Exam 26: Tax Practice and Ethics

Jenny prepared Steve's income tax returns for no compensation for 2009 and 2010.Jenny is Steve's mother.In 2012, the IRS notifies Steve that it will audit his returns for 2008-2010.Jenny cannot represent Steve during the audit of the returns, as she is not a "registered tax return preparer."

In taking a dispute to the Appeals Division, a written protest is required of the taxpayer when the proposed deficiency exceeds $____________________.

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.

In preparing a tax return, a CPA should verify "to the penny" every item of information submitted by a client.

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

Compute the overvaluation penalty for each of the following independent cases involving the taxpayer's reporting of the fair market value of charitable contribution property.In each case, assume a marginal income tax rate of 35%.

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

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

The taxpayer or a tax advisor may be subject to penalties if there is a misstatement of the valuation of an item reported on the tax return. Describe how these penalties work.

Chung's AGI last year was $180,000.Her Federal income tax came to $45,000, which she paid through a combination of withholding and estimated payments.This year, her AGI will be $250,000, with a projected tax liability of $60,000, all to be paid through estimates.Ignore the annualized income method.Compute Chung's quarterly estimated payment schedule for this year.

When a practitioner discovers an error in a client's prior return, AICPA tax ethics rules require that an amended return immediately be filed.

Harold, a calendar year taxpayer subject to a 35% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $20,000 for a sculpture that the IRS later valued at $10,000.The applicable overvaluation penalty is:

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:

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

Does the tax preparer enjoy an "attorney-client privilege" of confidentiality with his or her clients?

Juanita, who is subject to a 35% marginal gift tax rate, made a gift of a sculpture to Bianca, valuing the property at $150,000.The IRS later valued the gift at $300,000.The applicable undervaluation penalty is:

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:

The IRS employs about 100,000 personnel, making it one of the largest Federal agencies.

The tax professional can do more than just tax compliance work. He or she can work with the client in consultation over the strategy and tactics of dealing with a Federal tax audit.

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ____________________ for the taxpayer's position.