Exam 18: The Tax Compliance Process

F&D Inc.ceased operations and dissolved under state law in 2016.Mrs.Herron,a 20% shareholder,received a $490,300 liquidating distribution from F&D.This year,the IRS determined that F&D underpaid its 2015 and 2016 income tax by $967,100.How much of this deficiency can the IRS assess against Mrs.Herron?

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?

Mrs.Hepp completed her 2016 Form 1040 on April 13,2017.The return showed a $923 balance due.Mrs.Hepp needed more time to double check all her computations.What can Mrs.Hepp do to give herself more time?

The IRS assessed Ms.Tinlock a $3,050 income tax deficiency.Which of the following steps can the IRS not take to collect the deficiency?

Which type of audit takes place at the taxpayer's place of business?

Taxpayers should keep all supporting documentation (credit card statements,etc.)for a tax return for at least three years after the return is filed.

Which of the following statements about the tax return filing process is false?

Which of the following statements about the DIF score is true?

Mr.and Mrs.Clyde were married for 21 years before Mrs.Clyde divorced her husband in 2016.This year,the IRS determined that the Clydes underpaid their 2015 tax by $19,650.In which case would Mrs.Clyde be relieved of liability for the underpayment under the innocent spouse rule?

If a taxpayer fails to pay a deficiency,the IRS can garnish the taxpayer's salary or wage to settle the liability.

Which of the following statements about taxpayer negligence is false?

Mr.Bennett is a professional tax return preparer.Three years ago,he prepared the Form 1120 for Philly Inc.His fee for the preparation was $15,000.Upon audit of the return,the IRS disallowed a $100,000 deduction,which increased the corporation's tax by $35,000.Compute Mr.Bennett's preparer penalty if the IRS concludes that: a.Mr.Bennett had no reasonable legal basis for claiming the deduction and was not acting in good faith by doing so. b.Mr.Bennett intentionally disregarded the tax law by claiming the deduction in a willful attempt to understate Philly's tax. c.How would your answers to a.and b.change if Mr.Bennett's preparation fee was only $6,000?

Which of the following statements about tax fraud is true?

The revenue agent who audited Mr.and Mrs.Wilke's 2014 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 statements about criminal tax fraud is false?

Which of the following statements about federal tax return filing dates is false?

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.

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

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

Ms.Dela filed her unextended 2016 Form 1040 on November 2,2017,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.