Exam 12: Tax Administration and Tax Planning

Janet did not file her tax return or pay her taxes for 2015 until November of 2016. She paid the following amounts to the IRS related to the late filing and payment of tax: What amount of the above items may be deducted on Janet's 2016 individual income tax return? Explain.

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

For the following independent situations, list who (the IRS, the taxpayer, the party who initiates the case, or both sides) has the burden of proof in most civil tax cases: a.The tax case involves a penalty. b.The tax case involves a trust with net worth of $8.3 million. c.The taxpayer has credible evidence, maintains records, and cooperates with reasonable IRS requests. d.The IRS uses statistics to reconstruct an individual's income.

The IRS determined that John underpaid his 2014 tax liability by $6,000 due to negligence. In 2016, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS. a.Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation. b.What part of the deficiency, income taxes, interest and penalty, is deductible by John on his current tax return? Explain.

Answer the following: a.​ ​ Geoffrey filed his tax return 2 months and 8 days late and had not requested an extension of time for filing.Geoffrey's return indicated that he is to receive a $600 refund in taxes.Calculate the amount of Geoffrey's penalty for failure to file his tax return on time, assuming the failure to file was not fraudulent. b.​ ​ ​ ​ John filed his individual income tax return 3 1/2 months after it was due.He had not requested an extension of time for filing.Along with his return, John remitted a check for $1,000, which was the balance of the taxes he owed with his return.Disregarding interest, calculate the total penalty that John will be required to pay, assuming the failure to file was not fraudulent (and that he is not subject to failure-to-pay penalties).

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

If a taxpayer has too much income tax withheld from his salary during the tax year, the IRS will pay interest on the excess amount.

Indicate in the blank space the date the statute of limitations would run out on each of the following individual tax returns. a.​ A 2016 tax return filed on April 17, 2017 which omitted $20,000 of income.The total gross income shown on the tax return was $40,000 b.A 2016 tax return filed April 17, 2017 which contained a large bad debt deduction c.A 2010 tax return that was never filed d.A 2016 tax return filed on April 17, 2017 e.A fraudulent 2016 tax return filed April 17, 2017

All paid tax return preparers must sign up with the IRS, pay a fee, and obtain a preparer tax identification number.

The statute of limitations for a tax return generally is 3 years.

A "correspondence audit" by the IRS is conducted through the mail.

Patricia has taxable income of $40,000 on which she pays income tax of $5,778. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate?

Mark with a "Yes" if the following statement is true and is in Publication 1, The Taxpayers Bill of Rights. Mark with a "No" if the following statement is false or is not addressed in Publication 1. A)If you do not agree with the IRS examiner's proposed changes in an audit, you must go directly to the court system to resolve the issue. B)If a taxpayer is due a refund, but did not file a return, then the IRS uses statistics to reconstruct an individual's income in order to compute the refund for the taxpayer. C)The tax law generally provides for interest on your refund if it is not paid within 45 days of the date you filed your return or filed your claim for refund. D)Publication 1 explains how to file an amended tax return.

The Discriminant Function System is designed to identify tax returns that may contain errors.

Tax returns selected for most audits are selected by the Discriminant Function System.

The tax law is administered by the Federal Trade Commission.

An "office audit" is an audit in which the revenue agent visits the taxpayer's office.

Tax returns are processed at the IRS national office in Washington, D.C.