Question 1

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ________________ for the taxpayer's position.

Accepted Answer

The answer of A negligence penalty can be waived if...

Question 2

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

Accepted Answer

100, 90
on...

Question 3

The tax law requires that all paid tax preparers:

Accepted Answer

A)   Have a current Preparer Tax Identification Number (PTIN) .
B)   Hold a bachelor's degree.
C)   Hold a bachelor's degree in business or economics.
D)   Complete at least 20 hours or continuing education courses every year.E) B) and C)
F) A) and D)

Question 4

Minnie, your tax client, has decided to dispute the Revenue Agent's Report. List and discuss at least four of your
"next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.

Accepted Answer

Carrying out a level of due diligence in preparing for such a proceeding is part of the tax professional's responsibility in representing the client.
? Make certain that both sides agree on the issues to be resolved in the audit. The goal here is to bring closure to the agent's list of open issues.
? Identify all of the facts underlying the issues in dispute, including those favorable to the IRS. Gather evidence to support the taxpayer's position, and evaluate the evidence supporting the other side.
? Identify current tax law authorities as they bear on the facts and open issues.
Remember that the IRS agent is bound only by Supreme Court cases and IRS pronouncements. Determine here the degree of discretion that the IRS is likely to have in disposing of the case.
? Prepare a list of points, ranging from those bearing little weight to the core principles upon which the taxpayer's case may rest, supporting and contradicting that position. Short research memos will be useful as well in the discussion with the agent. Pro-taxpayer points should be mentioned during the discussion and "entered into the record."
? Prepare tax and interest computations as to the effects of points that are in dispute, so that the effects of closing or compromising an issue always can be determined.
? Determine a "litigation point" (i.e., at which the taxpayer's position will be withdrawn from further audit negotiation and taken to the courts). This position should reflect the dollars of tax, interest, and penalty involved, the chances of prevailing in various trial-level courts, and other strategies discussed with the taxpayer. One must have an "end game" strategy for the audit, and thorough tax research is critical in developing that position in this context.

Question 5

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

Accepted Answer

A) True 
 B)False

Question 6

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
a. Ignorance of the tax law 
b. Reasonable basis
c. Reasonable cause
d. Complexity of the tax law 
e. Substantial authority
f. Disclosure on return
-Failure to pay a tax that is due.

Accepted Answer

The answer of For each of the indicated tax penalties,...

Question 7

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Accepted Answer

A) True 
 B)False

Question 8

Circular 230 allows a tax preparer to:

Accepted Answer

A)   Take a position on a tax return that is contrary to a decision of the U.S. Supreme Court.
B)   Avoid signing a tax return that is likely to be audited.
C)   Charge a $5,000 fee to prepare a Form 1040EZ.
D)   Operate the "Tax Nerd's Blog" on the Internet.E) All of the above
F) A) and C)

Question 9

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

Accepted Answer

A) True 
 B)False

Question 10

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter.
a. Taxpayer penalty
b. Tax preparer penalty 
c. Appraiser's penalty
-Fraudulent failure to file a tax return.

Accepted Answer

The answer of Match each of the following tax penalties...

Question 11

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation, in the amount of the lesser of % of the tax understatement or ____________________ % of the appraisal fee collected.

Accepted Answer

10, 125
te...

Question 12

After receiving a ninety-day letter, the taxpayer has 90 days to:

Accepted Answer

A)   Pay any outstanding tax, interest, and penalties.
B)   Appeal the dispute to the Tax Court.
C)   Either a. or b.
D)   Neither a. nor b.E) B) and D)
F) A) and D)

Question 13

On July 1, Hernandez files a refund claim with the IRS, and the IRS agrees with his computations. The IRS can avoid paying any interest to Hernandez if:

Accepted Answer

A)   The total tax involved does not exceed $5,000 (indexed for inflation) .
B)   The IRS pays Hernandez the amount owed on August 10.
C)   Both a. and b.
D)   Neither a. nor b.E) A) and B)
F) None of the above

Question 14

Circular 230 applies to all paid tax practitioners. But attorneys, CPAs, and enrolled agents are exempt from the Circular 230 rules, because each of the groups has its own code of professional conduct.

Accepted Answer

A) True 
 B)False

Question 15

The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.

Accepted Answer

45

Question 16

The AICPA's Statements on Standards for Tax Services (SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

Accepted Answer

A) True 
 B)False  False

Question 17

A letter ruling should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a ________________ (proposed, completed) transaction.

Accepted Answer

The answer of A letter ruling should be requested when...

Question 18

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court. This is conveyed in the "ninety-day letter."

Accepted Answer

A) True 
 B)False

Question 19

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified ________________ .

Accepted Answer

The answer of The taxpayer can avoid a valuation penalty...

Question 20

Which statement is incorrect as to the conduct of IRS income tax audits?

Accepted Answer

A)   Most IRS examinations of Forms 1040 are conducted solely through the mail.
B)   The "office audit" occurs less frequently than all other audit types.
C)   The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report.
D)   For a Form 1040 that is filed on April 11, if the taxpayer has not received an audit notification from the IRS by the end of the year, the return still may be audited.E) A) and B)
F) A) and C)

Exam 26: Tax Practice and Ethics

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ________________ for the taxpayer's position.

Correct Answer
verified

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for this year must equal the lesser of percent of last year's taxes or percent of this year's taxes.

Correct Answer
verified
100, 90
on...
View Answer

The tax law requires that all paid tax preparers:

Correct Answer
verified

Minnie, your tax client, has decided to dispute the Revenue Agent's Report. List and discuss at least four of your "next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

Correct Answer
verified

Correct Answer
verified

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Correct Answer
verified

Circular 230 allows a tax preparer to:

Correct Answer
verified

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

Correct Answer
verified

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. a. Taxpayer penalty b. Tax preparer penalty c. Appraiser's penalty -Fraudulent failure to file a tax return.

Correct Answer
verified

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation, in the amount of the lesser of % of the tax understatement or ____________________ % of the appraisal fee collected.

Correct Answer
verified
10, 125
te...
View Answer

After receiving a ninety-day letter, the taxpayer has 90 days to:

Correct Answer
verified

On July 1, Hernandez files a refund claim with the IRS, and the IRS agrees with his computations. The IRS can avoid paying any interest to Hernandez if:

Correct Answer
verified

Circular 230 applies to all paid tax practitioners. But attorneys, CPAs, and enrolled agents are exempt from the Circular 230 rules, because each of the groups has its own code of professional conduct.

Correct Answer
verified

The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.

Correct Answer
verified
45

The AICPA's Statements on Standards for Tax Services (SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

Correct Answer
verified
False

A letter ruling should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a ________________ (proposed, completed) transaction.

Correct Answer
verified

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court. This is conveyed in the "ninety-day letter."

Correct Answer
verified

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified ________________ .

Correct Answer
verified

Which statement is incorrect as to the conduct of IRS income tax audits?

Correct Answer
verified

Exam 26: Tax Practice and Ethics

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ________________ for the taxpayer's position.

Correct AnswerverifiedShow Answer

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

Correct Answerverified100, 90on...View AnswerShow Answer

The tax law requires that all paid tax preparers:

Correct AnswerverifiedShow Answer

Minnie, your tax client, has decided to dispute the Revenue Agent's Report. List and discuss at least four of your "next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Correct AnswerverifiedShow Answer

Circular 230 allows a tax preparer to:

Correct AnswerverifiedShow Answer

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

Correct AnswerverifiedShow Answer

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. a. Taxpayer penalty b. Tax preparer penalty c. Appraiser's penalty -Fraudulent failure to file a tax return.

Correct AnswerverifiedShow Answer

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation, in the amount of the lesser of % of the tax understatement or ____________________ % of the appraisal fee collected.

Correct Answerverified10, 125te...View AnswerShow Answer

After receiving a ninety-day letter, the taxpayer has 90 days to:

Correct AnswerverifiedShow Answer

On July 1, Hernandez files a refund claim with the IRS, and the IRS agrees with his computations. The IRS can avoid paying any interest to Hernandez if:

Correct AnswerverifiedShow Answer

Circular 230 applies to all paid tax practitioners. But attorneys, CPAs, and enrolled agents are exempt from the Circular 230 rules, because each of the groups has its own code of professional conduct.

Correct AnswerverifiedShow Answer

The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.

Correct Answerverified45

The AICPA's Statements on Standards for Tax Services (SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

Correct AnswerverifiedFalse

A letter ruling should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a ________________ (proposed, completed) transaction.

Correct AnswerverifiedShow Answer

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court. This is conveyed in the "ninety-day letter."

Correct AnswerverifiedShow Answer

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified ________________ .

Correct AnswerverifiedShow Answer

Which statement is incorrect as to the conduct of IRS income tax audits?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for this year must equal the lesser of percent of last year's taxes or percent of this year's taxes.

Correct Answer
verified
100, 90
on...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
10, 125
te...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
45

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified