

Accepted Answer

A) True 
 B)False

Question 13

At which of the following IRS locations are tax returns processed?

Accepted Answer

A) Regional offices 
B) IRS Campus Processing Sites 
C) Local offices 
D) National office 
E) None of these 
A) Regional offices 
B) IRS Campus Processing Sites 
C) Local offices 
D) National office 
E) None of these

Question 14

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

Accepted Answer

A) True 
 B)False

Question 15

A "correspondence audit" by the IRS is conducted through the mail.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the calculation of the failure-to-file penalties?

Accepted Answer

A) Half of 1 percent (0.5 percent) of the tax due for each month late, limited to 25 percent of the taxes due 
B) 5 percent of the tax due for each quarter late, limited to 25 percent of the taxes due 
C) 5 percent of the tax due for each month or part of the month that it is late, limited to 25 percent of the taxes due 
D) 20 percent of the tax due 
E) 5 percent of the tax due 
A) Half of 1 percent (0.5 percent) of the tax due for each month late, limited to 25 percent of the taxes due 
B) 5 percent of the tax due for each quarter late, limited to 25 percent of the taxes due 
C) 5 percent of the tax due for each month or part of the month that it is late, limited to 25 percent of the taxes due 
D) 20 percent of the tax due 
E) 5 percent of the tax due

Question 17

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

Accepted Answer

A) To provide the IRS with additional enforcement powers 
B) To grant to taxpayers the right to choose the time and method of payment of delinquent taxes 
C) To inform taxpayers of their rights in dealing with the IRS 
D) To inform taxpayers of the methods for properly completing their income tax returns 
E) None of these 
A) To provide the IRS with additional enforcement powers 
B) To grant to taxpayers the right to choose the time and method of payment of delinquent taxes 
C) To inform taxpayers of their rights in dealing with the IRS 
D) To inform taxpayers of the methods for properly completing their income tax returns 
E) None of these

Question 18

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

Accepted Answer

A) True 
 B)False

Question 19

Kendall is considering the purchase of a home. He has saved $22,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan. Kendall currently rents an apartment for $1,200 per month and does not anticipate an increase in his monthly income. He wants to make sure that the monthly payment on his new home does not exceed $1,200, after-tax. Kendall has a marginal tax rate of 25 percent and an average tax rate of 22 percent. Assuming the monthly mortgage payment (before-tax) will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest, what is the maximum amount that Kendall can spend on a new home?

Accepted Answer

$182,000, determined as $22,000 down pay

Question 20

What type of audit (office, field or correspondence) is demonstrated in the following examples?
a. An IRS agent views Microsoft's books and records at the Microsoft headquarters.
b. Susie receives a letter from the IRS asking her to provide documentation to support her charitable contributions on her tax return filed in the prior year.
c. Mr. and Mrs. John Doe are asked to bring their supporting documents to the downtown IRS office so that an IRS agent may review their tax return which was filed 2 years ago.

Accepted Answer

a. Field audit
b. Co

What is the difference between tax avoidance and tax evasion?

Stephanie has taxable income of $48,200 and a tax liability of $6,468. If Stephanie's income increases by $4,000, her tax liability will be $7,348. a. What is her average tax rate on the $48,200 of income? b. What is her marginal tax rate?

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Tax penalties are not deductible by taxpayers.

Which of the following is the most common type of audit for an individual taxpayer?

Which of the following is the best definition of tax planning?

Which of the following is not a possible result of an audit by the IRS?

Which of the following is not a preparer penalty?

What are the requirements that an unenrolled preparer needs to do in order to participate in the Annual Filing Season Program?

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

At which of the following IRS locations are tax returns processed?

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

A "correspondence audit" by the IRS is conducted through the mail.

Which of the following is the calculation of the failure-to-file penalties?

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Filters

Exam 12: Tax Administration and Tax Planning

What is the difference between tax avoidance and tax evasion?

Stephanie has taxable income of $48,200 and a tax liability of $6,468. If Stephanie's income increases by $4,000, her tax liability will be $7,348. a. What is her average tax rate on the $48,200 of income? b. What is her marginal tax rate?

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Tax penalties are not deductible by taxpayers.

Which of the following is the most common type of audit for an individual taxpayer?

Which of the following is the best definition of tax planning?

Which of the following is not a possible result of an audit by the IRS?

Which of the following is not a preparer penalty?

What are the requirements that an unenrolled preparer needs to do in order to participate in the Annual Filing Season Program?

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

At which of the following IRS locations are tax returns processed?

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

A "correspondence audit" by the IRS is conducted through the mail.

Which of the following is the calculation of the failure-to-file penalties?

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Filters