Question 1

Tax return preparers must enter the annual filing season program (AFSP).

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the calculation of the failure-to-file penalties?

Accepted Answer

A) Half of 1 percent (0.5 percent) of the tax due for each month late, limited to 25 percent of the taxes due 
B) 5 percent of the tax due for each quarter late, limited to 25 percent of the taxes due 
C) 5 percent of the tax due for each month or part of the month that it is late, limited to 25 percent of the taxes due 
D) 20 percent of the tax due 
E) 5 percent of the tax due 
A) Half of 1 percent (0.5 percent) of the tax due for each month late, limited to 25 percent of the taxes due 
B) 5 percent of the tax due for each quarter late, limited to 25 percent of the taxes due 
C) 5 percent of the tax due for each month or part of the month that it is late, limited to 25 percent of the taxes due 
D) 20 percent of the tax due 
E) 5 percent of the tax due

Question 3

List three different ways that a tax return may be selected for an audit.

Accepted Answer

Any of the following will suffice:
1. By

Question 4

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

Accepted Answer

A) True 
 B)False

Question 5

For each of the following situations, indicate the nature and amount of the penalty that could be imposed. (The penalties include both tax practitioner penalties and taxpayer penalties).
​

Accepted Answer

The answer of For each of the following situations, indicate...

Question 6

The IRS may issue a summons for a taxpayer's bank account records.

Accepted Answer

A) True 
 B)False

Question 7

Mike deducts a bad debt on his 2014 tax return. How many years is the statute of limitations for the bad debt deduction?

Accepted Answer

A) Zero 
B) 3 years 
C) 6 years 
D) 7 years 
E) No limit 
A) Zero 
B) 3 years 
C) 6 years 
D) 7 years 
E) No limit

Question 8

The Wage and Investment Office of the IRS handles small business taxpayers.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a preparer penalty?

Accepted Answer

A) Tax preparers may be assessed a penalty for failing to give the taxpayer the preparer's workpapers. 
B) Tax preparers may be assessed a penalty for failing to keep a copy of the prepared return. 
C) Tax preparers may be assessed a penalty for endorsing or cashing a refund check issued to a taxpayer. 
D) Tax preparers may be assessed a penalty for failing to sign a tax return. 
A) Tax preparers may be assessed a penalty for failing to give the taxpayer the preparer's workpapers. 
B) Tax preparers may be assessed a penalty for failing to keep a copy of the prepared return. 
C) Tax preparers may be assessed a penalty for endorsing or cashing a refund check issued to a taxpayer. 
D) Tax preparers may be assessed a penalty for failing to sign a tax return.

Question 10

​Which of the following is not a characteristic around which tax planning is organized:

Accepted Answer

A) Jurisdiction​ 
B) ​Timing 
C) ​Entity 
D) ​Character 
E) ​All of the above 
A) Jurisdiction​ 
B) ​Timing 
C) ​Entity 
D) ​Character 
E) ​All of the above

Question 11

Tax evasion involves the use of illegal methods to reduce or avoid income tax.

Accepted Answer

A) True 
 B)False

Question 12

Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.

Accepted Answer

A) True 
 B)False

Question 13

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

Accepted Answer

A) True 
 B)False

Question 14

The Discriminant Function System is designed to identify tax returns that may contain errors.

Accepted Answer

A) True 
 B)False

Question 15

Indicate the date that the statute of limitations would run out on the following situations:
​
a. The IRS assesses additional taxes for a 2012 tax return audit on May 5, 2014. How long does the IRS have to collect the tax?
b. On April 1, 2014, the IRS asks for and the taxpayer agrees to an additional year to complete an audit for a 2010 tax return which was filed on March 9, 2011.
c. Jeremy reported $10,000 of worthless debt on his 2013 tax return which he filed on August 3, 2014.
d. Jenny files her 2014 tax return on February 25, 2015.
e. James omits 7 percent of his income on his 2012 tax return which he filed on July 12, 2013.

Accepted Answer

a. May 5, 2024
b. April 1, 201

Question 16

What type of audit (office, field or correspondence) is demonstrated in the following examples?
a. An IRS agent views Microsoft's books and records at the Microsoft headquarters.
b. Susie receives a letter from the IRS asking her to provide documentation to support her charitable contributions on her tax return filed in the prior year.
c. Mr. and Mrs. John Doe are asked to bring their supporting documents to the downtown IRS office so that an IRS agent may review their tax return which was filed 2 years ago.

Accepted Answer

The answer of What type of audit (office, field or...

Question 17

The IRS determined that John underpaid his 2012 tax liability by $6,000 due to negligence. In 2014, John pays $1,000 of interest related to the underpayment and the full amount of any penalties assessed by the IRS.
a.Calculate the amount of the accuracy-related penalty that could be assessed by the IRS in this situation.
b.What part of the deficiency, income taxes, interest and penalty, is deductible by John on his current tax return? Explain.

Accepted Answer

The answer of The IRS determined that John underpaid his...

Question 18

Answer the following:
a.​​Geoffrey filed his tax return 2 months and 8 days late and had not requested an extension of time for filing. Geoffrey's return indicated that he is to receive a $600 refund in taxes. Calculate the amount of Geoffrey's penalty for failure to file his tax return on time, assuming the failure to file was not fraudulent.
b.​​​​John filed his individual income tax return 3 1/2 months after it was due. He had not requested an extension of time for filing. Along with his return, John remitted a check for $1,000, which was the balance of the taxes he owed with his return. Disregarding interest, calculate the total penalty that John will be required to pay, assuming the failure to file was not fraudulent (and that he is not subject to failure-to-pay penalties).

Accepted Answer

The answer of Answer the following:
a.​​Geoffrey filed his tax return...

Question 19

Tax returns selected for most audits are selected by the Discriminant Function System.

Accepted Answer

A) True 
 B)False

Question 20

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

Accepted Answer

A) True 
 B)False

Tax return preparers must enter the annual filing season program (AFSP).

Which of the following is the calculation of the failure-to-file penalties?

List three different ways that a tax return may be selected for an audit.

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

For each of the following situations, indicate the nature and amount of the penalty that could be imposed. (The penalties include both tax practitioner penalties and taxpayer penalties).

The IRS may issue a summons for a taxpayer's bank account records.

Mike deducts a bad debt on his 2014 tax return. How many years is the statute of limitations for the bad debt deduction?

The Wage and Investment Office of the IRS handles small business taxpayers.

Which of the following is not a preparer penalty?

Which of the following is not a characteristic around which tax planning is organized:

Tax evasion involves the use of illegal methods to reduce or avoid income tax.

Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

The Discriminant Function System is designed to identify tax returns that may contain errors.

Tax returns selected for most audits are selected by the Discriminant Function System.

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

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

Tax return preparers must enter the annual filing season program (AFSP).

Which of the following is the calculation of the failure-to-file penalties?

List three different ways that a tax return may be selected for an audit.

A taxpayer with an average tax rate of 20 percent who receives additional income of $20,000 will pay additional taxes of $4,000.

For each of the following situations, indicate the nature and amount of the penalty that could be imposed. (The penalties include both tax practitioner penalties and taxpayer penalties). ​

The IRS may issue a summons for a taxpayer's bank account records.

Mike deducts a bad debt on his 2014 tax return. How many years is the statute of limitations for the bad debt deduction?

The Wage and Investment Office of the IRS handles small business taxpayers.

Which of the following is not a preparer penalty?

​Which of the following is not a characteristic around which tax planning is organized:

Tax evasion involves the use of illegal methods to reduce or avoid income tax.

Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.

Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.

The Discriminant Function System is designed to identify tax returns that may contain errors.

Tax returns selected for most audits are selected by the Discriminant Function System.

Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits.

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

For each of the following situations, indicate the nature and amount of the penalty that could be imposed. (The penalties include both tax practitioner penalties and taxpayer penalties).

Which of the following is not a characteristic around which tax planning is organized: