Question 1

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

The answer of The IRS is one of the largest...

Question 3

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

Accepted Answer

The answer of A tax preparer can incur a penalty...

Question 4

Last year, Ned's property tax deduction on his residence was $22,500.Although he lives in the same house, he tells his CPA that this year's taxes will be only $7,500.The CPA can use this estimate in computing Ned's itemized deductions, under the Statements of Standards for Tax Services.

Accepted Answer

A) True 
 B)False

Question 5

Recently, the overall Federal income tax audit rate for the Form 1040 has been about 1%.

Accepted Answer

A) True 
 B)False

Question 6

Latrelle prepares the tax return for Whitehall Corporation. Latrelle includes a $5,000 deduction on the return.This type of deduction previously has been disallowed by the Tax Court, although there is a 15% chance that the holding will be reversed on an appeal by Whitehall. The return does not make any special disclosure that the deduction is being claimed. Whitehall paid Latrelle a fee of $8,000 for preparing the Form 1120. Latrelle is assessed a preparer penalty of $4,000 for taking an unreasonable position on the Whitehall return.

Accepted Answer

A) True 
 B)False

Question 7

Compute the failure to pay and failure to file penalties for John, who filed his 2011 income tax return on December 14, 2012, paying the $10,000 amount due.On April 1, 2012, John submitted a six-month extension of time in which to file his return; 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 15, 2012.John's failure to comply with the tax laws was not fraudulent.

Accepted Answer

Failure to Pay
 @#IMG-DLM& Failure to File
 @#IMG-DLM& The f

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

Accepted Answer

A) True 
 B)False

Question 10

Babs filed an amended return in 2013, claiming a refund relative to her 2011 tax computation.When the IRS approves the amended return, it will pay Babs interest with respect to the overpayment.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is subject to tax return preparer penalties?

Accepted Answer

A) Lizzie, the firm's administrative assistant, makes copies of returns and assembles the mailings that the client must make to the taxing agencies. 
B) Meredith is the director of Federal taxes for a C corporation. 
C) Sammy is a volunteer who prepares returns at the retirement home under the IRS Tax Counseling for the Elderly program. 
D) Abbie prepares her mother's tax returns for $50 a year.A CPA, Abbie would charge a client $750 for completing a similar return. 
A) Lizzie, the firm's administrative assistant, makes copies of returns and assembles the mailings that the client must make to the taxing agencies. 
B) Meredith is the director of Federal taxes for a C corporation. 
C) Sammy is a volunteer who prepares returns at the retirement home under the IRS Tax Counseling for the Elderly program. 
D) Abbie prepares her mother's tax returns for $50 a year.A CPA, Abbie would charge a client $750 for completing a similar return.

Question 12

The Treasury document regulating the professional conduct of tax return preparers is the Regulation known as _________________________.

Accepted Answer

The answer of The Treasury document regulating the professional conduct...

Question 13

Evaluate this statement: the audited taxpayer has more freedom to "trade issues" with the IRS when the dispute progresses to an Appeals conference. Hint: What are the "hazards of litigation?"

Accepted Answer

The taxpayer may attempt to negotiate an

Question 14

Georgio, a calendar year taxpayer subject to a 35% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $100,000.The applicable overvaluation penalty is:

Accepted Answer

A) $10,000 (maximum penalty). 
B) $14,000. 
C) $28,000. 
D) $70,000. 
A) $10,000 (maximum penalty). 
B) $14,000. 
C) $28,000. 
D) $70,000.

Question 15

A registered tax return preparer who is not also a CPA, attorney, or Enrolled Agent:

Accepted Answer

A) Can prepare returns and give tax advice. 
B) Can represent the taxpayer before an IRS Appeals officer. 
C) Must pass an annual qualifying exam concerning the tax law. 
D) Is subject only to selected Circular 230 rules. 
A) Can prepare returns and give tax advice. 
B) Can represent the taxpayer before an IRS Appeals officer. 
C) Must pass an annual qualifying exam concerning the tax law. 
D) Is subject only to selected Circular 230 rules.

Question 16

Maria's AGI last year was $95,000.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.
or

Accepted Answer

100, 90 on

Question 17

Which of the following statements is incorrect as to the conduct of IRS income tax audits?

Accepted Answer

A) Only the Appeals Division of the IRS has the authority to settle tax disputes based on the hazards of litigation. 
B) The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report. 
C) For a Form 1040 that is filed on April 11, 2012, if the taxpayer has not received an audit notification from the IRS by the end of 2012, the return may still be audited. 
D) Most IRS examinations of Forms 1040 are conducted solely through the mail. 
A) Only the Appeals Division of the IRS has the authority to settle tax disputes based on the hazards of litigation. 
B) The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report. 
C) For a Form 1040 that is filed on April 11, 2012, if the taxpayer has not received an audit notification from the IRS by the end of 2012, the return may still be audited. 
D) Most IRS examinations of Forms 1040 are conducted solely through the mail.

Question 18

Freddie has been assessed a preparer penalty for willful and reckless conduct.When he completed Peggy's Federal income tax return (who is in the 35% tax bracket), Freddie purposely omitted $100,000 of cash receipts that should have been reported as gross income.Freddie charged Peggy $4,000 to prepare the return.What is Freddie's preparer penalty?

Accepted Answer

A) $0, because Peggy incurred her own understatement penalty for the return. 
B) $2,000. 
C) $4,000. 
D) $5,000. 
A) $0, because Peggy incurred her own understatement penalty for the return. 
B) $2,000. 
C) $4,000. 
D) $5,000.

Question 19

It is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.

Accepted Answer

A) True 
 B)False

Question 20

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

Accepted Answer

A) Financial accounting tax accrual workpapers. 
B) A tax research memo used to determine an amount reported on the tax return. 
C) Building a defense against a penalty assessed for the use of a tax shelter. 
D) Building a defense against a charge brought by the SEC. 
A) Financial accounting tax accrual workpapers. 
B) A tax research memo used to determine an amount reported on the tax return. 
C) Building a defense against a penalty assessed for the use of a tax shelter. 
D) Building a defense against a charge brought by the SEC.

Exam 26: Tax Practice and Ethics

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

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

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

Last year, Ned's property tax deduction on his residence was $22,500.Although he lives in the same house, he tells his CPA that this year's taxes will be only $7,500.The CPA can use this estimate in computing Ned's itemized deductions, under the Statements of Standards for Tax Services.

Recently, the overall Federal income tax audit rate for the Form 1040 has been about 1%.

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

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

Babs filed an amended return in 2013, claiming a refund relative to her 2011 tax computation.When the IRS approves the amended return, it will pay Babs interest with respect to the overpayment.

Which of the following is subject to tax return preparer penalties?

The Treasury document regulating the professional conduct of tax return preparers is the Regulation known as _________________________.

Evaluate this statement: the audited taxpayer has more freedom to "trade issues" with the IRS when the dispute progresses to an Appeals conference. Hint: What are the "hazards of litigation?"

Georgio, a calendar year taxpayer subject to a 35% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $100,000.The applicable overvaluation penalty is:

A registered tax return preparer who is not also a CPA, attorney, or Enrolled Agent:

Maria's AGI last year was $95,000.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. or

Which of the following statements is incorrect as to the conduct of IRS income tax audits?

It is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Income Taxation of Trusts and Estates

Filters

Maria's AGI last year was $95,000.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. or