1. If the fraud penalty is assessed, which one of the following may be assessed with respect to the same underpayment? o Negligence penalty o Failure to file penalty o Failure to pay penalty o 2. If any part of any understatement of liability as to a return or claim for refund is due to a willful attempt to understate the liability, the preparer could be subject to a “per return” penalty of: o $250 o $1,000 o o $10,000 3. Any preparer who endorses or otherwise negotiates a refund check issued to a taxpayer for a return or claim for refund prepared by the preparer is subject, with respect to each such check, to a penalty of: · $25 · $50 · $100 4. Interest is paid by the IRS on overpayment of tax if any overpayment of tax is not refunded within which of the following number of days after the due date of the return (or filing date, if later): · 10 days · 30 days · 60 days 5. What is the applicable length of time for the statute of limitations on assessment of taxes if the taxpayer willfully evades taxes? · 18 months · 3 years · 6 years 6. Which of the following helps solve taxpayer problems of dealing with the IRS? · Chief Financial Officer · Chief Compliance Officer · Chief Information Officer 7. If a taxpayer under review disagrees with the revenue agent, he or she may: · Request a conference in the IRS Appeals Office. · File a petition in the Tax Court within the 90-day period after receiving the statutory notice of deficiency. · Wait for the 90-day period to expire, pay the assessment, and start a refund suit in the District Court or the Claims Court. 8. Which of the following may not occur during the Appeals conference? · The taxpayer may represent himself or herself. · The Appeals Officer may request that the taxpayer submit additional information which could involve additional conferences. · The Appeals Office may resolve controversies between the taxpayer and the IRS by considering the “hazards of litigation.” 9. All of the following statements relating to Form 870-AD are true, except: · By signing Form 870-AD, the taxpayer waives restrictions on the assessment and collection of any deficiency. · Form 870-AD is merely the taxpayer’s offer to waive restrictions and interest will run until 30 days after the IRS has accepted the offer. · The taxpayer is not required to sign Form 870-AD if the taxpayer does not agree with the decision at the Appeals level. 10. All of the following statements regarding determination letters are true, except: · A determination letter is generally issued in the same circumstances as a private ruling. · Most determination letters are issued in matters involving pension plans and exempt organizations. · A determination letter is issued in response to a written inquiry of the taxpayer which applies the principles and precedents announced by the National Office to a specific set of facts. 11. There is no limitation on the period for assessment: · If the taxpayer omits from gross income an amount which is in excess of 25 percent of the amount of gross income stated on the return. · In the case of a deficiency attributable to the application of a carryback (capital loss, net operating loss, or investment credit carryback). · If a personal holding company fails to file with its return a schedule regarding its status as a personal holding company. · In all of the above cases. 12. Leo Lambert, a calendar year taxpayer, filed his 2007 individual income tax return on March 15, 2008, and attached a check for the balance of tax due as shown on the return. On June 15, 2008, Leo discovered that he had failed to include, in his itemized deductions, $1,000 interest on his home mortgage. In order for Leo to recover the tax that he would have saved by utilizing the $1,000 deduction, he must file an amended return no later than: · December 31, 2010 · March 15, 2011 · June 15, 2011 13. Barbara Bigsby filed her 2006 Form 1040 on April 15, 2007, but did not pay her tax liability of $3,000. On June 15, 2008, she paid the tax in full. In 2009, Barbara discovered additional deductions for 2006 that will result in a refund of $1,000. To receive her refund, Barbara must file an amended income tax return by: · April 15, 2011 · June 15, 2011 · April 15, 2010 14. Brian Bogart wishes to appeal the findings of the United States Claims Court concerning his tax liability. Brian must appeal to: · · United States Board of Tax Appeals · United States District Court · United States Court of Appeals for the Federal Circuit 15. Interest rates for overpayments and underpayments of taxes are established on a: · Monthly basis · Semiannual basis· Annual basis 16. Individuals pay a rate of interest on tax deficiencies: · Equal to one point less than the current LIBOR rate · Equal to one point greater than the rate paid by the IRS on tax refunds · Equal to the prime rate as set by the Federal Reserve on the date that the assessment is made 17. The accuracy related penalty for negligence or disregard of rules and regulations is: · 25% of the deficiency· 35% of the deficiency· 15% of the deficiency 18. The penalty for substantial understatement of income tax and substantial valuation misstatements: o Are identical o May be assessed even though no tax return has been filed o May not be abated even though the taxpayer may demonstrate reasonable cause 19. If a federal income tax return is mailed prior the due date but received by the IRS Service Center after the due date it is: o Deemed to be filed with the Service Center on the due date o Deemed to be filed on the date it is actually delivered to the Service Center o Deemed to be timely filed if mailed by Certified Mail- Return Receipt Requested 20. In computing the three year statute of limitations, the date that the return is deemed filed is: o Excluded o o Disregarded if it falls on a Saturday, Sunday or a legal holiday o Not relevant 21. Pass through adjustments to an individual resulting from an IRS examination of an S corporation, partnership or other entity whose taxable year ended after December 31, 1998, the statute of limitation begins to run from: o The filing date of the return for the pass through entity o The date 75 days following the close of the entity’s taxable year o Begins three months and 15 days following the close of the taxable year of the entity 22. The special six year statute of limitations may be applied if a taxpayer omits: o 25% of the gross income reported on the income tax return o 20% of the amount of the gross estate on a Form 706 o 25% of the adjusted gross income on the tax return 23. If no federal income tax return is filed, an assessment of tax may be made within. o Three years from the date the return should have been filed o Six years from the date that the return should have been filed o Within ten years following the discovering of the failure to file 24. Where a taxpayer and the appeals officer have reached an agreement as to some or all of the issues in controversy, the taxpayer may execute: o A Form 870-AD o A Form 870-P o Any of the above 25. A court of competent jurisdiction will not allow a claim for refund following the execution of a Form 870-AD. o True o Both true and false o Neither true nor false 26. A court of competent jurisdiction will not allow a claim for refund following the execution of a Form 870-P. o False o Both true and false o Neither true nor false 27. A court of competent jurisdiction will not allow a claim for refund following the execution of a closing agreement under Section 7121 of the Internal Revenue Code. o False o Both true and false o Neither true nor false 28. A Statutory Notice of Deficiency may be rescinded under Code Section 6212(d) with the consent of the taxpayer if: o o The taxpayer specifically requests such rescission within the 90 day period. o The taxpayer submits information establishing that he has good cause to believe that the actual tax liability is less than that shown in the Notice of Deficiency. o The taxpayer agrees to execute a Form 872. 29. Where a Statutory Notice of Deficiency is incompletely or incorrectly addressed, courts have generally held that an incorrect address will nullify a Notice of Deficiency even if the taxpayer actually receives the Notice without delay. o True o o Both true and false o Neither true nor false 30. The Internal Revenue Service Manual permits audits of returns after the collection process has begun when: o Taxpayer has received only one notification from the IRS prior to the billing. o The taxpayer is unsatisfied with his/her opportunity to submit the required substantiation and now believes that he/ she has sufficient documentation to support his/her claim. o . o The taxpayer and the original revenue agent had a severe personality conflict. 31. David, an unmarried taxpayer with income exclusively from wages, filed her initial income tax return for the 2002 calendar year. By December 31, 2002, David’s employer had withheld $16,000 in federal income taxes, and David had made no estimated tax payments. On April 15, 2003, David timely filed an extension request to file her individual tax return and paid $300 of additional taxes. David’s 2002 income tax liability was $16,500 when she timely filed her return on April 30, 2003 and paid the remaining income tax liability balance. What amount is subject to the penalty for the underpayment of estimated taxes? o $0 o $ o $500 o $16,500 32. A taxpayer filed his income tax return after the due date but neglected to file an extension form. The return indicated a tax liability of $50,000 and taxes withheld of $45,000. On what amount are the penalties for late filing and late payment computed? o $0 o $45,000 o $50,000 o E.. None of the above 33. Form 4564 is o Notice of Proposed Adjustment o Reportable Transaction Disclosure Statement o Report of Income Tax Preparer Penalty Case o Special Consent to Extend the Time to Assess Tax 34. The form for applying for a taxpayer assistance order (ATAO) is o Form 870 o Form 870AD o Form 872 o Form 872A 35. Which is the Code Section which authorizes the IRS to enter into an agreement (closing agreement) in writing with any person regarding that person’s tax liability for any period? o Section 7129 o Section 7130 o Section 7131 o none of the above 36. If a taxpayer fails to file a return, the taxpayer is liable for a penalty equal to: o 5% for each month’s (or part of a month’s) delay. o 5% for each month’s (or part of a month’s) delay, not to exceed 10% in the aggregate. o at least $100 or 100% of the tax due on the return, whichever is less, if the failure to file the return extends for more than 60 days. 37. Mr. P, who lives in Paris, Texas, receives a letter from the IRS stating that the result of a recent examination is a tax deficiency of $15,000. The examination was handled by a revenue agent at Mr. P’s art studio, his only place of business. The letter also states that Mr. P has a right to file a protest if he does not agree with the proposal. Generally, how many days does Mr. P have to file a written protest? o 15 o 60 o 90 38. A taxpayer, who lives in the United States, receives a 30-day letter from the IRS showing a proposed tax deficiency of $10,000. Which of the following actions should the taxpayer take? o appeal the 30-day letter to the Tax Court o disregard the 30-day letter o wait for a telephone call from an IRS appeals officer for a conference 39. A tax return may not be selected for audit if there is nothing wrong with it. o True or False? o True 40. The interest rates on corporate overpayments of tax are the same as the rates on underpayments. o False o Both true and false o Neither true nor false 41. Civil penalties include additions to tax; criminal penalties consist of fines or imprisonment or both and are imposed on offenses that are misdemeanors or felonies. o False o Both true and false o Neither true nor false 42. The late filing penalty runs to the date on which the IRS actually receives the late return and not to the date on which the return was mailed. o True o o Both true and false o Neither true nor false 43. A firm that offers computerized tax preparation services to tax practitioners or the seller of a computerized program used by taxpayers to prepare returns may be subject to the return preparer penalties if the program determines how tax items are characterized. o True o Both true and false o Neither true nor false 44. To ensure that the IRS will not assess a deficiency against a partner of a partnership without conducting an administrative proceeding at the partnership level, the partner must make sure that his or her return is consistent with the partnership return. o o False o Both true and false o Neither true nor false 45. The Internal Code provision that appears to provide authority to permit the use of indirect methods to compute taxable income is believed to be: o methods of reporting income o methods of allocating income o methods of taxable income o none of the above 46. The Tax Court has held that the use of the net worth method will not be upheld where the taxpayer fails to produce evidence to refute the IRS’s computations. o True o Both true and false o Neither true nor false 47. The “Klein Conspiracy” is movie about how Al Capone’s #1 associate was convicted of tax evasion. o True o Both true and false o Neither true nor false 48. A notice of deficiency received by a taxpayer from the Internal Revenue Service means that a proposed tax liability has been automatically assessed and the taxpayer can no longer take his or her case to the Tax Court. o True o Both true and false o Neither true nor false 49. Tax “evasion” and “avoidance” are almost identical concepts, both relating to the willful failure to comply with tax laws. o True o o Both true and false o Neither true nor false 50. The IRS uses the Formal Document Request (FDR) as a routine practice in examinations of large corporate taxpayers. o True o Both true and false o Neither true nor false 51. A practitioner who is an income tax return preparer and who files a power of attorney with the Internal Revenue Service may receive and endorse a taxpayer’s refund check. o True 52. A corporation may be represented by one of its bona fide officers before the Internal Revenue Service. o False 53. An individual who is a regular full-time employee of a partnership may represent the partnership before the Internal Revenue Service. o o False 54. A claim for refund (Form 1040X, Amended U.S. Individual Income Tax Return) must be filed within three years from the date the return was due or filed, or within two years from the date the tax was paid, whichever is later. · False 55. A notice of deficiency received by a taxpayer from the Internal Revenue Service means that a proposed tax liability has been automatically assessed and the taxpayer can no longer take his or her case to the Tax Court. · True · 56. Determination letters regarding the written qualifications of an individually designed retirement plan are issued by the Internal Revenue Service’s National Office in Washington. · True · 57. Decisions of the Court of Federal Claims are appealed to the U.S. Supreme Court. · True · 58. An unenrolled individual may represent his or her regular full-time employer before the Internal Revenue Service. · False 59. The Tax Court hears cases only if the tax has been assessed or paid. · True 60. A jury trial is allowed in the Tax Court. · True · 61. Taxpayers may request a determination letter from the National Office of the IRS. · True 62. Arnold Ames, a partner in an accounting firm, discovers that one of his clients omitted a substantial amount of gross income. Arnold should immediately notify his partners and the IRS. · True · 63. A claim for refund must be filed within three years from the date the return was filed or within three years from the date the tax was paid, whichever date is later. · True 64. If the taxpayer disagrees with an examiner’s findings, the taxpayer must first make an appeal to the IRS before going to the courts. · True
1. If the fraud penalty is assessed, which one of the following may be assessed with respect to the same underpayment?
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