Exam 26: Tax Practice and Ethics

The IRS targets high-income individuals for an audit rate that is much higher than that of the general populace.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. a.Ignorance of the tax law b.Reasonable basis c.Reasonable cause d.Complexity of the tax law e.Substantial authority f.Disclosure on return -Undervaluation of a reported item.

Vera is audited by the IRS for three tax years.Her returns were prepared by the following parties,to each of whom Vera paid a professional fee. Tax Year Preparer 1 Sally (Vera's niece,a dentist) 2 Wesley (an Enrolled Agent) 3 Alex (a CPA) Vera wants help in appearing before the IRS Revenue Agent for the audit.Which of the following statements is correct?

The accuracy-related penalties typically relate to ____________________on the part of the taxpayer,or other understatements of tax.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. a.Taxpayer penalty b.Tax preparer penalty c.Appraiser's penalty -Failure to file a tax return.

A(n) ___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

Under Circular 230,tax preparer Winston cannot disclose to a mortgage banker the income level of her client Pickett,or other information acquired by preparing the return,without Pickett's permission.

If the taxpayer comes to the office of the IRS for the audit of a tax return,the review is called a(n) ____________________ audit.

Chung's AGI last year was $180,000.Her Federal income tax came to $45,000,which she paid through a combination of withholding and estimated payments.This year,her AGI will be $250,000,with a projected tax liability of $60,000,all to be paid through estimates.Ignore the annualized income method.Compute Chung's quarterly estimated payment schedule for this year.

The chief executive of the IRS is the _________________________.

Circular 230 requires that a paid tax preparer apply a thorough quality review system in preparing tax returns for her clients.