Exam 18: The Tax Compliance Process

Gretchen's 2017 tax return, due April 17, 2018, was filed on July 9, 2018. Her tax due with the return was $1,200. Gretchen owes a late filing penalty of $180.

A professional tax return preparer must attach his or her signature and identifying number to each return prepared.

If a taxpayer has insufficient financial means to pay a deficiency, the IRS may make an offer in compromise to settle for a lesser amount.

Tony Curtis filed her 2017 income tax return on May 2, 2018. Which of the following statements is false?

Which of the following statements about the tax litigation process is false?

Mr and Mrs Latt use a fiscal year ending October 31 as the taxable year for filing their joint Form 1040. a. What is the last date on which the Latts can apply for an automatic extension of time to file their return for fiscal year ending October 31, 2018? b. Assuming that the Latts make a timely application, what is the extended due date for the return?

The fact that a taxpayer receives a refund check indicates that the IRS is satisfied with the accuracy of the taxpayer's return.

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule unless that person was forced to sign the tax return under duress.

Employees who deliberately have excess income tax withheld from their salaries in order to receive a tax refund are making an interest-free loan of the excess withholding to the government.

Dela filed her unextended 2017 Form 1040 on November 2, 2018, and had no reasonable cause for the delinquency. The return showed a $22,840 balance of tax due. Compute Ms. Dela's late-filing and late-payment penalty.

Which type of audit can be handled entirely by telephone or through the mail?

Mr Boyd is a bookkeeper for a local auto repair company. Several years ago, he began to prepare federal income tax returns for his friends and relatives and has developed this sideline into a profitable business. Which of the following statements is false?

Mr Braco is an enrolled agent who prepares tax returns for a living. In preparing Mr and Mrs Colter's Form 1040, Mr Braco claimed a deduction based on an unreasonable legal position. Mr Braco's compensation for the return was $3,800. What is the consequence to Mr Braco if the IRS disallows the deduction?

According to the Taxpayer Bill of Rights, a taxpayer has the right to both privacy and confidentiality during the course of an IRS audit.

The IRS who audited Mr Kodak's 2015 Form 1040 assessed an $87,400 deficiency. If the agent believes that the entire deficiency was caused by Mr Kodak's willful attempt to cheat the government, compute the resulting civil fraud penalty. 

A taxpayer who wants a jury trial must pay the tax deficiency and then sue the government for a refund in U.S. District Court.

Which of the following statements about the outcome of an IRS audit is false?

The revenue agent who audited Mr and Mrs Wilke's 2015 Form 1040 assessed a $40,200 deficiency and concluded that $13,900 of the deficiency resulted from Mr Wilke's deliberate disregard of the tax rules concerning business entertainment expense. The remaining deficiency resulted from various errors caused by confusing instructions on the tax forms. Compute the negligence penalty that the agent can impose.

Which of the following should increase the likelihood that Mr and Mrs McNut's Form 1040 will be selected for audit by the IRS?

Mr and Mrs Ibrah filed their 2017 Form 1040 on June 6, 2018. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2017 tax?