Chapter 13

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

A

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

A

Which of the following would be a disadvantage to filing a protest in an IRS audit? a. The cost involved in filing the protest. b. Preserves the option for further litigation. c. The protest will delay the ultimate resolve of the issue. d. The protest will provide greater information to the taxpayer.

A

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

A

The IRS is now organized into what kind of lines: a. Type of taxpayer b. Remedy requested c. Functional d. Type of tax

A

What are the functions performed by the Mathematical/Clerical Error Program?

- Check every return for mathematical errors - Re-compute the tax due after properly applying the numbers that are included in the return - Summarily assess any additional tax that is due or allows refunds or credits based on (previously) miscomputed deductions or credits. - A summary assessment may be made concerning any deficiency that results from a mathematical or clerical error

How much time from the date of issue of 30-day letter does a taxpayer get to request for a conference with an appeals officer? a. 30 days b. 90 days c. 10 days d. 21 days

A

If a return is identified as including an unallowable item, the IRS: a. Computes the seemingly necessary adjustment in taxes, and the taxpayer is notified 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.

A

A "DIF" score is a type of: a. Fraud definition used by the Service. b. Discriminate analysis used to identify questionable returns. c. Negligent penalty score. d. Score used for an information purpose in collateral agreements.

B

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

B

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

B

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

B

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

C

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. Yes, the taxpayer will be contacted since a high DIF score always will mean some type of audit. b. Yes, 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. No, the taxpayer will not necessarily be contacted since after the Service Center review, it may be decided that an audit is unwarranted. d. No, the taxpayer will not necessarily be contacted by an auditor or revenue a agent since after the return is screened by the Service Center, it then is randomly selected for audit.

C

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 return and ends on the date of payment or the last working day of the respective year, whichever is later. b. Filing 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.

C

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

C

Your client has just received an IRS summons to appear for an interview. Which of the following statements is false concerning this interview? a. Provided your client gives prior notice to the IRS, the taxpayer may tape-record the interview. b. The IRS may tape record the interview but must provide a transcript of the recording to the taxpayer if he requests a copy and pays for the copying 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.

C

The IRS Oversight Board: a. Has the authority to affect tax policy. b. Has the authority to affect the processing of individual tax cases. c. Can intervene in IRS personnel or procurement matters. d. Can review and approve the IRS annual budget request.

D

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

D

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

D

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.

D

Individual Taxpayers have around a 20% chance of being audited.

False, 1-6% chance

The IRS was established by Congress on July 1, 1682, to meet the fiscal needs of the Civil War.

False, 1862

The IRS is responsible for administering and enforcing the internal revenue laws of the United States.

False, Department of Treasury is.

The Tax Exempt and Government Entities (TEGE) Division of the IRS comprises three business divisions: employer plans, export organizations, and government entities.

False, EMPLOYEE plans, EXEMPT organizations

What are the "Pros" and "Cons" of filing a protest to an IRS Audit?

Pros: 1) Allows for another review of issue by independent Appeals Officer. 2) No reason to retain an attorney, anyone authorized to practice before the IRS may represent TP. 3) Will delay the resolution of the issue. 4) Matter can still be taken to U. S. TC, DC's or CoFC's. Cons: 1) The interest and penalties continue to run if protest not filed. 2) Professional assistance usually required if not filed. 3) If not filed, new issues can be discovered.

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

A Power of Attorney is necessary when a qualified representative goes to the IRS to represent a Taxpayer.

True

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

True

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

True

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

True

Form 911 is a Request for Taxpayer Advocate Assistance.

True

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

True

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

True

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

True

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

True

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

True

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

True

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

What are the major duties of the IRS Oversight Board?

• Review and approve IRS mission, strategic plans, and annual planning documents. • Review IRS operational functions, including modernization, outsourcing, and training efforts. • Recommend to the President candidates for Commissioner. • Review the process of selecting, evaluating, and compensating senior IRS executives. • Review and approve the IRS annual budget request. • Ensure the proper treatment of taxpayers.

What are the guiding principles of the IRS?

• Understand and solve problems from the taxpayers' point of view. • Enable its managers to be accountable to taxpayers. • Use balanced measures of performance for taxpayer satisfaction, business results & employee satisfaction. • Foster open, honest communications. • Insist on total integrity.

"If a taxpayer cannot resolve his or her dispute with the IRS administratively, he or she may seek judicial relief." Explain how a taxpayer can seek relief through the judicial system.

- TP can choose from the U.S. Tax Court, district court, and U.S. Court of Federal Claims to initiate lawsuit against the government. - TC will review the taxpayer's case provided that TP files a petition with the court within 90 days of the date of his or her statutory notice of deficiency. - DC's & CoFC's cannot hear the taxpayer's case unless he or she is suing for a refund, so must first pay the disputed tax, and then file an (unsuccessful) claim for refund to obtain a judicial review in either of these latter two forums

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.

B

The two methods of judicial review of an administrative action taken by the Service in determining whether a taxpayer owes taxes are: a. Release method and the deficiency method. b. Refund method and the assessment method. c. The refund method and the deficiency method. d. The protest method and the deferral method.

B

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

C

When the IRS examines the returns of large corporate taxpayers, it uses a team approach in its field audits known as the: a. Collective Examination Program b. Grouped Examination Program c. Coordinated Examination Program d. Team Examination Program

C

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

False, only within its jurisdiction

A form 911 is filed by the Taxpayer for which of the following: a. National Research Program b. Appeals Conference c. Tax Court Hearing d. Taxpayer Assistance

D

A written RAR is prepared by the IRS agent and is given to the taxpayer: a. before the commencement of the examination b. at the beginning of the examination c. during the examination d. upon the conclusion of the examination

D

An office examination is scheduled when a selected return for examination: a. belongs to a taxpayer who was previously found guilty of manipulating return b. belongs to a taxpayer who resides near to 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

D

The procedure used to match the information recorded on a return with corresponding data received from third parties is referred to as: a. Information Document Reconciliation Program b. Information Document Review Program c. Information Document Check Program d. Information Document Matching Program

D

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

False, sometimes at office of taxpayer's representative

'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, UNDER reported

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

False, can be CPA's or anyone with properly obtained executed power of attorney

The IRS has increased the number of tax return processing centers with the increase in electronic filing of returns.

False, decreased number of centers

The IRS Oversight Board is made up of only IRS officials.

False, includes members from private sector as well

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

False, number of errors sharply decreased

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

False, only those that will generate additional revenues for the Treasury