Exam 26: Tax Practice and Ethics

The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

Which of the following statements correctly reflects the rules governing interest to be paid on an individual's Federal tax deficiency or claim for refund?

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

Describe the following written determinations that are issued by the IRS.

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

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment.What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

Jake, an individual calendar year taxpayer, incurred the following transactions. Assuming that any error in timely reporting these amounts was inadvertent, how much omission from gross income would be required before the six-year statute of limitations would apply?

Under Circular 230, tax preparer Winston cannot disclose to a mortgage banker the income level of her client Pickett, or other information acquired by preparing the return, without Pickett's permission.

The AICPA's Statements on Standards for Tax Services must be followed by its members; they are more than merely advisory.

A CPA, an attorney, and a(n) ____________________ can represent taxpayers before the IRS in an Appeals conference.

The IRS targets high-income individuals for an audit rate that is much higher than that of the general populace.

Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

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

In a criminal fraud case, the burden is on the taxpayer to show that he or she was innocent "beyond the shadow of any reasonable doubt."

Maria and Miguel Blanco are in the midst of negotiating a divorce. Because both parties are unwilling to share any current financial information, their joint Form 1040 for 2012 is not filed until October 31, 2013, when the respective divorce attorneys forced them to cooperate. The Blancos should not be subject to any Federal late-filing penalties, because of the reasonable cause exception.

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.

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

During an audit, the IRS might require that the taxpayer produce the ____________________ that underlie the tax return data.

If the taxpayer refuses to pay an assessed tax, the IRS can seize taxpayer property under the ____________________ process.

Minnie, a calendar year taxpayer, filed a return correctly showing a zero Federal income tax liability for 2011, because her Form 1040 showed various deductions and credits.During 2012, Minnie's AGI is $120,000 and her tax liability is $20,000.To avoid a penalty for 2012, Minnie must make aggregate estimated tax payments of at least: