Chapter 12-Tax Administration and Planning

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

On April 1, 2015, the IRS asks for and the taxpayer agrees to an additional year to complete an audit for a 2011 tax return which was filed on March 9, 2012.

Ask for an extension April 1, 2016

The IRS assesses additional taxes for 2013 tax return audit on May 5, 2015. How long does the IRS have to collect the tax?

10 years from date of audit May 5, 2025

The general statute of limitations for a tax return

3 years

A 2015 tax return filed on April 15, 2016

3 years April 15, 2019

Which of the following is the most common type of audit for an individual taxpayer?

Correspondence audit

One of the ways that a tax return may be selected for an audit

Disagreement between the agent and the taxpayer

One of the ways that a tax return may be selected for an audit

Discriminant Function System

Commissioner of Internal Revenue

Establishes policy, supervises the activities of the organization, and acts in an advisory capacity to the Treasury Department on legislative matters

Which of the following will not affect the statute of limitations on a tax return?

Failure to pay the tax due with the tax return

An IRS agent views Microsoft's books and records at the Microsoft headquarters

Field audit

The IRS uses statistics to reconstruct an individual's income

IRS

Using monthly payments, a taxpayer can afford to pay off the tax owed within 2 years

Installment agreement

Tax planning opportunities can be classified into four categories

Jurisdiction Timing Entity Character

Taxpayer Bill of Rights Only the taxpayer has the right to represent themselves in front of the IRS

No

Taxpayer Bill of Rights If a taxpayer is unable to provide or to verify information, then the IRS may contact a neighbor, bank, employer, or employees in order to obtain the information.

No

A taxpayer is unlikely to pay the tax amount they owe

Offer to compromise

IRS Campus Processing Sites

Processes the information from tax documents

Large Business and International Division

Services taxpayers with assets of $10 million or more

Taxpayer Bill of Rights Publication 1 explains what to do if an IRS employee has not provided prompt, courteous, and professional assistance to the taxpayer.

Yes

Taxpayer Bill of Rights A phone number to call to have questions answered

Yes

A 2001 tax return that was never filed

no statute of limitations

A fraudulent 2015 tax return filed April 15, 2016

no statute of limitations

Difference between tax avoidance and tax evasion

tax evasion can subject taxpayer and tax practitioner to fines, penalties, or incarceration. Tax avoidance is tax planning to avoid tax, provided legal methods are used.

The statute of limitations for a fraudulent tax return is

there is no statute of limitations

The tax law generally provides for interest on your refund if it is not paid within 45 days of the date you filed your return or filed your claim for refund

Yes (true statement in Publication 1)

A taxpayer made estimated tax payments in excess of the tax due for the year, but failed to file a tax return. Since the taxes were paid in full, would there be a penalty?

Yes, if failed to be reported

The case involves a trust with net worth of $8.3 million

Tax payer

Which of the following is not a preparer penalty?

Tax preparers may be assessed a penalty for failing to give the taxpayer the preparers work papers.

Which of the following types of audits was suspended due to protests from taxpayers and lawmakers?

Taxpayer Compliance Measurement Program selected audit

A tax return with a large casualty loss would be most likely selected for audit through

The Discriminant Function System

Which of the following statements best describes the purpose of the Taxpayer Bill of RIghts?

To inform taxpayers of their rights in dealing with the IRS

The taxpayer has credible evidence, maintains records, and cooperates with reasonable IRS requests

IRS

At which of the following IRS locations are tax returns processed?

IRS Campus Processing Sites

Jenny files her 2015 tax return on February 25, 2016

3 years April 15, 2019

Which of the following is the calculation of the failure-to-file penalties?

5 percent of the tax due for each month or part of the month that it is late, limited to 25 percent of the taxes due

Which of the following is false regarding the return audit process?

50 percent of taxpayers are audited each year

The special statute of limitations for a tax return that omits income greater than 25 percent of gross income is

6 years

Mike deducts a bad debt on his 2015 tax return. How many years is the statute of limitations for the bad debt deduction?

7 years

The statute of limitations for a bad debt deductions or worthless securities is

7 years

A 2015 tax return filed on April 15, 2016 which omitted $20,000 of income. The total gross income shown on the tax return was $20,000

7 years April 15, 2022

Jeremy reported $10,000 of worthless debt on his 2014 tax return which he filed on August 3, 2015.

7 years August 3, 2022

A 2015 tax return filed April 15, 2016 which contained a large bad debt deduction

7 years April 15, 2022

James omits 7 percent of his income on his 2013 tax return which he filed on July 12, 2014

Amended tax return (3 years) July 12, 2017

Which of the following taxpayers will benefit most in terms of dollars saved as a result of tax planning to reduce taxes?

An individual taxpayer who has an average tax rate of 28 percent.

A taxpayer can pay off their tax owed when they sell their boat which is up for sale

Ask for an extension

One of the things a preparer needs to do in order to participate in the Annual Filing Season Program

Complete 18 hours of continuing education

Susie receives a letter from the IRS asking her to provide documentation to support her charitable contributions on her tax return filed in the prior year

Correspondence audit

The tax case involves a penalty

IRS

Which of the following statements is the most correct regarding The Taxpayer Bill of Rights?

It directs taxpayers to other IRS publications with more details on specific taxpayer rights. It explains the examination, appeal, collection, and refund process. It states that a taxpayer is responsible for payment of only the correct amount of tax due, no more, no less.

If a calendar year taxpayer's 2015 individual income tax return is mailed on June 15, 2016, the statute of limitations would normally run out on

June 15, 2019

Publication 1 explains how to file an amended tax return

No, it simply states our rights as a tax payer.

If a taxpayer is due a refund, but did not file a return, then the IRS uses statistics to reconstruct an individual's income in order to compute the refund for the taxpayer.

No, only if you do not respond

If you do not agree with the IRS examiner's proposed changes in an audit, you must go directly to the court system to resolve the issue

No, you ask for a review

One of the things a preparer needs to do in order to participate in the Annual Filing Season Program

Obtain tax preparer id number

Mr. and Mrs. John Doe are asked to bring their supporting documents to the downtown IRS office so that an IRS agent may review their tax return which was filed 2 years ago

Office audit

Which of the following is not a possible result of an audit by the IRS?

Payment of a refund to the taxpayer Payment of a deficiency by the taxpayer An appeal No change in the liability

Which of the following is the best definitions of tax planning?

Planning taxpayers' financial affairs in an effort to minimize tax liability

Which category of tax payers may represent their clients in only the most limited situations in front of the IRS?

Preparers enrolled only in the Annual Filing Season Program

One of the things a preparer needs to do in order to participate in the Annual Filing Season Program

Refresher course

One of the ways that a tax return may be selected for an audit

Reported by an informant

Small Business/Self-Employed Division

Services individuals who file Form 1040 Schedules, C, E, or F

Wage & Investment Division

Services taxpayers who pay most of their taxes through withholding

if a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited?

a. Wage & Investment Division (W&I)

Which of the following statements best describes the process of tax planning?

c. Tax planning is the process of arranging one's financial affairs to minimize one's overall tax liability.


Ensembles d'études connexes

Microeconomics chapter 6,7,8,9 AIC

View Set

Astronomy Ch01.6: Key Concept: Our Cosmic Origins

View Set

Quiz #2 Attempt Chapter 12 Module 8, Chapter 13 Module 9, Chapter 14 Module 9, Chapter 15 Module 10

View Set