Exam 18: The Tax Compliance Process

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

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, 2015. It filed the return on February 18, 2016. The revenue agent that examined the return suspects that Linney may have substantially underreported income for the year. Which of the following is false?

The revenue agent who audited Mr. and Mrs. Wilke's 2013 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. Clarke's Form 1040 will be selected for audit by the IRS?

Ms. Dela filed her unextended 2014 Form 1040 on November 2, 2015, 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.

Only the government may appeal a tax case to the U.S. Supreme Court.

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

Mr. and Mrs. Nestor were assessed a $51,240 income tax deficiency. Which of the following statements is false?

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

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

Which type of audit is handled by a revenue agent?

The IRS who audited Mr. Kodak's 2013 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.

For no particularly good reason, Ms. Totter has not yet filed her 2014 Form 1040. Which of the following statements is false?

The IRS can't impose a negligence penalty on an individual who relied on the advice of a CPA in preparing his tax return.

The revenue agent who audited Mr. Silver's 2013 Form 1040 concluded that Mr. Silver deliberately disregarded the tax rules about charitable contributions. Consequently, the agent disallowed $19,320 of Mr. Silver's contribution deduction. Mr. Silver also miscalculated his AMT in spite of his good faith effort to make the difficult calculation. Because of these two errors, the agent assessed a tax deficiency for 2013. Which of the following statements is false?

Mr. Beale prepared and signed his 2014 tax return on April 3, 2015. However, he carelessly forgot to mail the return until May 19. He enclosed his check for the $11,940 balance of tax due with the return. Compute Mr. Beale'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.

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

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. and Mrs. Dint filed their 2014 Form 1040 on January 28, 2015. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2014 tax?