ACC607 - Chapter 12

After the assessment has been made, the taxes assessed must be collected within: a. 2 years b. 10 years c. 5 years d. 8 years

10 years

Michelle accidentally omitted from her 2019 tax return $8,000 of gross receipts she collected as the owner of a restaurant. Her 2019 return indicated collective gross receipts of $40,000. The IRS no longer can pursue Michelle with the threat of collection of the related tax, interest, and penalties as of April 15 of what year? a. 2021 b. 2023 c. 2026 d. 2027 e. There is no expiration date for the statute of limitations in this context.

2023

Jackie filed her 2019 income tax return on February 15, 2020. There was no material understatement of income on her return, and the return was properly signed and filed. The statute of limitations for Jackie's 2019 return expires on: a. February 15, 2023 b. April 15, 2023 c. February 15, 2026 d. April 15, 2026

April 15, 2023

The highest ranking legal adviser of the IRS is the: a. Attorney General b. Chief Attorney c. District Attorney d. Chief Counsel

Chief Counsel

A Form 911 is filed by the taxpayer as a request for which of the following? a. National Research Program b. Appeals Conference c. Tax Court Hearing d. Taxpayer Advocate Service Assistance

Taxpayer Advocate Service Assistance

The program that is designed to furnish the IRS with statistics concerning the type and number of errors that are made on a representative sample of individual income tax returns is the: a. Unallowable Items Program b. Mathematical/clerical Error Program c. National Research Program d. Discriminant Function Program

National Research Program

Your client has just received an IRS summons to appear for an interview. The following statements are CORRECT concerning this interview EXCEPT: a. Provided your client gives prior notice to the IRS, the taxpayer may record the interview. b. The IRS may record the interview but must provide a transcript of the recording to the taxpayer if he requests a copy and pays for the duplication charges. c. Notes may not be taken by either the IRS agent or the taxpayer during the interview. d. The IRS investigator must explain various taxpayer rights to your client before commencing the interview.

Notes may not be taken by either the IRS agent or the taxpayer during the interview.

The Commissioner of the Internal Revenue Service (IRS) is appointed by the: a. President of the United States b. Secretary of the Treasury c. Senate d. Congress

President of the United States

Which of the following is NOT a factor in favor of the Protest/Appeals Process? a. An appeals officer can consider the hazards of litigation. b. The litigation path remains a possibility even if an appeal is pursued. c. The conclusion of the dispute, whether for or against the taxpayer, is expedited. d. The appeals process allows a further delay in the payment of the disputed tax.

The conclusion of the dispute, whether for or against the taxpayer, is expedited.

54. Form 911 is a Request for Taxpayer Advocate Assistance.

True

The National Taxpayer Advocate: a. represents the IRS in Tax Court cases b. administers a taxpayer-intervention system c. assists the IRS in preparing proposed legislation, treaties, regulations, and executive orders d. prepares IRS rulings and other written determinations

administers a taxpayer-intervention system

A "DIF" score is a type of: a. fraud definition used by the IRS b. composite score that rates returns for potentially higher tax liability c. negligent penalty score d. score used for information purposes in collateral agreements

composite score that rates returns for potentially higher tax liability

An office examination is scheduled when a selected return for examination: a. belongs to a taxpayer who previously was found guilty of manipulating a return b. belongs to a taxpayer who resides near the IRS local office c. requires a mere verification of record-keeping d. involves one or more issues that will require some analysis and the exercise of the IRS personnel's judgment

involves one or more issues that will require some analysis and the exercise of the IRS personnel's judgment

. The statute of limitations refers to a: a. set of provisions that limits a tax return preparer's rights b. specific period of time within which returns must be filed c. set of provisions that limits a taxpayer's rights d. specific period of time within which all taxes must be assessed and collected and all refund claims must be made

specific period of time within which all taxes must be assessed and collected and all refund claims must be made

Signed into law in 1996, it guarantees taxpayers various rights to representation before the IRS. What is it called? a. the Constitution b. the Sixteenth Amendment c. the Taxpayer Bill of Rights d. the Taxpayer Advocate

the Taxpayer Bill of Rights

A written revenue agent's report (RAR) is prepared by the IRS agent and is given to the taxpayer: a. before the commencement of the examination b. upon conclusion of the examination c. during the examination d. none of these are correct

upon conclusion of the examination

In selecting returns for examination, the primary goal of the IRS is to review only those returns that: a. belong to taxpayers who were found guilty previously b. will result in a satisfactory increase in the tax liability c. have been filed for the first time d. contain mathematical/clerical errors

will result in a satisfactory increase in the tax liability

Madison and Robyn sold a piece of property for $250,000, claiming that their basis was $100,000, and reported a taxable gain of $150,000. Their 2019 return filed in February 2020 reported gross income of $250,000. Madison and Robyn later determine that the property's basis was actually $25,000, not $100,000, resulting in a $75,000 understatement of income on the 2019 return. The statute of limitations period in which the IRS may assess additional tax in this situation expires on April 15 of what year? a. 2022 b. 2023 c. 2026 d. There is no expiration date for the statute of limitations in this context.

2026

Robert accidentally omitted from his 2019 tax return $80,000 of the gross receipts that he collected as the owner of a restaurant. His 2019 return indicated collective gross receipts of $200,000. The IRS no longer can pursue Robert with the threat of collection of the related tax, interest, and penalties, as of April 15 of what year? a. 2021 b. 2024 c. 2026 d. 2027 e. There is no expiration date for the statute of limitations in this context.

2026

Sue filed her 2019 income tax return on April 10, 2020. In November she learned that 100 shares of stock that she owned had become worthless in 2019. Because she did not deduct this loss on the 2019 return, Sue intends to file a claim for refund. This claim must be filed by no later than April 15 of what year? a. 2021 b. 2024 c. 2026 d. 2027 e. There is no expiration date for the statute of limitations in this context.

2027

How much time from the date of issue of a 30-day letter does a taxpayer have to request a conference with an appeals officer?

30 days

When a taxpayer does not agree with the IRS agent's proposed adjustments a: a. 30-day letter is issued b. RAR is issued c. 10-day notice is issued d. 21-day notice is issued

30-day letter is issued

The Tax Court will review a taxpayer's case, provided that he or she files a petition with the court within: a. 10 days of the date of his or her statutory notice of deficiency b. 60 days of the date of his or her statutory notice of deficiency c. 30 days of the date of his or her statutory notice of deficiency d. 90 days of the date of his or her statutory notice of deficiency

90 days of the date of his or her statutory notice of deficiency

A statutory notice of deficiency is also known as a: a. 30-day letter b. 10-day letter c. 90-day letter d. 21-day letter

90-day letter

If a taxpayer and the IRS cannot agree on the proposed adjustments after an appeals conference, the regional director of appeals will issue a: a. 30-day letter b. 90-day letter c. 21-day letter d. 10-day letter

90-day letter

To whom does the Chief Counsel of the Internal Revenue Service report? a. Commissioner of the Internal Revenue Service b. Secretary of the Treasury c. Regional Council in National Office d. Attorney General

Commissioner of the Internal Revenue Service

39. A taxpayer may be represented before the IRS only by attorneys.

False

41. The IRS examines each and every return critically in order to generate additional revenue for the Treasury.

False

42. The number of routine math errors has increased sharply due to increase in electronic filing.

False

45. Economic-reality factors are considered by the IRS in selection of returns for audit only where it has some other evidence that the taxpayer has over reported taxable income for the year.

False

48. A field audit by the IRS is always conducted at the taxpayer's premises.

False

52. The Appeals Office has the exclusive and final authority to settle cases that originate in any district irrespective of its jurisdiction.

False

The Taxpayer Assistance Order (TAO) is issued by the: a. Secretary of Treasury b. Chief Counsel c. National Taxpayer Advocate d. Commissioner of IRS

National Taxpayer Advocate

A taxpayer's return is classified for audit after receiving a high DIF score and being manually screened by an IRS classifier. Which of the following statements best describes whether the taxpayer will be contacted by an auditor or revenue agent? a. The taxpayer will be contacted since a high DIF score always will mean some type of audit. b. The taxpayer will be contacted because only the National Office has the power to decide that after screening, the return need not be audited. c. The taxpayer will not necessarily be contacted since after the Service Center review, it may be decided that an audit is unwarranted because the return will be manually inspected for audit determination. d. The taxpayer will not necessarily be contacted by an auditor or revenue agent since after the return is screened by the Service Center, it then is randomly selected for audit.

The taxpayer will not necessarily be contacted since after the Service Center review, it may be decided that an audit is unwarranted because the return will be manually inspected for audit determination.

Jimmy purposely omitted from his 2019 tax return $40,000 of the gross receipts that he collected as the owner of a restaurant. His 2019 return indicated collective gross receipts of $200,000. The IRS no longer can pursue Jimmy with the threat of collection of the related tax, interest, and penalties, as of April 15 of what year? a. 2022 b. 2025 c. 2027 d. 2028 e. There is no expiration date for the statute of limitations in this context.

There is no expiration date for the statute of limitations in this context.

36. The IRS was established by Congress on July 1, 1862, to meet the fiscal needs of the Civil War.

True

37. The Chief Counsel is appointed by the President and reports to the Commissioner of the IRS.

True

38. The Tax Exempt and Government Entities (TEGE) Division of the IRS comprises three business divisions: employee plans, exempt organizations, and governmental entities.

True

40. In absence of an administrative summons, a taxpayer cannot be required to accompany the representative to an interview.

True

43. The IRS treats an adjustment in tax resulting from an unallowable item identified in a return as a correction of a mathematical or clerical error.

True

44. Generally, the IRS selects returns for examination through the use of mathematical models, including correlations and discriminant functions.

True

46. In cases where an IRS examiner questions only one or two items on a selected return, an examination is typically conducted by mail, called a correspondence examination.

True

47. A field examination is usually limited to an examination of corporations and individual business returns.

True

49. A RAR contains a brief explanation of the proposed adjustments and lists the balance due or the overpayment.

True

50. A taxpayer's appeal must be in written form if the total proposed additional tax and penalties exceed $2,500.

True

51. The objective of the Appeals Office is to resolve tax controversies without litigation on a basis that is fair and impartial to both the government and the taxpayer.

True

53. Individual taxpayers have less than a 1 percent chance of being audited.

True

55. A power of attorney is necessary when a qualified representative goes to the IRS to represent a taxpayer.

True

56. There is a general common law privilege of confidentiality for non-criminal tax matters that exists between a taxpayer and his or her tax practitioner.

True

57. The National Research Program (NRP) provides statistics that are used in the development and update of the DIF formulas.

True

If a return is identified as including an unallowable item, the IRS: a. computes the seemingly necessary adjustment in taxes and notifies the taxpayer by mail b. sends a formal notice of deficiency to the taxpayer c. considers the contact that it makes with a taxpayer under this circumstance to be an examination d. cancels the return and asks the taxpayer to file his return again

computes the seemingly necessary adjustment in taxes and notifies the taxpayer by mail

What is the formula that assigns numeric weights to certain (undisclosed by the IRS) return items, generating a composite score for the return? a. selection of returns formula b. unallowable items formula c. discriminant function formula (DIF) d. mathematical errors formula

discriminant function formula (DIF)

The IRS: a. facilitates the processing of tax returns b. enforces the internal revenue laws of the United States c. is a bureau within the U.S. Department of Finance d. all of these are correct

facilitates the processing of tax returns

Which of the following examinations involves complex issues that require more advanced knowledge of the internal revenue laws and accounting skills? a. correspondence examination b. field examination c. office examination d. arithmetical error examination

field examination

The procedure used to match the information recorded on a return with corresponding data received from third parties is referred to as the: a. Information Document Reconciliation Program b. Information Document Review Program c. Information Document Check Program d. none of these are correct

none of these are correct

Which of the following issues would most typically NOT be handled as a correspondence examination? a. mathematical errors b. clearly defined unallowable deductions c. errors detected through matching of Forms 1099 and W-2 d. questions concerning gambling income

questions concerning gambling income

In case of underpayment of taxes, if the deficiency is not paid in a timely fashion, interest is imposed on the unpaid amount for a period that begins on the date of: a. filing the return and ends on the date of payment or the last working day of the respective year, whichever is later b. filing the return and ends on the date of payment c. the notice and demand and ends on the date of payment d. the notice and demand and ends on the date when the taxpayer receives the notice

the notice and demand and ends on the date of payment