Exam 15: Administrative Procedures

On April 15,2010,a married couple filed their joint 2009 tax return showing gross income of $120,000.Their return was prepared by a professional tax preparer who mistakenly omitted $45,000 of income,which the preparer in good faith considered to be nontaxable.No information with regard to this omitted income was disclosed on the return or attached statements.By what date must the IRS assert a notice of deficiency before the statute of limitations expires?

Explain one of the two exceptions to imposing interest from the original due date of the tax return until the date the tax deficiency is paid.

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.

According to Circular 230,what should a CPA do upon discovery of an error in a client's prior-year return?

Paul's tax liability for last year was $30,000.Paul projects that his tax for this year will be $40,000.Paul is self-employed and,thus,will have no withholding.His AGI for last year did not exceed $150,000.How much estimated tax should Paul pay for this year to avoid the penalty for underpayment of estimated taxes?

How does the IRS regulate the activities of compensated tax return preparers? In particular,list six acts that will cause a compensated tax return preparer to incur a penalty.

A calendar-year individual taxpayer files last year's income tax return on October 17 of the current year.No extension was requested,and there is not a reasonable cause for the late filing.The return shows a balance due of $1,500 of tax.The late filing penalty is

Richard recently won a popular television reality show and its one million dollar prize.However,he omitted the prize money from his tax return for the year.What penalties can the IRS assess?

What is the penalty for a tax return preparer who lacks substantial authority to take a return position?

The 90-day letter (Statutory Notice of Deficiency)gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

How long does a taxpayer have to file a petition with the U.S.Tax Court following the date of the Statutory Notice of Deficiency?

The statute of limitations is unlimited for a tax return that is never filed.

Explain the four conditions that must be met in civil cases for the burden of proving any factual issue relevant to the determination of taxpayer liability to rest with the IRS.

The IRS provides advice concerning an issue that arises during an audit by issuing

All of the following requirements must be met in order to establish innocent spouse relief except which of the following?

Linda's individual tax return for the current year is subject to an IRS audit.The IRS assesses a $10,000 deficiency,$4,000 of which is due to Linda's negligence.What is Linda's negligence penalty?

Identify which of the following statements is true.

A calendar-year individual taxpayer files last year's income tax return on July 1 of the current year.No extension was requested,and there is not a reasonable cause for the late filing.The return shows a balance due of $800 of tax.The late filing penalty is

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

On July 25 of the following year,Joy files her current calendar-year tax return without having requested an extension.On October 8,she pays the amount due.The tax shown on her return is $25,000.Her current-year withholding tax is $20,000.Joy pays no estimated taxes and does not claim any tax credits on her current year return.Calculate the penalties that the IRS is likely to assess.Ignore the penalty for underpayment of estimated taxes.Assume she did not commit fraud.