Question 1

Which type of audit takes place at an IRS district office?

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 B

Question 2

Taxpayers who win their case in court are automatically entitled to recover litigation expenses from the government.

Accepted Answer

A) True 
 B)False  False

Question 3

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?

Accepted Answer

A)  The IRS can terminate Mr. Braco's status as an enrolled agent. 
B)  The IRS can impose a $1,900 penalty on Mr. Braco. 
C)  The IRS can impose a negligence penalty on the Colters but can't penalize Mr. Braco. 
D)  The IRS can impose a civil fraud penalty on Mr. Braco. 
A)  The IRS can terminate Mr. Braco's status as an enrolled agent. 
B)  The IRS can impose a $1,900 penalty on Mr. Braco. 
C)  The IRS can impose a negligence penalty on the Colters but can't penalize Mr. Braco. 
D)  The IRS can impose a civil fraud penalty on Mr. Braco. B

Question 4

Both individual and corporate taxpayers must pay any balance due of their tax by the extended due date of the tax return for the year.

Accepted Answer

A) True 
 B)False

Question 5

Mr. Fiocchi filed his unextended 2011 Form 1040 on July 22, 2012, 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 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2011 Form 1040, which he filed on March 9, 2012. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2011 tax?

Accepted Answer

A)  March 9, 2015 
B)  April 15, 2015 
C)  March 9, 2018 
D)  April 15, 2018 
A)  March 9, 2015 
B)  April 15, 2015 
C)  March 9, 2018 
D)  April 15, 2018

Question 8

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?

Accepted Answer

A)  Seize Ms. Tinlock's assets and sell them at auction. 
B)  Garnish Ms. Tinlock's salary. 
C)  Assess the deficiency against Ms. Tinlock's children age 21 years or older. 
D)  The IRS can take all of the above steps to collect the deficiency. 
A)  Seize Ms. Tinlock's assets and sell them at auction. 
B)  Garnish Ms. Tinlock's salary. 
C)  Assess the deficiency against Ms. Tinlock's children age 21 years or older. 
D)  The IRS can take all of the above steps to collect the deficiency.

Question 9

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

Accepted Answer

A)  Mr. Clarke is self-employed and reported $723,900 net profit on his Schedule C 
B)  Mr. Clarke has four dependent children under age 17. 
C)  Mr. Clarke is a resident of California. 
D)  None of the above should increase the likelihood of audit. 
A)  Mr. Clarke is self-employed and reported $723,900 net profit on his Schedule C 
B)  Mr. Clarke has four dependent children under age 17. 
C)  Mr. Clarke is a resident of California. 
D)  None of the above should increase the likelihood of audit.

Question 10

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 11

A taxpayer who is disputing a deficiency of $50,000 or less may request an informal hearing by the Small Tax Case Division of the Tax Court.

Accepted Answer

A) True 
 B)False

Question 12

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 A. and C. 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 A. and C. should increase the likelihood of audit.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

F&D Inc. ceased operations and dissolved under state law in 2011. Mrs. Herron, a 20% shareholder, received a $490,300 liquidating distribution from F&D. This year, the IRS determined that F&D underpaid its 2010 and 2011 income tax by $967,100. How much of this deficiency can the IRS assess against Mrs. Herron?

Accepted Answer

A)  -0- 
B)  $193,420 
C)  $490,300 
D)  $967,100 
A)  -0- 
B)  $193,420 
C)  $490,300 
D)  $967,100

Question 15

Mr. and Mrs. Chung filed their unextended 2011 Form 1040 on May 30, 2012, and had no reasonable cause for the delinquency. The return showed a $10,479 balance of tax due. Compute the Chungs' late-filing and late-payment penalty.

Accepted Answer

A)  $524 
B)  $1,048 
C)  $2,620 
D)  None of the above 
A)  $524 
B)  $1,048 
C)  $2,620 
D)  None of the above

Question 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

Mr. and Mrs. Dint filed their 2011 Form 1040 on January 28, 2012. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2011 tax?

Accepted Answer

A)  December 31, 2014 
B)  January 28, 2015 
C)  April 15, 2015 
D)  December 31, 2015 
A)  December 31, 2014 
B)  January 28, 2015 
C)  April 15, 2015 
D)  December 31, 2015

Question 19

Macy filed her 2011 tax return on its extended due date of October 15, 2012. The IRS has until December 31, 2014, to audit this return.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about criminal tax fraud is false?

Accepted Answer

A)  Criminal tax fraud is a felony offense. 
B)  A taxpayer must be convicted of criminal tax fraud in federal court. 
C)  Individuals who are convicted of criminal tax fraud may be fined or imprisoned or both. 
D)  None of the above is false. 
A)  Criminal tax fraud is a felony offense. 
B)  A taxpayer must be convicted of criminal tax fraud in federal court. 
C)  Individuals who are convicted of criminal tax fraud may be fined or imprisoned or both. 
D)  None of the above is false.

Which type of audit takes place at an IRS district office?

Taxpayers who win their case in court are automatically entitled to recover litigation expenses from the government.

Both individual and corporate taxpayers must pay any balance due of their tax by the extended due date of the tax return for the year.

Mr. Fiocchi filed his unextended 2011 Form 1040 on July 22, 2012, 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 taxpayer who wants a jury trial must pay the tax deficiency and then sue the government for a refund in U.S. District Court.

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2011 Form 1040, which he filed on March 9, 2012. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2011 tax?

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

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

A taxpayer who is disputing a deficiency of $50,000 or less may request an informal hearing by the Small Tax Case Division of the Tax Court.

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

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

Mr. and Mrs. Chung filed their unextended 2011 Form 1040 on May 30, 2012, and had no reasonable cause for the delinquency. The return showed a $10,479 balance of tax due. Compute the Chungs' late-filing and late-payment penalty.

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

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

Mr. and Mrs. Dint filed their 2011 Form 1040 on January 28, 2012. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2011 tax?

Macy filed her 2011 tax return on its extended due date of October 15, 2012. The IRS has until December 31, 2014, to audit this return.

Which of the following statements about criminal tax fraud is false?

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

Which type of audit takes place at an IRS district office?

Taxpayers who win their case in court are automatically entitled to recover litigation expenses from the government.

Both individual and corporate taxpayers must pay any balance due of their tax by the extended due date of the tax return for the year.

Mr. Fiocchi filed his unextended 2011 Form 1040 on July 22, 2012, 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 taxpayer who wants a jury trial must pay the tax deficiency and then sue the government for a refund in U.S. District Court.

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2011 Form 1040, which he filed on March 9, 2012. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2011 tax?

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

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

A taxpayer who is disputing a deficiency of $50,000 or less may request an informal hearing by the Small Tax Case Division of the Tax Court.

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

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

Mr. and Mrs. Chung filed their unextended 2011 Form 1040 on May 30, 2012, and had no reasonable cause for the delinquency. The return showed a $10,479 balance of tax due. Compute the Chungs' late-filing and late-payment penalty.

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

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

Mr. and Mrs. Dint filed their 2011 Form 1040 on January 28, 2012. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2011 tax?

Macy filed her 2011 tax return on its extended due date of October 15, 2012. The IRS has until December 31, 2014, to audit this return.

Which of the following statements about criminal tax fraud is false?

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