FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 26: Tax Practice and Ethics

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

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 might be used. -Failure to pay a tax that is due.

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

G) D) and F)
H) A) and E)

Correct Answer

verified

Show Answer

Question 72

Multiple Choice

Review LaterAdd Note

Review Later

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

A) Financial accounting tax accrual workpapers.
B) A tax research memo used to determine an amount reported on the tax return.
C) Building a defense against a penalty assessed for the use of a tax shelter.
D) Building a defense against a charge brought by the SEC.

E) B) and C)
F) A) and D)

Correct Answer

verified

Show Answer

Question 73

Short Answer

Review LaterAdd Note

In taking a dispute to the Appeals Division, a written protest is required of the taxpayer when the proposed deficiency exceeds $____________________.

Mickey, a calendar year taxpayer, was not required to file a Federal income tax return last year because his AGI was negative due to business losses. For this tax year, his AGI is $120,000 and his tax liability is $10,000. To avoid a penalty for tax underpayments for the current year, Mickey must make aggregate estimated tax payments of at least:

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate. In each case, assume a marginal Federal estate tax rate of 40%. $\begin{array}{lll} &\text { Reported Value }&\text {Corrected IRS Value }\\\end{array}$ A) $\begin{array}{lll} && \$ 10,000 &&&&& \$ 20,000 \\\end{array}$ B) $\begin{array}{lll}&& 60,000 &&&&&& 100,000 \\\end{array}$ C) $\begin{array}{lll} && 80,000 &&&&&& 150,000 \\\end{array}$ D) $\begin{array}{lll}&& 50,000 & &&&&&300,000\end{array}$

When a tax dispute is resolved, interest is paid by or to the government. How are IRS interest amounts determined? To which tax amounts do they apply?

Maria did not pay her Federal income tax on time. When she eventually filed the return, she reported a balance due. Compute Maria's failure to file penalty in each of the following cases. Disregard any failure to pay penalty. a. Three months late, $500 additional tax due. b. Four months late, $2,000 additional tax due. c. Ten months late, $10,000 additional tax due. d. Four months late due to fraud by Maria, $10,000 additional tax due. e. Fifteen months late due to fraud by Maria, $10,000 additional tax due.

Compute the failure to pay and failure to file penalties for John, who filed his 2012 income tax return on December 14, 2013, paying the $10,000 amount due. On April 1, 2013, John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request. He has no reasonable cause for failing to file his return by October 15, or for failing to pay the tax that was due on April 15, 2013. John's failure to comply with the tax laws was not fraudulent.

If the taxpayer shows for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.

Lori, a calendar year individual taxpayer, files her 2013 return on February 10, 2015. She had obtained a six-month extension for filing her return. There was additional income tax of $30,000 due with the return. a. What are Lori's penalties for failure to file and to pay? b. Would your answer to a. change if Lori, before the due date of the return, had retained a CPA to prepare the return and it was the CPA's negligence that caused the delay?

For purposes of tax penalties, a VITA volunteer is not classified as a tax return .

The general statute of limitations regarding Federal tax returns extends for years. It is years if a substantial understatement of income is found, and years with respect to worthless securities.

When a tax issue is taken to court, the burden of proof is on the IRS to show that its audit adjustments are correct.

Juarez (a calendar year taxpayer) donates a painting to a local art museum (a qualified charity) . The painting cost Juarez $2,000 ten years ago and, according to one of Juarez's friends (an amateur artist) , now is worth $40,000. On his income tax return, Juarez deducts $40,000 as a Form 1040 charitable contribution. Upon later audit by the IRS, it is determined that the true value of the painting was $30,000. Assuming that Juarez is subject to a 25% marginal Federal income tax rate, his penalty for overvaluation is:

The tax preparer penalty for taking an unreasonable tax return position is the greater of $ or of the tax professional's income from preparing the return.

Minnie, a calendar year taxpayer, filed a return correctly showing a zero Federal income tax liability for last year, because her Form 1040 showed various deductions and credits. For this tax year, Minnie's AGI is $120,000 and her tax liability is $20,000. To avoid a penalty for the current year, Minnie must make aggregate estimated tax payments of at least:

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

The IRS processes about million individual tax returns every year, about percent of which are filed electronically.

Freddie has been assessed a preparer penalty for willful and reckless conduct. When he completed Peggy's Federal income tax return (she is in the 33% tax bracket) , Freddie purposely omitted $100,000 of cash receipts that should have been reported as gross income. Freddie charged Peggy $4,000 to prepare the return. What is Freddie's preparer penalty?