Exam 26: Tax Practice and Ethics

The IRS periodically updates its list of "audit initiatives," the areas of tax enforcement that will receive special attention during the current tax year. List five or more of the current IRS audit initiatives.

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."

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

The IRS can waive the penalty for understating a tax liability if the taxpayer shows ____________________ for the position taken on the tax return.

Which statement appearing below does not correctly describe the IRS letter ruling process?

A tax professional needs to know how the IRS is structured and how it works to carry out its mission. Evaluate this statement.

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

With respect to the Small Cases Division of the Tax Court,

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

A taxpayer can take a dispute to the Small Cases Division of the Tax Court when the disputed amounts do not exceed $____________________. or

To file for a tax refund, an individual generally uses Form ____________________.

Quon filed an amended return, claiming a $100,000 refund. The IRS disallowed the refund, and it can assess a penalty if there was no reasonable basis of support for the refund claim, in the amount of ____________________% of the disallowed amount. or

A(n) $____________________ penalty applies if the tax preparer does not sign the client's tax return. or

In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?

IRS computers use document matching programs for both individuals and business taxpayers to keep the audit rate low.

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation, in the amount of the lesser of ____________________% of the tax understatement or ____________________ % of the appraisal fee collected. or

Fiona, a VITA volunteer for her college's tax clinic, is exempted from the Code's tax preparer penalties.

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.

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.

Faye, a CPA, is preparing Judith's tax return.Before computing Judith's deduction for business supplies, Faye must examine Judith's records in support of the deducted amount.