Exam 26: Tax Practice and Ethics

A CPA and a taxpayer can keep a document confidential from the IRS unless it relates to a ____________________ or a ____________________ proceeding against the taxpayer.

Mickey,a calendar year taxpayer,filed a return correctly showing no Federal income tax liability for 2009.During 2010,his AGI is $120,000 and his tax liability is $20,000.To avoid a penalty for 2010,Mickey must make aggregate estimated tax payments of at least:

Jenny prepared Steve's income tax returns for no compensation for 2007 and 2008.Jenny is Steve's cousin.In 2010,the IRS notifies Steve that it will audit his returns for 2006-2008.If Steve so desires,Jenny may represent him during the audit of all three returns.

A ____________________% penalty may result when a taxpayer overstates by _____________________ percent or more the value of an asset contributed to a charity.

How do rulings issued by the IRS benefit both the taxpayer and the IRS?

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.

Maureen,a calendar year taxpayer subject to a 35% marginal tax rate,claimed a charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $200,000.The applicable overvaluation penalty is:

The IRS is one of the largest Federal agencies,employing at least ____________________ people throughout the year.

Henrietta has hired Gracie,a CPA,to complete this year's Form 1040.Henrietta uses software to keep the books for her business.She tells Gracie that a $5,000 amount for business supplies is "close enough" to constitute the deduction.Gracie can use this estimate in completing the Form 1040.

The IRS targets high-income individuals for an audit rate that is about double that of the general populace.

If the taxpayer comes to the IRS's office to review a tax return,the review is called a(n)____________________ audit.

Orville,a cash basis,calendar year taxpayer,filed his income tax return 100 days after the due date.Orville never extended his return,and with the return he paid the taxes that were due.What penalties will Orville incur,and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

The IRS processes about ____________________ million individual tax returns every year.

IRS letter rulings seldom are revised or revoked.

Does the tax preparer enjoy an "attorney-client privilege" of confidentiality with his or her clients?

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

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?

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 $6,000 to prepare the return.What is Freddie's preparer penalty?

Circular 230 prohibits a tax preparer from charging a contingent fee for preparing an original Form 1040.

A tax preparer can incur a penalty if the client's return includes a(n)___________________ or ____________________ tax return position that understates the tax liability.