Question 1

When a tax issue is taken to court, the burden of proof is on the taxpayer to show that the items reported on the return are correct.

Accepted Answer

A) True 
 B)False

Question 2

The Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Accepted Answer

A) True 
 B)False

Question 3

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

Accepted Answer

A) True 
 B)False

Question 4

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Accepted Answer

A) True 
 B)False

Question 5

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000.The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Accepted Answer

A) True 
 B)False

Question 6

Currently, the IRS charges a ____________________% interest rate on taxes that the taxpayer underpays.
or

Accepted Answer

The answer of Currently, the IRS charges a ____________________% interest...

Question 7

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Accepted Answer

A) True 
 B)False

Question 8

Megan prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Megan is not liable for a preparer penalty for taking an unreasonable tax return position if:

Accepted Answer

A) The tax reduction attributable to the disputed deduction did not exceed $5,000. 
B) There was a reasonable basis for Joan's interpretation of the travel deduction rules. 
C) There was substantial authority for Joan's interpretation of the travel deduction rules. 
D) The IRS found that the travel deduction was frivolous, but Joan disclosed the position in an attachment to the return. 
A) The tax reduction attributable to the disputed deduction did not exceed $5,000. 
B) There was a reasonable basis for Joan's interpretation of the travel deduction rules. 
C) There was substantial authority for Joan's interpretation of the travel deduction rules. 
D) The IRS found that the travel deduction was frivolous, but Joan disclosed the position in an attachment to the return.

Question 9

Clara underpaid her taxes by $50,000.Of this amount, $15,000 was due to negligence on her part, as her record-keeping system is highly inadequate.Determine the amount of any negligence penalty

Accepted Answer

$3,000 (20

Question 10

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

Accepted Answer

A) True 
 B)False

Question 11

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

Accepted Answer

The answer of According to AICPA rules, the CPA cannot...

Question 12

The tax preparer penalty for taking an unreasonable tax return position is the greater of $____________________ or ____________________ of the tax professional's income from preparing the return.

Accepted Answer

The answer of The tax preparer penalty for taking an...

Question 13

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 14

An "office audit" takes place at the headquarters office of the corporate taxpayer.

Accepted Answer

A) True 
 B)False

Question 15

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

Accepted Answer

A) True 
 B)False

Question 16

A tax preparer is in violation of Circular 230 if he or she:

Accepted Answer

A) Files a tax return that includes a math error. 
B) Charges a fee to prepare an original Form 1120 equal to one-third of the taxpayer's refund due. 
C) Fails to inform the IRS of an error on the client's prior-year return. 
D) All of the above are Circular 230 violations. 
A) Files a tax return that includes a math error. 
B) Charges a fee to prepare an original Form 1120 equal to one-third of the taxpayer's refund due. 
C) Fails to inform the IRS of an error on the client's prior-year return. 
D) All of the above are Circular 230 violations.

Question 17

CPA Jennifer has heard about the AICPA's Statements on Standards for Tax Services. Although Jennifer is a licensed CPA in her state, she is not a member of the AICPA. How do the Statements affect Jennifer's tax practice?

Accepted Answer

The Statements are enforceable standards

Question 18

Concerning a taxpayer's requirement to make quarterly estimated tax payments:

Accepted Answer

A) An individual must make estimated payments if his or her balance due for the Federal income tax for the year will exceed $1,000. 
B) The due dates of the payments for a calendar-year C corporation are March, June, September, and December 15. 
C) A C corporation must make estimated payments if its Federal income tax liability for the year will exceed $250. 
D) A trust is not required to make estimated payments. 
A) An individual must make estimated payments if his or her balance due for the Federal income tax for the year will exceed $1,000. 
B) The due dates of the payments for a calendar-year C corporation are March, June, September, and December 15. 
C) A C corporation must make estimated payments if its Federal income tax liability for the year will exceed $250. 
D) A trust is not required to make estimated payments.

Question 19

Mickey, a calendar year taxpayer, was not required to file a 2011 Federal income tax return because his AGI was negative due to business losses.During 2012, his AGI is $120,000 and his tax liability is $10,000.To avoid a penalty for tax underpayments for 2012, Mickey must make aggregate estimated tax payments of at least:

Accepted Answer

A) $10,000. 
B) $9,000. 
C) $1,000 (minimum amount). 
D) $0. 
A) $10,000. 
B) $9,000. 
C) $1,000 (minimum amount). 
D) $0.

Question 20

According to the IRS, the annual "Tax Gap" totals about $______________________ billion.
or

Accepted Answer

385 three

Exam 26: Tax Practice and Ethics

When a tax issue is taken to court, the burden of proof is on the taxpayer to show that the items reported on the return are correct.

The Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000.The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Currently, the IRS charges a ____________________% interest rate on taxes that the taxpayer underpays. or

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Megan prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Megan is not liable for a preparer penalty for taking an unreasonable tax return position if:

Clara underpaid her taxes by $50,000.Of this amount, $15,000 was due to negligence on her part, as her record-keeping system is highly inadequate.Determine the amount of any negligence penalty

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

The tax preparer penalty for taking an unreasonable tax return position is the greater of $____________________ or ____________________ of the tax professional's income from preparing the return.

An "office audit" takes place at the headquarters office of the corporate taxpayer.

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

A tax preparer is in violation of Circular 230 if he or she:

CPA Jennifer has heard about the AICPA's Statements on Standards for Tax Services. Although Jennifer is a licensed CPA in her state, she is not a member of the AICPA. How do the Statements affect Jennifer's tax practice?

Concerning a taxpayer's requirement to make quarterly estimated tax payments:

According to the IRS, the annual "Tax Gap" totals about $______________________ billion. or

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

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

The tax preparer penalty for taking an unreasonable tax return position is the greater of $ or of the tax professional's income from preparing the return.