Question 1

All paid tax return preparers must sign up with the IRS, pay a fee, and obtain a preparer tax identification number.

Accepted Answer

A) True 
 B)False  True

Question 2

Patricia has taxable income of $40,000 on which she pays income tax of $5,856. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate?

Accepted Answer

A) 15.00 percent 
B) 14.84 percent 
C) 15.32 percent 
D) 25.00 percent 
E) None of the above 
A) 15.00 percent 
B) 14.84 percent 
C) 15.32 percent 
D) 25.00 percent 
E) None of the above D

Question 3

In the following independent situations, is it better to make an installment agreement with the IRS, an offer in compromise with the IRS, or ask for an extension of time to pay any taxes owed?
a. A taxpayer is unlikely to pay the tax amount they owe.
b. Using monthly payments, a taxpayer can afford to pay off the tax owed within 2 years.
c. A taxpayer can pay off their tax owed when they sell their boat which is up for sale.

Accepted Answer

a. An offer in compromise
b. Installment agreement
c. Ask for an extension of time to pay the taxes owed

Question 4

Mark with a "Yes" if the following statement is true and is in Publication 1, The Taxpayers Bill of Rights. Mark with a "No" if the following statement is false or is not addressed in Publication 1.
a. If you do not agree with the IRS examiner's proposed changes in an audit, you must go directly to the court system to resolve the issue.
b. If a taxpayer is due a refund, but did not file a return, then the IRS uses statistics to reconstruct an individual's income in order to compute the refund for the taxpayer.
c. The tax law generally provides for interest on your refund if it is not paid within 45 days of the date you filed your return or filed your claim for refund.
d. Publication 1 explains how to file an amended tax return.

Accepted Answer

a. No
b. N

Question 5

The tax law is administered by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements best describes the process of tax planning?

Accepted Answer

A) Tax planning is equivalent to tax evasion. 
B) Tax planning is the avoidance of "tax traps." 
C) Tax planning is the process of arranging one's financial affairs to minimize one's overall tax liability. 
D) Tax planning is the deferral of tax on income. 
E) Tax planning is the calculation of a taxpayer's marginal rate of tax. 
A) Tax planning is equivalent to tax evasion. 
B) Tax planning is the avoidance of "tax traps." 
C) Tax planning is the process of arranging one's financial affairs to minimize one's overall tax liability. 
D) Tax planning is the deferral of tax on income. 
E) Tax planning is the calculation of a taxpayer's marginal rate of tax.

Question 7

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Accepted Answer

A) True 
 B)False

Question 8

Stephanie has taxable income of $48,200 and a tax liability of $7,913. If Stephanie's income increases by $4,000, her tax liability will be $8,913.
​
a. What is her average tax rate on the $48,200 of income?
b. What is her marginal tax rate?

Accepted Answer

a. 16.4%, calculated

Question 9

Which of the following is the best definition of tax planning?

Accepted Answer

A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of the above are considered tax planning 
A) Preparing a client's tax return 
B) Planning taxpayers' financial affairs in an effort to minimize tax liability 
C) Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law 
D) Researching complex tax issues 
E) None of the above are considered tax planning

Question 10

A tax return with a large casualty loss would be most likely selected for audit through:

Accepted Answer

A) The Discriminant Function System 
B) Information from an informant 
C) Information from another governmental agency 
D) The Taxpayer Compliance Measurement Program 
E) None of the above 
A) The Discriminant Function System 
B) Information from an informant 
C) Information from another governmental agency 
D) The Taxpayer Compliance Measurement Program 
E) None of the above

Question 11

Which of the following is false regarding the return audit process?

Accepted Answer

A) The higher DIF score a return gets, the higher the likelihood for audit. 
B) An office audit is performed at an IRS office. 
C) 50 percent of taxpayers are audited every year. 
D) None of the above is false. 
A) The higher DIF score a return gets, the higher the likelihood for audit. 
B) An office audit is performed at an IRS office. 
C) 50 percent of taxpayers are audited every year. 
D) None of the above is false.

Question 12

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

Accepted Answer

A) Discriminant Function System selected audit 
B) Taxpayer Compliance Measurement Program selected audit 
C) Correspondence audit 
D) Office audit 
E) None of the above 
A) Discriminant Function System selected audit 
B) Taxpayer Compliance Measurement Program selected audit 
C) Correspondence audit 
D) Office audit 
E) None of the above

Question 13

The statute of limitations for the deduction of a worthless security is 5 years.

Accepted Answer

A) True 
 B)False

Question 14

At which of the following IRS locations are tax returns processed?

Accepted Answer

A) Regional offices 
B) IRS Campus Processing Sites 
C) Local offices 
D) National office 
E) None of the above 
A) Regional offices 
B) IRS Campus Processing Sites 
C) Local offices 
D) National office 
E) None of the above

Question 15

The statute of limitations for a tax return generally is 3 years.

Accepted Answer

A) True 
 B)False

Question 16

Janet did not file her tax return or pay her taxes for 2013 until November of 2014. She paid the following amounts to the IRS related to the late filing and payment of tax:
What amount of the above items may be deducted on Janet's 2014 individual income tax return? Explain.

Accepted Answer

$0. The interest is consumer i

Question 17

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

Accepted Answer

A) True 
 B)False

Question 18

If a taxpayer has too much income tax withheld from his salary during the tax year, the IRS will pay interest on the excess amount.

Accepted Answer

A) True 
 B)False

Question 19

Mark with a "Yes" if the following statement is true and is in Publication 1, The Taxpayer Bill of Rights. Mark with a "No" if the following statement is false or is not addressed in Publication 1.
​
a. A phone number to call to have tax questions answered.
b. If a taxpayer is unable to provide or to verify information, then the IRS may contact a neighbor, bank, employer, or employees in order to obtain the information.
c. Only the taxpayer has the right to represent themselves in front of the IRS.
d. Publication 1 explains what to do if an IRS employee has not provided prompt, courteous, and professional assistance to the taxpayer.

Accepted Answer

a. Yes
b.

Question 20

Which of the following is not a possible result of an audit by the IRS?

Accepted Answer

A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of the above are possible results 
A) Payment of a refund to the taxpayer 
B) Payment of a deficiency by the taxpayer 
C) An appeal 
D) No change in the liability 
E) All of the above are possible results

All paid tax return preparers must sign up with the IRS, pay a fee, and obtain a preparer tax identification number.

Patricia has taxable income of $40,000 on which she pays income tax of $5,856. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate?

The tax law is administered by the Federal Trade Commission.

Which of the following statements best describes the process of tax planning?

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Stephanie has taxable income of $48,200 and a tax liability of $7,913. If Stephanie's income increases by $4,000, her tax liability will be $8,913. a. What is her average tax rate on the $48,200 of income? b. What is her marginal tax rate?

Which of the following is the best definition of tax planning?

A tax return with a large casualty loss would be most likely selected for audit through:

Which of the following is false regarding the return audit process?

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

The statute of limitations for the deduction of a worthless security is 5 years.

At which of the following IRS locations are tax returns processed?

The statute of limitations for a tax return generally is 3 years.

Janet did not file her tax return or pay her taxes for 2013 until November of 2014. She paid the following amounts to the IRS related to the late filing and payment of tax: What amount of the above items may be deducted on Janet's 2014 individual income tax return? Explain.

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

If a taxpayer has too much income tax withheld from his salary during the tax year, the IRS will pay interest on the excess amount.

Which of the following is not a possible result of an audit by the IRS?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Filters

Exam 12: Tax Administration and Tax Planning

All paid tax return preparers must sign up with the IRS, pay a fee, and obtain a preparer tax identification number.

Patricia has taxable income of $40,000 on which she pays income tax of $5,856. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate?

The tax law is administered by the Federal Trade Commission.

Which of the following statements best describes the process of tax planning?

Taxpayers are required by law to maintain records to facilitate an IRS audit.

Stephanie has taxable income of $48,200 and a tax liability of $7,913. If Stephanie's income increases by $4,000, her tax liability will be $8,913. ​ a. What is her average tax rate on the $48,200 of income? b. What is her marginal tax rate?

Which of the following is the best definition of tax planning?

A tax return with a large casualty loss would be most likely selected for audit through:

Which of the following is false regarding the return audit process?

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

The statute of limitations for the deduction of a worthless security is 5 years.

At which of the following IRS locations are tax returns processed?

The statute of limitations for a tax return generally is 3 years.

Janet did not file her tax return or pay her taxes for 2013 until November of 2014. She paid the following amounts to the IRS related to the late filing and payment of tax: What amount of the above items may be deducted on Janet's 2014 individual income tax return? Explain.

As a result of an IRS audit, a taxpayer may be required to pay additional taxes, but he or she is never paid a refund.

If a taxpayer has too much income tax withheld from his salary during the tax year, the IRS will pay interest on the excess amount.

Which of the following is not a possible result of an audit by the IRS?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Filters

Stephanie has taxable income of $48,200 and a tax liability of $7,913. If Stephanie's income increases by $4,000, her tax liability will be $8,913. a. What is her average tax rate on the $48,200 of income? b. What is her marginal tax rate?