Exam 12: Tax Administration and Tax Planning

Patricia has taxable income of $40,000 on which she pays income tax of $4,745.If Patricia's taxable income increases by $2,000, she will pay an additional tax of $440.What is Patricia's marginal tax rate?

Tax returns are processed at the IRS national office in Washington, DC.

Tax penalties are not deductible by taxpayers.

Linda filed her individual income tax return on its due date but failed to pay $1,000 in taxes that were due with the return.Linda promptly paid the taxes upon receipt of a notice and demand for payment.If Linda pays the taxes exactly 5 months late, calculate the amount of her failure-to-pay penalty.

Which of the following is the calculation of the failure-to-file penalties?

A "correspondence audit" by the IRS is conducted through the mail.

At which of the following IRS locations are tax returns processed?

Indicate in the blank space the date the statute of limitations would run out on each of the following individual tax returns. a.​A 2018 tax return filed on April 15, 2019 which omitted $20,000 of income.The total gross income shown on the tax return was $40,000 b.A 2018 tax return filed April 15, 2019 which contained a large bad debt deduction c.A 2015 tax return that was never filed d.A 2018 tax return filed on April 15, 2019 e.A fraudulent 2018 tax return filed April 15, 2019

Which of the following statements is the most correct regarding The Taxpayer Bill of Rights?

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

Which of the following is the best definition of tax planning?

Stephanie has taxable income of $48,200 and a tax liability of $6,549.If Stephanie's income increases by $4,000, her tax liability will be $7,429. a.What is her average tax rate on the $48,200 of income? b.What is her marginal tax rate?

What type of audit (office, field or correspondence)is demonstrated in the following examples? a.An IRS agent views Microsoft's books and records at the Microsoft headquarters. b.Susie receives a letter from the IRS asking her to provide documentation to support her charitable contributions on her tax return filed in the prior year. c.Mr.and Mrs.John Doe are asked to bring their supporting documents to the downtown IRS office so that an IRS agent may review their tax return which was filed 2 years ago.

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

For each of the following situations, indicate the nature and amount of the penalty that could be imposed.(The penalties include both tax practitioner penalties and taxpayer penalties).​ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Description of the Penalty a. Kyle files his tax return on the original due date and pays the entire balance of tax due of $\$ 5,000$ . He did not $p$ ay any estimated tax during the year and had no withholding. His pri or year tax $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ _______________ return showed a tax liability of $\$ 12,000$ (do not calculate the penalty). b. Drew writes a check for $\$ 300$ in payment of his income taxes. Drew knows he does not have sufficient funds in his account to $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ _______________ cover the check. c. Enrique has a $\$ 10,000$ tax deficiency on his 2017 tax return due to civil fraud. d. Vladimir prepares a tax return for Oscar but does not keep a copy $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ _______________ of the tax return. e. Friscilla, a self-employed accountant, prepares a tax return for Billy. She signs the return but does not include her preparer tax $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ _______________ identification number on the tax return as required. f. Manny prepares a tax return for his client who requests that Manny disregard a current tax law which would increase his tax $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ _______________ liability by $\$ 17,000$ . Manny agrees to do so since he does not want to lose this important client.

Which of the following will not affect the statute of limitations on a tax return?

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

Which of the following is not a characteristic around which tax planning is organized:

Which of the following statements best describes the process of tax planning?

Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.