Exam 17: Tax Practice and Ethics

When a tax dispute is resolved, interest is paid by or to the government. List three or more features of the interest computations that arise when a tax return is audited.

Troy Center Ltd. withheld from its employees' paychecks $200,000 in Federal income and Social Security taxes for the Monday, June 30 payroll. It then spent the $200,000 on equipment upgrades, missing altogether the August 2 due date for the tax remittances. How much does Troy now owe the government in taxes and penalties? Ignore interest accruals, and assume that the Treasury can prove that Troy's redirecting of the tax withholdings was willful.

A C corporation is not subject to an underpayment penalty until more than $____________________ is due and unpaid through estimated taxes. or

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

Marco, a cash basis, calendar year taxpayer, filed his income tax return 50 days after the due date. Marco never extended his return, and with the return he paid the taxes that were due. What penalties will Marco incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

The IRS employs almost 90,000 personnel, making it one of the largest Federal agencies.

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

The IRS is one of the largest Federal agencies, employing at least ____________________ people throughout the year. or or

A tax preparer can incur a penalty if the client's return includes an unreasonable or ___________________ tax return position that understates the tax liability.

Loren Ltd., a calendar year taxpayer, had the following transactions, all of which were properly reported on a timely filed return. Presuming the absence of fraud, how much of an omission from gross income must occur for Loren before the six-year statute of limitations applies? Show your computations.

Yang, a calendar year taxpayer, did not file a tax return for 2005 because she honestly believed that no additional tax was due. In 2011, Yang is audited by the IRS and the agent assesses a deficiency of $17,000 for tax year 2005. Yang need not pay this deficiency, since the statute of limitations expired on April 15, 2009.

Jaime's negligence penalty will be waived, under the reasonable cause exception. He told the court, "My taxes were wrong because I couldn't understand the tax law."

Leroy, who is subject to a 45% marginal gift tax rate, made a gift of a sculpture to Marvin, valuing the property at $150,000. The IRS later valued the gift at $400,000. The applicable undervaluation penalty is:

A CPA and his/her client hold a privilege of confidentiality from the IRS, as to their discussions about completing a tax return.

Roger prepared for compensation a Federal income tax return for Mona. Mona's return included an aggressive interpretation of the rules concerning overnight business travel. Roger is not liable for a preparer penalty for taking an unreasonable tax return position if:

According to the IRS, the annual "Tax Gap" totals about $______________________ billion. or

Circular 230 allows a tax preparer to:

The IRS can require that the taxpayer produce its financial accounting records, to determine if taxable income is computed correctly.

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $8,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

The taxpayer can use a(n) ____________________ to pay off a deficiency over a longer period of time, if the IRS believes that this will facilitate the tax collection process.