Exam 17: Tax Practice and Ethics

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. -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 need be used. -Failure to pay a tax that is due.

In a criminal tax fraud case, the burden is on the taxpayer to show that he or she was innocent beyond the shadow of any reasonable doubt.

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.

Jenny prepared Steve's income tax returns for no compensation for 2017 and 2018. She is Steve's mother. In 2020, the IRS notifies Steve that it will audit his returns for 2017 and 2018. Jenny cannot represent Steve during the audit of the returns, because she is not a registered tax return preparer.

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

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 need be used. -Failure to deposit withholding tax.

The AICPA's Statements on Standards for Tax Services SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

During an audit, the IRS might require that the taxpayer produce the________ that underlie the tax return data.

Michelle, a calendar year taxpayer subject to a 24% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $275,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

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

Fiona, a VITA volunteer for her college's tax clinic, is not a tax preparer as defined by the Code. Thus, Fiona is exempted from the Code's tax preparer penalties.

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 need be used. -Preparer penalty for reckless conduct.

In preparing a tax return, a CPA should verify to the penny every item of information submitted by a client about its deduction for repairs and maintenance.

The IRS can waive the penalty for a substantial understatement of a tax liability if the taxpayer shows__________for the position taken on the 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 need be used. -Preparer penalty for taking an unreasonable tax return position.

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.

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Compute the failure to pay and failure to file penalties for John, who filed his 2018 income tax return on December 14, 2019, paying the $10,000 amount due. On April 1, 2019, John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request. He has no reasonable cause for failing to file his return by October 15, or for failing to pay the tax that was due on April 15, 2019. John's failure to comply with the tax laws was not fraudulent.

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. -Improper refund claim.