Question 1

What is the difference between tax avoidance and tax evasion?

Accepted Answer

Tax avoidance consists of usin

Question 2

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

Accepted Answer

A) To provide the IRS with additional enforcement powers 
B) To grant to taxpayers the right to choose the time and method of payment of delinquent taxes 
C) To inform taxpayers of their rights in dealing with the IRS 
D) To inform taxpayers of the methods for properly completing their income tax returns 
E) None of the above 
A) To provide the IRS with additional enforcement powers 
B) To grant to taxpayers the right to choose the time and method of payment of delinquent taxes 
C) To inform taxpayers of their rights in dealing with the IRS 
D) To inform taxpayers of the methods for properly completing their income tax returns 
E) None of the above

Question 3

Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be?

Accepted Answer

A) $500 
B) $30,000 
C) $40,000 
D) $0 
A) $500 
B) $30,000 
C) $40,000 
D) $0

Question 4

Kendall is considering the purchase of a home. He has saved $22,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan. Kendall currently rents an apartment for $1,200 per month and does not anticipate an increase in his monthly income. He wants to make sure that the monthly payment on his new home does not exceed $1,200, after-tax. Kendall has a marginal tax rate of 25 percent and an average tax rate of 22 percent. Assuming the monthly mortgage payment (before-tax) will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest, what is the maximum amount that Kendall can spend on a new home?

Accepted Answer

$182,000, determined as $22,000 down pay

Question 5

Tax penalties are not deductible by taxpayers.

Accepted Answer

A) True 
 B)False

Question 6

Linda filed her individual income tax return on its due date, but failed to pay $1,000 in taxes that were due with the return. Linda promptly paid the taxes upon receipt of a notice and demand for payment. If Linda pays the taxes exactly 5 months late, calculate the amount of her failure-to-pay penalty.

Accepted Answer

$25 = $1,0

Question 7

List three things that a preparer needs to do in order to participate in the Annual Filing Season Program.

Accepted Answer

1. Obtain a preparer tax identification

Question 8

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

Accepted Answer

A) True 
 B)False

Question 9

The tax law contains a penalty for filing a "frivolous" tax return.

Accepted Answer

A) True 
 B)False

Question 10

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

Accepted Answer

A) True 
 B)False

Question 11

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 12

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

Accepted Answer

A) Enrolled Agents 
B) Preparers enrolled only in the Annual Filing Season Program 
C) Attorneys 
D) CPAs 
A) Enrolled Agents 
B) Preparers enrolled only in the Annual Filing Season Program 
C) Attorneys 
D) CPAs

Question 13

Which of the following is the most common type of audit for an individual taxpayer?

Accepted Answer

A) Office audit 
B) Telephone audit 
C) Correspondence audit 
D) Field audit 
E) None of the above 
A) Office audit 
B) Telephone audit 
C) Correspondence audit 
D) Field audit 
E) None of the above

Question 14

For the following independent situations, list who (the IRS, the taxpayer, the party who initiates the case, or both sides) has the burden of proof in most civil tax cases:
a. The tax case involves a penalty.
b. The tax case involves a trust with net worth of $8.3 million.
c. The taxpayer has credible evidence, maintains records, and cooperates with reasonable IRS requests.
d. The IRS uses statistics to reconstruct an individual's income.

Accepted Answer

a. The IRS

Question 15

Match between columns
                        Premises: Small Business/Self-Employed Division
Commissioner of internal revenue
Wage & Investment Division
IRS Campus Processing Site
Large Business and International Division

Accepted Answer

The Answer of Processes the information from tax documents and is...

Question 16

Tax returns are processed at the IRS national office in Washington, D.C.

Accepted Answer

A) True 
 B)False

Question 17

The IRS charges a fixed 10 percent interest rate on underpayments of taxes.

Accepted Answer

A) True 
 B)False

Question 18

A "correspondence audit" by the IRS is conducted through the mail.

Accepted Answer

A) True 
 B)False

Question 19

If a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited?

Accepted Answer

A) Wage & Investment Division (W&I) 
B) Large & Midsize Business Office 
C) Small Business Office 
D) Criminal Investigation Office 
E) None of the above offices would perform the audit 
A) Wage & Investment Division (W&I) 
B) Large & Midsize Business Office 
C) Small Business Office 
D) Criminal Investigation Office 
E) None of the above offices would perform the audit

Question 20

Which of the following will not affect the statute of limitations on a tax return?

Accepted Answer

A) Omission of a significant amount of gross income 
B) Mutual consent of the IRS and the taxpayer 
C) Failure to pay the tax due with the tax return 
D) Failure to file a tax return 
E) Filing a fraudulent tax return 
A) Omission of a significant amount of gross income 
B) Mutual consent of the IRS and the taxpayer 
C) Failure to pay the tax due with the tax return 
D) Failure to file a tax return 
E) Filing a fraudulent tax return

What is the difference between tax avoidance and tax evasion?

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be?

Tax penalties are not deductible by taxpayers.

List three things that a preparer needs to do in order to participate in the Annual Filing Season Program.

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

The tax law contains a penalty for filing a "frivolous" tax return.

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

Which of the following is the most common type of audit for an individual taxpayer?

Tax returns are processed at the IRS national office in Washington, D.C.

The IRS charges a fixed 10 percent interest rate on underpayments of taxes.

A "correspondence audit" by the IRS is conducted through the mail.

If a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited?

Which of the following will not affect the statute of limitations on a tax return?

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

What is the difference between tax avoidance and tax evasion?

Which of the following statements best describes the purpose of the Taxpayer Bill of Rights?

Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be?

Tax penalties are not deductible by taxpayers.

List three things that a preparer needs to do in order to participate in the Annual Filing Season Program.

A tax preparer may be subject to a penalty for failing to provide a copy of the taxpayer's tax return to the client.

The tax law contains a penalty for filing a "frivolous" tax return.

The Taxpayer Bill of Rights is summarized in IRS Publication 1.

A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.

Which category of tax preparers may represent their clients in only the most limited situations in front of the IRS?

Which of the following is the most common type of audit for an individual taxpayer?

Tax returns are processed at the IRS national office in Washington, D.C.

The IRS charges a fixed 10 percent interest rate on underpayments of taxes.

A "correspondence audit" by the IRS is conducted through the mail.

If a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited?

Which of the following will not affect the statute of limitations on a tax return?

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