Exam 16: Tax Practice and Ethics

The client has decided to dispute the Revenue Agent's Report.What is the tax advisor's next step?

A CPA cannot take a tax return position for a client that is contrary to current IRS interpretations of the law.

The Square Services Corporation estimates that its 2008 taxable income will be $800,000.Thus,it is subject to a flat 34% income tax rate and incurs a $272,000 liability.For each of the following independent cases,compute Square's minimum quarterly estimated tax payments that will avoid an underpayment penalty. a.For 2007, taxable income was ($150,000). Square carried back all of this loss to prior years and exhausted the entire net operating loss in creating a zero 2007 liability. b.For 2007, taxable income was $700,000, and tax liability was $238,000. c.For 2006, taxable income was $2 million, and tax liability was $680,000. For 2007, taxable income was $100,000, and tax liability was $22,250.

In a criminal fraud case,the burden is on the taxpayer to show that he or she was innocent "beyond the shadow of any reasonable doubt."

The Statements on Standards for Tax Services are issued by the:

Dana underpaid his taxes by $170,000.Portions of the underpayment were attributable to negligence ($90,000)and to civil fraud ($80,000).Compute the total penalties incurred.

The usual three-year statute of limitations on additional tax assessments applies in the following situation(s).