Question 1

The Taxpayer's Bill of Rights prevents the IRS from seizing a taxpayer's assets to satisfy a tax deficiency.

Accepted Answer

A) True 
 B)False

Question 2

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2014 Form 1040, which he filed on March 9, 2015. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2014 tax?

Accepted Answer

A)  March 9, 2018 
B)  April 15, 2018 
C)  March 9, 2021 
D)  April 15, 2021 
A)  March 9, 2018 
B)  April 15, 2018 
C)  March 9, 2021 
D)  April 15, 2021

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.

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

Which of the following is not a legal obligation of an income tax return preparer?

Accepted Answer

A)  A preparer must endorse clients' refund checks. 
B)  A preparer must furnish clients with copies of their returns. 
C)  A preparer must sign clients' tax returns. 
D)  A preparer must include his or her identifying number on clients' tax returns. 
A)  A preparer must endorse clients' refund checks. 
B)  A preparer must furnish clients with copies of their returns. 
C)  A preparer must sign clients' tax returns. 
D)  A preparer must include his or her identifying number on clients' tax returns.

Question 6

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 7

Mr. and Mrs. Clyde were married for 21 years before Mrs. Clyde divorced her husband in 2013. This year, the IRS determined that the Clydes underpaid their 2013 tax by $19,650. In which case would Mrs. Clyde be relieved of liability for the underpayment under the innocent spouse rule?

Accepted Answer

A)  Mrs. Clyde did not read through the Form 1040 before she signed it. 
B)  Mrs. Clyde remarried this year and is now Mrs. Novak. 
C)  Mr. Clyde was the sole income earner during the entire marriage. 
D)  None of the above. 
A)  Mrs. Clyde did not read through the Form 1040 before she signed it. 
B)  Mrs. Clyde remarried this year and is now Mrs. Novak. 
C)  Mr. Clyde was the sole income earner during the entire marriage. 
D)  None of the above.

Question 8

If a taxpayer has insufficient financial means to pay a deficiency, the IRS may make an offer in compromise to settle for a lesser amount.

Accepted Answer

A) True 
 B)False

Question 9

Mr. Fiocchi filed his unextended 2014 Form 1040 on July 22, 2015, 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 10

Mr. and Mrs. Chung filed their unextended 2014 Form 1040 on May 30, 2015, 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 11

Every year, the IRS selects a certain number of Form 1040s for audit. What is the approximate average audit coverage rate (percentage of individual returns filed selected for audit)?

Accepted Answer

A)  About 1% 
B)  About 5% 
C)  Between 10% and 12% 
D)  None of the above 
A)  About 1% 
B)  About 5% 
C)  Between 10% and 12% 
D)  None of the above

Question 12

An individual who did not graduate from high school has less exposure to a negligence penalty from the IRS than a college graduate.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements about taxpayer negligence is false?

Accepted Answer

A)  A taxpayer who makes a good faith effort to comply with the tax law is not negligent. 
B)  A taxpayer who keeps complete and careful tax records is less likely to incur a negligence penalty than a taxpayer with no records. 
C)  A taxpayer who cooperates with the revenue agent is less likely to incur a negligence penalty than an uncooperative taxpayer. 
D)  A taxpayer who relies on the advice of a tax professional has a guaranteed defense against the negligence penalty. 
A)  A taxpayer who makes a good faith effort to comply with the tax law is not negligent. 
B)  A taxpayer who keeps complete and careful tax records is less likely to incur a negligence penalty than a taxpayer with no records. 
C)  A taxpayer who cooperates with the revenue agent is less likely to incur a negligence penalty than an uncooperative taxpayer. 
D)  A taxpayer who relies on the advice of a tax professional has a guaranteed defense against the negligence penalty.

Question 14

Only attorneys and CPAs may prepare tax returns for compensation.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Mr. and Mrs. Ibrah filed their 2014 Form 1040 on June 6, 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?

Accepted Answer

A)  December 31, 2018 
B)  June 6, 2018 
C)  April 15, 2018 
D)  December 31, 2017 
A)  December 31, 2018 
B)  June 6, 2018 
C)  April 15, 2018 
D)  December 31, 2017

Question 17

Mrs. Lui decided to contest a negligence penalty in federal court. Which of the following statements is true?

Accepted Answer

A)  Mrs. Lui must present a preponderance of evidence establishing that she was not negligent. 
B)  The government must present a preponderance of evidence establishing that Mrs. Lui was negligent. 
C)  The government must present clear and convincing evidence that Mrs. Lui was negligent. 
D)  The government must establish Mrs. Lui's negligence beyond any reasonable doubt. 
A)  Mrs. Lui must present a preponderance of evidence establishing that she was not negligent. 
B)  The government must present a preponderance of evidence establishing that Mrs. Lui was negligent. 
C)  The government must present clear and convincing evidence that Mrs. Lui was negligent. 
D)  The government must establish Mrs. Lui's negligence beyond any reasonable doubt.

Question 18

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

Accepted Answer

A)  A corporation with a fiscal tax year ending on September 30 must file its unextended Form 1120 by December 15 following the close of the tax year. 
B)  A corporation may request an automatic extension of time to file Form 1120. 
C)  A corporation may request an extension of time to pay any balance due of its annual income tax if it has reasonable cause for the delay. 
D)  None of the above is false. 
A)  A corporation with a fiscal tax year ending on September 30 must file its unextended Form 1120 by December 15 following the close of the tax year. 
B)  A corporation may request an automatic extension of time to file Form 1120. 
C)  A corporation may request an extension of time to pay any balance due of its annual income tax if it has reasonable cause for the delay. 
D)  None of the above is false.

Question 19

Which of the following statements about a tax deficiency is true?

Accepted Answer

A)  If a taxpayer is assessed a deficiency, the government will charge interest on the deficiency regardless of the reason for the deficiency. 
B)  Individuals who pay interest on a tax deficiency can deduct it as an itemized deduction. 
C)  Individuals who pay interest on a tax deficiency can deduct it as a business expense. 
D)  Statements A. and B. are both true. 
A)  If a taxpayer is assessed a deficiency, the government will charge interest on the deficiency regardless of the reason for the deficiency. 
B)  Individuals who pay interest on a tax deficiency can deduct it as an itemized deduction. 
C)  Individuals who pay interest on a tax deficiency can deduct it as a business expense. 
D)  Statements A. and B. are both true.

Question 20

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 woul

The Taxpayer's Bill of Rights prevents the IRS from seizing a taxpayer's assets to satisfy a tax deficiency.

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2014 Form 1040, which he filed on March 9, 2015. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2014 tax?

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

Which of the following is not a legal obligation of an income tax return preparer?

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

Mr. and Mrs. Clyde were married for 21 years before Mrs. Clyde divorced her husband in 2013. This year, the IRS determined that the Clydes underpaid their 2013 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 has insufficient financial means to pay a deficiency, the IRS may make an offer in compromise to settle for a lesser amount.

Mr. Fiocchi filed his unextended 2014 Form 1040 on July 22, 2015, 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.

Mr. and Mrs. Chung filed their unextended 2014 Form 1040 on May 30, 2015, 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.

Every year, the IRS selects a certain number of Form 1040s for audit. What is the approximate average audit coverage rate (percentage of individual returns filed selected for audit)?

An individual who did not graduate from high school has less exposure to a negligence penalty from the IRS than a college graduate.

Which of the following statements about taxpayer negligence is false?

Only attorneys and CPAs may prepare tax returns for compensation.

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

Mr. and Mrs. Ibrah filed their 2014 Form 1040 on June 6, 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?

Mrs. Lui decided to contest a negligence penalty in federal court. Which of the following statements is true?

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

Which of the following statements about a tax deficiency is true?

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

The Taxpayer's Bill of Rights prevents the IRS from seizing a taxpayer's assets to satisfy a tax deficiency.

Mr. Hepp, a self-employed consultant, failed to include a $38,200 income item on his 2014 Form 1040, which he filed on March 9, 2015. The gross income reported on the return was $102,380. What is the latest date that the IRS can assess any additional 2014 tax?

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

Which of the following is not a legal obligation of an income tax return preparer?

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

Mr. and Mrs. Clyde were married for 21 years before Mrs. Clyde divorced her husband in 2013. This year, the IRS determined that the Clydes underpaid their 2013 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 has insufficient financial means to pay a deficiency, the IRS may make an offer in compromise to settle for a lesser amount.

Mr. Fiocchi filed his unextended 2014 Form 1040 on July 22, 2015, 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.

Mr. and Mrs. Chung filed their unextended 2014 Form 1040 on May 30, 2015, 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.

Every year, the IRS selects a certain number of Form 1040s for audit. What is the approximate average audit coverage rate (percentage of individual returns filed selected for audit)?

An individual who did not graduate from high school has less exposure to a negligence penalty from the IRS than a college graduate.

Which of the following statements about taxpayer negligence is false?

Only attorneys and CPAs may prepare tax returns for compensation.

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

Mr. and Mrs. Ibrah filed their 2014 Form 1040 on June 6, 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?

Mrs. Lui decided to contest a negligence penalty in federal court. Which of the following statements is true?

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

Which of the following statements about a tax deficiency is true?

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