Exam 26: Tax Practice and Ethics

Jenny prepared Steve's income tax returns for no compensation for 2015 and 2016. Jenny is Steve's mother. In 2018, the IRS notifies Steve that it will audit his returns for 2015 and 2016. Jenny cannot represent Steve during the audit of the returns, as she is not a "registered tax return preparer."

AICPA SSTS#1 requires that a client's tax return position:

Circular 230 requires that a paid tax preparer apply a quality review system in preparing tax returns for her clients.

The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are each division's responsibilities. List the four IRS operating divisions.

Mikel prepared for compensation a Federal income tax return for Mona. Mona's return included an aggressive interpretation of the rules concerning the home office deduction of a sole proprietor. Mikel is not liable for a preparer penalty for taking an unreasonable tax return position if:

Lori, a calendar year individual taxpayer, files her 2016 return on February 10, 2018. She had obtained a six-month extension for filing her return. There was additional income tax of $30,000 due with the return. a. What are Lori's penalties for failure to file and to pay? b. Would your answer to a. change if Lori, before the due date of the return, had retained a CPA to prepare the return and it was the CPA's negligence that caused the delay?

The tax ________________ workpapers prepared as part of an independent financial audit are not privileged communications that can be kept confidential from an IRS subpoena.

When a tax dispute is resolved, interest is paid by or to the government. How are IRS interest amounts determined? To which tax amounts do they apply?

Describe the potential outcomes to a party who provides information to the IRS under the informant or whistleblower program.

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

James can state "the tax law confused me" to avoid a tax penalty for:

Maria did not pay her Federal income tax on time. When she eventually filed the return, she reported a balance due. Compute Maria's failure to file penalty in each of the following cases. Disregard any failure to pay penalty. a. Three months late, $500 additional tax due. b. Four months late, $2,000 additional tax due. c. Ten months late, $10,000 additional tax due. d. Four months late due to fraud by Maria, $10,000 additional tax due. e. Fifteen months late due to fraud by Maria, $10,000 additional tax due.

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.

The IRS employs almost 80,000 personnel, making it one of the largest Federal agencies.

An individual who claims a deduction for qualified business income under § 199A

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

Loren Ltd., a calendar year taxpayer, had the following transactions, all of which were properly reported on a timely filed return. Presuming the absence of fraud, how much of an omission from gross income must occur for Loren before the six-year statute of limitations applies? Show your computations.

Some taxpayers must make quarterly estimated payments of their income tax. Describe the structure of these requirements. In your answer, include both corporate and non-corporate taxpayers.

The general statute of limitations regarding Federal tax returns extends for ________________ years. It is________________years if a substantial understatement of income is found, and ________________years with respect to worthless securities.

After the completion of an audit, the taxpayer has 90 days to petition the ________________ Court to modify the proposed tax due.