Exam 18: The Tax Compliance Process

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, 2015? b. Assuming that the Latts make a timely application, what is the extended due date for the return?

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

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

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?

Mrs. Hepp completed her 2014 Form 1040 on April 13, 2015. 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?

Mrs. Claire underpaid her 2014 federal income tax by $11,017. If the entire underpayment was attributable to Mrs. Claire's failure to make a good faith effort to comply with the tax law, the IRS may impose a $2,754 negligence penalty.

Macy filed her 2014 tax return on its extended due date of October 15, 2015. The IRS has until December 31, 2017, to audit this return.

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

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 litigation process is false?

This year, the IRS audited Mr. and Mrs. Simon's 2013 income tax return and determined that they underpaid their tax by $13,780. Which of the following statements is true?

Gretchen's 2014 tax return, due April 15, 2015, was filed on July 15, 2015. Her tax due with the return was $1,200. Gretchen owes a late filing penalty of $180.

Mrs. Jordan applied for an automatic six-month extension of time (until October 15, 2015) to file her 2014 income tax return. She actually filed an accurate return on July 9, 2015. The IRS may audit the return and assess Mrs. Jordan for additional 2014 tax at any time through:

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

The harshest administrative penalty that the IRS can impose is the civil fraud penalty.

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.

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

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

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.