Exam 1: Federal Income Taxation-An Overview

The statute of limitations is three years, six years if the taxpayer omits gross income in excess of 25%, and there is no statute of limitations if the taxpayer willfully defrauds the government.

The Statements on Standards for Tax Services (SSTS) have common concepts running through most of them. Which of the following statements are parts of the SSTSs? I.The preparer may in good faith rely upon, without verification, information furnished by the client. II.There is confidentiality of the CPA-client relationship. III.Taxpayer supplied estimates may be used to prepare returns if it is impractical to obtain exact data and the estimates are reasonable. IV.The preparer must never disclose to the IRS any facts about the client's tax return information -- unless the client approves disclosure, or the preparer is required to do so by law. ​

Christy's 2017 tax return was audited during November 2018. The auditor proposed additional tax due of $1,500. Christy disagreed. What should Christy do next? I.Within 30 days, she must file a protest. II.She must respond with a written protest letter. III.She may respond with an oral protest. ​

In December 2018, Arnold is considering one last financial decision for 2018. He has $5,000 that he would like to spend before the end of the year. His options include donating the money to a qualified charity (and receiving an itemized deduction) or using the money as a down payment on the purchase of $30,000 of equipment for his business. If he purchases the equipment, he will receive an 8% tax credit for the entire purchase price. He does not need the equipment until early next year, so the purchase at this time is not critical. Assume that Arnold is in the 32% marginal tax rate bracket in 2018 and itemizes his deductions. Which option will provide him with the greatest tax benefit? Explain and show any calculations that support your answer.

Which of the following payments meets the IRS definition of a tax?

Which of the following payments would not be considered a tax?

How long does a taxpayer have to file a petition with the U.S. Tax Court after receiving a Statutory Notice of Deficiency?

The mythical country of Traviola imposes a tax based on the number of gold Tokens each taxpayer owns at the end of each year per the following schedule: ? Number of Tokens Tax 0-200 \ 100+\ 5 per Token 201-500 \ 1,000+\ 6 per Token >500 \ 4,000+\ 7 per Token Traviola's Token tax is a

Tax avoidance occurs when a taxpayer uses fraudulent methods or deceptive behavior to hide actual tax liability.

Match each term with the correct statement below. -Used by persons who do not itemize deductions on their return.

Terry is a worker in the country Pretoria. His salary is $46,000 and his taxable income is $52,000. Pretoria imposes a Worker Tax as follows: ​ Employers withhold a tax of 20% of all wages and salaries. If taxable income as reported on the employee's income tax return is greater than $50,000, an additional 10% tax is withheld on all income. Terry's marginal tax rate is:

Barry has prepared the following 2018 income tax estimate for his sister, Sylvia. Sylvia is single, age 32, and has no children. Sylvia is an employee of General Motors and rents an apartment. Her only investment is a savings bank account. ? Salary \ 37,200 Bank Interest Taxable Income \ 37,950 Tax on \ 37,950@12\% \ 4,554 Income tax liability \ 4,554 Withheld income tax Balance due \ 246 Identify the errors, if any, in Barry's income tax estimate. Additional calculations are not required. ? ? ?

Andrea is single and has a 2018 taxable income of $199,800. She also received $15,000 of tax-exempt income. Andrea's average tax rate is:

Sally is an electrician employed by Bogie Company. Sam is a self-employed electrician. During the current year, Sally's salary is $85,000 and Sam's net self-employment income is $85,000. Which of the following statements about the Social Security and self-employment taxes paid is/are correct? I.Sam's self-employment tax is greater than the Social Security tax paid on Sally's income. II.Sam and Sally pay the same amount of tax. ​

Match each term with the correct statement below. -The result when two similarly situated taxpayers are taxed the same.

Based on the following information, what is the 2018 taxable income for a married couple with two children? ? Total income \ 120,000 Excludable income 2,000 Deductions for AGI 5,000 Allowable itemized deductions 8,000

Carolyn and Craig are married. They have two children (8 years old and 13 years old) living with them. How many qualifying dependents are claimed on Carolyn and Craig's 2018 tax return for purposes of a tax credit?

All tax practitioners who prepare tax returns for a fee are subject to which of the following? I.IRS Circular 230 II.AICPA Code of Professional Conduct III.Statements on Standards for Tax Services IV.American Bar Association Code of Professional Conduct ​

Pay-as-you-go withholding is consistent with Adam Smith's criteria of

Dana is considering investing $20,000 in one of two investments. The income from Investment A is $2,300. The income from Investment B is $3,000. The income from Investment A would be received at the end of the current year and would be excluded from tax. The income from Investment B would also be received at the end of the current year, but would be subject to tax in 3 years under a special deferral provision. How would you advise Dana? Discuss the factors that are necessary to determine which of the two investments provides the greater after-tax yield.