Question 1

An individual taxpayer is not required to give the IRS an explanation for extending the filing date for Form 1040.

Accepted Answer

A) True 
 B)False

Question 2

Mr.and Mrs.Dint filed their 2016 Form 1040 on January 28,2017.Assuming that the return does not contain any significant errors,what is the latest date that the IRS can assess any additional 2016 tax?

Accepted Answer

A) December 31,2019 
B) January 28,2020 
C) April 15,2020 
D) December 31,2020 
A) December 31,2019 
B) January 28,2020 
C) April 15,2020 
D) December 31,2020

Question 3

Linney Corporation,which uses a June 30 fiscal year end for tax purposes,requested an automatic six-month extension of time to file its return for FYE June 30,2017.It filed the return on February 18,2018.The revenue agent that examined the return suspects that Linney may have substantially underreported income for the year.Which of the following is false?

Accepted Answer

A) If the underreporting of income constitutes fraud,there is no statute of limitations,and the IRS can assess additional tax at any time. 
B) If the amount of unreported income exceeds 25% of the gross income reported on the return,the IRS has until February 18,2024,to assess additional tax. 
C) If the amount of unreported income is less than 25% of the gross income reported on the return and the return is not fraudulent,the IRS has until September 15,2020,to assess additional tax. 
D) None of the above is false. 
A) If the underreporting of income constitutes fraud,there is no statute of limitations,and the IRS can assess additional tax at any time. 
B) If the amount of unreported income exceeds 25% of the gross income reported on the return,the IRS has until February 18,2024,to assess additional tax. 
C) If the amount of unreported income is less than 25% of the gross income reported on the return and the return is not fraudulent,the IRS has until September 15,2020,to assess additional tax. 
D) None of the above is false.

Question 4

The IRS selects returns to audit that have the highest probability of generating additional revenue.

Accepted Answer

A) True 
 B)False

Question 5

Ms.Hepp filed her 2016 Form 1040 on February 19,2017.The return showed a $2,730 overpayment of tax,and Ms.Hepp received her refund check from the IRS on April 30.Which of the following statements is true?

Accepted Answer

A) The government will not pay Ms.Hepp any interest on her refund. 
B) The government must pay Ms.Hepp interest on her refund for the period from February 20 until April 30. 
C) The government must pay Mrs.Hepp interest on her refund for the period from April 16 until April 30. 
D) The government must pay Mrs.Hepp interest on her refund for the period from January 1 through April 30. 
A) The government will not pay Ms.Hepp any interest on her refund. 
B) The government must pay Ms.Hepp interest on her refund for the period from February 20 until April 30. 
C) The government must pay Mrs.Hepp interest on her refund for the period from April 16 until April 30. 
D) The government must pay Mrs.Hepp interest on her refund for the period from January 1 through April 30.

Question 6

During the audit of Mr.and Mrs.Luce's income tax return,the revenue agent concluded that the couple had claimed a $26,300 deduction that was not allowed by law.The improper deduction reduced the couple's tax by $9,205.The Luces' total tax deficiency was $13,890.
a.Compute the penalty that the IRS agent can impose if he concludes that the improper deduction was attributable to negligence.
b.Compute the penalty that the IRS agent can impose if he concludes that the improper deduction was attributable to fraud.

Accepted Answer

a.The negligence penalty would

Question 7

Taxpayers who can't complete their tax return by the filing date can request an automatic extension of time to file the return and pay any balance of tax due.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) The most probable outcome of an audit is that the taxpayer will be assessed a deficiency. 
B) An audit can't result in a refund of tax due to the taxpayer. 
C) If a revenue agent finds no mistakes on a return during an audit,the agent files a report concluding "no change." 
D) None of the above is false. 
A) The most probable outcome of an audit is that the taxpayer will be assessed a deficiency. 
B) An audit can't result in a refund of tax due to the taxpayer. 
C) If a revenue agent finds no mistakes on a return during an audit,the agent files a report concluding "no change." 
D) None of the above is false.

Question 9

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

Accepted Answer

A) Taxpayers can begin the litigation process in the U.S.Tax Court,a U.S.District Court,or the U.S.Court of Federal Claims. 
B) A taxpayer can receive a jury trial only in a U.S.District Court. 
C) If the government loses a tax case at the trial level,it can appeal the case to the U.S.Supreme Court. 
D) A decision in a tax case by the Supreme Court is final. 
A) Taxpayers can begin the litigation process in the U.S.Tax Court,a U.S.District Court,or the U.S.Court of Federal Claims. 
B) A taxpayer can receive a jury trial only in a U.S.District Court. 
C) If the government loses a tax case at the trial level,it can appeal the case to the U.S.Supreme Court. 
D) A decision in a tax case by the Supreme Court is final.

Question 10

The revenue agent who audited Mr.and Mrs.Vento's Form 1040 assessed a $49,200 tax deficiency.The Ventos strongly disagree with the result of the audit.What is their first step in contesting the result?

Accepted Answer

A) They may request that a different revenue agent conduct a second audit. 
B) They must appeal the result of the audit to the regional Appeals Office of the IRS. 
C) They must pay the deficiency and sue the federal government for a refund. 
D) They must file a petition with the U.S.Tax Court. 
A) They may request that a different revenue agent conduct a second audit. 
B) They must appeal the result of the audit to the regional Appeals Office of the IRS. 
C) They must pay the deficiency and sue the federal government for a refund. 
D) They must file a petition with the U.S.Tax Court.

Question 11

Mr.and Mrs.Lester failed to report a $40,540 capital gain on their 2016 Form 1040.The gross income reported on the return was $169,404,and the return was filed on January 20,2017.What is the last date on which the IRS can assess additional tax for 2017?

Accepted Answer

The unreported income does not

Question 12

The statute of limitations for a tax return does not begin to run until the return is filed.

Accepted Answer

A) True 
 B)False

Question 13

Corporations are allowed to deduct interest paid on an income tax deficiency as a business expense.

Accepted Answer

A) True 
 B)False

Question 14

Mr.Fiocchi filed his unextended 2016 Form 1040 on July 22,2017,and had no reasonable cause for the delinquency.The return showed a $1,906 overpayment of tax (refund due).Compute Mr.Fiocchi's late-filing and late-payment penalty.

Accepted Answer

A) -0- 
B) $191 
C) $286 
D) $381 
A) -0- 
B) $191 
C) $286 
D) $381

Question 15

A special agent is assigned to a tax investigation to determine if the government has enough evidence to indict the taxpayer for criminal fraud.

Accepted Answer

A) True 
 B)False

Question 16

Mr.Hepp,a self-employed consultant,failed to include a $38,200 income item on his 2016 Form 1040,which he filed on March 9,2017.The gross income reported on the return was $102,380.What is the latest date that the IRS can assess any additional 2016 tax?

Accepted Answer

A) March 9,2020 
B) April 15,2020 
C) March 9,2023 
D) April 15,2023 
A) March 9,2020 
B) April 15,2020 
C) March 9,2023 
D) April 15,2023

Question 17

Which type of audit has the broadest scope and may involve a complete analysis of the taxpayer's accounting records?

Accepted Answer

A) Correspondence examination 
B) Office examination 
C) Field examination 
D) All of the above 
A) Correspondence examination 
B) Office examination 
C) Field examination 
D) All of the above

Question 18

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

Accepted Answer

A) Correspondence examination 
B) Office examination 
C) Field examination 
D) All of the above 
A) Correspondence examination 
B) Office examination 
C) Field examination 
D) All of the above

Question 19

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule if that person enjoyed significant financial benefit from taxable income omitted from the return.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) Mrs.McNut is self-employed and reported a $112,000 loss on her Schedule C. 
B) The McNuts claim two additional standard deductions because they are both over age 65. 
C) The McNuts reported a $12,600 nonbusiness bad debt for a loan to their grandchild as a capital loss on Schedule D. 
D) Both Mrs.McNut being self-employed and reporting a $112,000 loss on her Schedule C and the McNuts reporting a $12,600 nonbusiness bad debt should increase the likelihood of audit. 
A) Mrs.McNut is self-employed and reported a $112,000 loss on her Schedule C. 
B) The McNuts claim two additional standard deductions because they are both over age 65. 
C) The McNuts reported a $12,600 nonbusiness bad debt for a loan to their grandchild as a capital loss on Schedule D. 
D) Both Mrs.McNut being self-employed and reporting a $112,000 loss on her Schedule C and the McNuts reporting a $12,600 nonbusiness bad debt should increase the likelihood of audit.

An individual taxpayer is not required to give the IRS an explanation for extending the filing date for Form 1040.

Mr.and Mrs.Dint filed their 2016 Form 1040 on January 28,2017.Assuming that the return does not contain any significant errors,what is the latest date that the IRS can assess any additional 2016 tax?

The IRS selects returns to audit that have the highest probability of generating additional revenue.

Ms.Hepp filed her 2016 Form 1040 on February 19,2017.The return showed a $2,730 overpayment of tax,and Ms.Hepp received her refund check from the IRS on April 30.Which of the following statements is true?

Taxpayers who can't complete their tax return by the filing date can request an automatic extension of time to file the return and pay any balance of tax due.

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

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

The revenue agent who audited Mr.and Mrs.Vento's Form 1040 assessed a $49,200 tax deficiency.The Ventos strongly disagree with the result of the audit.What is their first step in contesting the result?

Mr.and Mrs.Lester failed to report a $40,540 capital gain on their 2016 Form 1040.The gross income reported on the return was $169,404,and the return was filed on January 20,2017.What is the last date on which the IRS can assess additional tax for 2017?

The statute of limitations for a tax return does not begin to run until the return is filed.

Corporations are allowed to deduct interest paid on an income tax deficiency as a business expense.

Mr.Fiocchi filed his unextended 2016 Form 1040 on July 22,2017,and had no reasonable cause for the delinquency.The return showed a $1,906 overpayment of tax (refund due).Compute Mr.Fiocchi's late-filing and late-payment penalty.

A special agent is assigned to a tax investigation to determine if the government has enough evidence to indict the taxpayer for criminal fraud.

Mr.Hepp,a self-employed consultant,failed to include a $38,200 income item on his 2016 Form 1040,which he filed on March 9,2017.The gross income reported on the return was $102,380.What is the latest date that the IRS can assess any additional 2016 tax?

Which type of audit has the broadest scope and may involve a complete analysis of the taxpayer's accounting records?

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

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule if that person enjoyed significant financial benefit from taxable income omitted from the return.

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

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

Filters

Exam 18: The Tax Compliance Process

An individual taxpayer is not required to give the IRS an explanation for extending the filing date for Form 1040.

Mr.and Mrs.Dint filed their 2016 Form 1040 on January 28,2017.Assuming that the return does not contain any significant errors,what is the latest date that the IRS can assess any additional 2016 tax?

The IRS selects returns to audit that have the highest probability of generating additional revenue.

Ms.Hepp filed her 2016 Form 1040 on February 19,2017.The return showed a $2,730 overpayment of tax,and Ms.Hepp received her refund check from the IRS on April 30.Which of the following statements is true?

Taxpayers who can't complete their tax return by the filing date can request an automatic extension of time to file the return and pay any balance of tax due.

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

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

The revenue agent who audited Mr.and Mrs.Vento's Form 1040 assessed a $49,200 tax deficiency.The Ventos strongly disagree with the result of the audit.What is their first step in contesting the result?

Mr.and Mrs.Lester failed to report a $40,540 capital gain on their 2016 Form 1040.The gross income reported on the return was $169,404,and the return was filed on January 20,2017.What is the last date on which the IRS can assess additional tax for 2017?

The statute of limitations for a tax return does not begin to run until the return is filed.

Corporations are allowed to deduct interest paid on an income tax deficiency as a business expense.

Mr.Fiocchi filed his unextended 2016 Form 1040 on July 22,2017,and had no reasonable cause for the delinquency.The return showed a $1,906 overpayment of tax (refund due).Compute Mr.Fiocchi's late-filing and late-payment penalty.

A special agent is assigned to a tax investigation to determine if the government has enough evidence to indict the taxpayer for criminal fraud.

Mr.Hepp,a self-employed consultant,failed to include a $38,200 income item on his 2016 Form 1040,which he filed on March 9,2017.The gross income reported on the return was $102,380.What is the latest date that the IRS can assess any additional 2016 tax?

Which type of audit has the broadest scope and may involve a complete analysis of the taxpayer's accounting records?

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

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule if that person enjoyed significant financial benefit from taxable income omitted from the return.

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

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

Filters