Exam 17: Tax Practice and Ethics

Circular 230 applies to all paid tax practitioners.This includes attorneys,CPAs,and enrolled agents,even though each of the groups has its own code of conduct.

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

During any month in which both the failure-to-file and failure-to-pay penalties apply,both penalties must be paid in full.

A tax preparer can incur a penalty if the client's return includes an unreasonable or ___________________ tax return position that understates the tax liability.

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:

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

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

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

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

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

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. The IRS has engaged in the following initiatives,among others.

Circular 230 requires that the tax practitioner use the "best practices" of the tax profession in carrying out a tax engagement.Specify what some of these best practices entail.

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

The IRS pays interest on a refund to the taxpayer,unless the IRS's payment is made within ____________________ days of the date that a return is filed.

Maria's AGI last year was $95,000.To avoid a penalty,her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes. or

The taxpayer must pay a significant fee to have a letter ruling issued by the IRS.

The IRS processes about ____________________ million individual tax returns every year,about ____________________ million of which are filed electronically.

Bettie,a calendar year individual taxpayer,files her 2011 return on February 10,2013.She had obtained a six-month extension for filing her return.There was additional income tax of $20,000 due with the return.

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

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