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Exam 26: Tax Practice and Ethics

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Question 1

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The tax professional can do more than just tax compliance work. He or she can work with the client in consultation over the strategy and tactics of dealing with a Federal tax audit.

A) True
B) False

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Question 2

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Fiona, a VITA volunteer for her college's tax clinic, is exempted from the Code's tax preparer penalties.

A) True
B) False

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Question 3

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Faye, a CPA, is preparing Judith's tax return.Before computing Judith's deduction for business supplies, Faye must examine Judith's records in support of the deducted amount.

Chung's AGI last year was $180,000.Her Federal income tax came to $45,000, which she paid through a combination of withholding and estimated payments.This year, her AGI will be $250,000, with a projected tax liability of $60,000, all to be paid through estimates.Ignore the annualized income method.Compute Chung's quarterly estimated payment schedule for this year.

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

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.

An individual is not subject to an underpayment penalty until more than $____________________ is due and unpaid through estimated taxes. or

A(n) $____________________ penalty applies if the tax preparer does not sign the client's tax return. or

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. or

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

The special tax penalty imposed on appraisers:

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

CPA Jennifer has heard about the AICPA's Statements on Standards for Tax Services. Although Jennifer is a licensed CPA in her state, she is not a member of the AICPA. How do the Statements affect Jennifer's tax practice?

Margaurite did not pay her Federal income tax on time.When she eventually filed the return, she reported a balance due.Compute Margaurite's failure to file penalty in each of the following cases.

Jaime's negligence penalty will be waived, under the reasonable cause exception. He told the court, "My taxes were wrong because I couldn't understand the tax law."

The IRS can pay an informant's fee of up to ____________________% of the recovered tax, interest, and penalty amounts.The reward can be as high as ____________________% for information provided by a "whistle blower." or

To file for a tax refund, an individual generally uses Form ____________________.

Henrietta has hired Gracie, a CPA, to complete this year's Form 1040.Henrietta uses software to keep the books for her business.She tells Gracie that a $5,000 amount for business supplies is "close enough" to constitute the deduction.Gracie can use this estimate in completing the Form 1040.

The IRS periodically updates its list of "audit initiatives," the areas of tax enforcement that will receive special attention during the current tax year. List five or more of the current IRS audit initiatives.