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?

Which of the following communications between an accountant and client are privileged? a)During the preparation of her 2008 tax return,Tammy informs her accountant that she contributed $25,000 to a qualified charitable organization. b)After filing his tax return,a client mentions to his accountant that he forgot to report a $7,000 prize that he won playing bingo.He asks how he should correct the error. c)A client tells his accountant that he will no longer pay alimony to his ex-wife.

Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS.

Which of the following is not a reason for relief from the substantial understatement penalty?

The court in which the taxpayer does not have to pay the tax and then litigate for a refund is the

If Brad files his last year's individual tax return on July 5 of the current year after having requested an extension,what is the amount of his failure-to-pay penalty if his total tax is $10,000 and he paid $9,500 through timely withholding and $500 with the return?

On August 13 of the following year,Joy files her current calendar-year tax return and pays the amount due without having requested an extension.The tax shown on her return is $25,000.Her current-year withholding tax is $15,000.Joy pays no estimated taxes and does not claim any tax credits on her current-year return.Will Joy owe interest,and if so,on what amount and for how many days?

Identify which of the following statements is true.

Which one of the following statements about letter rulings is false?

Billy,a calendar-year taxpayer,files his current year individual tax return on August 17 of the following year without having requested an extension.His return reports an amount due of $5,000.Billy pays this amount on November 23 of the following year.What are Billy's penalties for his failure to file and his failure to pay his tax on time? Assume Billy did not commit fraud.

What is the penalty for a tax return preparer who willfully attempts to understate taxes,or intentionally disregards the tax rules and regulations?

Which of the following communications between an accountant and client are not privileged? a)An accountant orally communicates to his client that he should set up a foreign subsidiary to shift taxable income to a lower tax jurisdiction. b)An accountant privately submits to the client a plan for shifting taxable income to a lower tax jurisdiction. c)During a meeting in which a client is asking for advice relating to criminal fraud,the client tells his accountant that he lied to the IRS.

Kristina and Victor filed a joint return for the current year.They are in the 31% marginal tax bracket.Victor did not know that Kristina failed to report a prize valued at $16,000 that she won.She used the money to buy Victor a motorcycle.Does Victor meet the tests for relief under the innocent spouse provisions?

Identify which of the following statements is false.

Which of the following items can be omitted from a taxpayer's request for a ruling?

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 Internal Revenue Service is part of the

Anyone who prepares a tax return is subject to the provisions of Circular 230.

If the taxpayer has credible evidence,the IRS bears the burden of proof in a tax dispute.

On July 25 of the following year,Joy files her current calendar-year tax return.She had requested extensions as required.On October 8,she pays the amount due.The tax shown on her return is $22,000.Her current-year withholding tax is $21,000.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.