Exam 16: Tax Practice and Ethics

The rules of Circular 230 need not be followed by:

If the taxpayer refuses to pay an assessed tax,the IRS can place a(n)____________________ on the taxpayer's property and a(n)_________________________ on the taxpayer's wages.

The general statute of limitations extends for ____________________ years,while it is ____________________ years if a substantial understatement of income is found,and ____________________ years with respect to worthless securities.

A tax preparer can incur a penalty if the client's return includes a(n)___________________ tax return position that understates the tax liability.

For each of the indicated penalties, indicate the appropriate taxpayer defense. a.Reasonable basis b.Reasonable cause c.Substantial authority d.Disclosure on return -Negligence in filing a return

The AICPA's Statements on Standards for Tax Services are advisory,not mandatory,on its members.

Match each of the following penalties with the rate for that penalty as specified by the Code. a.$1,000 per violation b.$500 per violation c.$50 per violation d.1/2% per month e.5% per month f.15% per month g.5% of tax due h.15% of tax due i.20% of tax due j.75% of tax due -Failure by a tax preparer to sign the return

To file for a tax refund,an individual generally uses Form ____________________.

The head of IRS operations is the Chief Counsel.

IRS letter rulings seldom are revised or revoked.

Circular 230 allows a tax preparer to:

The IRS can pay an informant's fee of up to ____________________% of the recovered tax,interest,and penalty amounts.In the typical year,about ____________________ such rewards are paid.The reward can be as high as __________% for a "whistle blower."

The IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction in a Tax Interpretation.

Compute the failure to pay and failure to file penalties for John,who filed his 2007 income tax return on December 6,2008,paying the $15,000 amount due.On April 1,2008,John had received a six-month extension of time in which to file his return,but he paid no tax with the extension request.He has no reasonable cause for failing to file his return by October 15 or for failing to pay the tax that was due on April 17,2008.John's failure to comply with the tax laws was not fraudulent.

A taxpayer can be subject to both ____________________ and ____________________ penalties for tax misconduct.

Gloria,a calendar year taxpayer subject to a 35% marginal tax rate,claimed a charitable contribution deduction of $800,000 for a sculpture that the IRS later valued at $100,000.The applicable overvaluation penalty is:

As a result of undervaluing property transferred by gift,Dan owes additional gift taxes of $3,000.The penalty for undervaluation does not apply in this situation,because the tax understatement was too small.

A CPA and a taxpayer can keep a document confidential from the IRS unless it relates to a ____________________ proceeding against the taxpayer.

Maria's AGI last year was $195,000.To avoid a penalty,her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

When the IRS issues a notice of tax due,the taxpayer has 30 days to either pay the tax or file a petition with the Tax Court.This is conveyed in the "thirty-day letter."