ACCT 108 (W7-W10)

Under a guaranteed installment agreement between the IRS and a taxpayer, the taxpayer must agree to pay in full within how many years?

3 years.

Jeopardy levies may occur when the IRS waives the 10-day notice and demand period and/or the 30-day Final Notice (Notice of Intent to Levy) period because

A delay would endanger the collection of tax.

Until the IRS files a Notice of Federal Tax Lien, the lien is ineffective against certain parties. Which of the following is not one of these parties?

A holder of an artisan’s lien.

Which of the following statements with respect to a continuous levy is false?

A levy does not apply to wages and salaries received after the date of levy.

Which of the following best describes a levy when it relates to a tax debt?

A levy on salary or wages will end when the time expires for legally collecting the tax.

When dealing with IRS employees, taxpayers have certain rights. Which of the following most accurately reflects those rights?

A right of appeal is available for most collection actions.

Which of the following may the Internal Revenue Service settle by accepting an Offer in Compromise for less than the full amount of the balance due?

A tax deficiency plus penalties and accrued interest.

Which of the following statements is false in respect to a Notice of Federal Tax Lien?

A taxpayer cannot sue the federal government for damages if the IRS knowingly or negligently fails to release a Notice of Federal Tax Lien when a release is warranted.

Which of the following statements is false with respect to court decisions?

Dictum is the court’s formal answer to the principal issue in litigation. It is legally binding and is enforceable by the authority of the courts.

In general, the IRS may exercise

Executive, judicial, and legislative power.

A preparer who is paid to review a tax return does not have to sign and fill in the other blanks in the paid preparer’s area of the return.

False

All courts except the Tax Court are bound by legislative regulations.

False

All regulations are written by the Office of Chief Counsel. Internal Revenue Service employees and all courts, except the U.S. Supreme Court, are bound by these regulations.

False

Anthony is a partner in AC Partnership. He is responsible for the overall substantive accuracy of all income tax returns prepared by the employees. Anthony does not collect the necessary information nor does he prepare tax returns. Anthony should not sign the returns as the preparer.

False

Cameron, a tax return preparer, prepared at different times during the tax season both Mr. Murphy’s individual income tax return and his S corporation’s income tax return. Cameron was compensated for the preparation of both returns. Cameron is only required to furnish a copy of his client’s original income tax return at the time the second return is presented for signature.

False

Final regulations are issued to elicit comments from the public.

False

Interpretative regulations are issued pursuant to specific authorization from Congress in particular Code sections.

False

Proposed regulations automatically replace the temporary regulations.

False

The Commissioner of Internal Revenue does not publicly announce acquiescence or nonacquiescence to regular decisions adverse to the IRS’s position other than those of the United States Tax Court.

False

The courts are bound by legislative regulations but not by interpretative regulations.

False

The definition of a tax return preparer includes a fiduciary who prepares a return for the trust.

False

Trent’s Tax Service prepared the current year return of George Dell and was paid $100 by Mr. Dell. The return was audited and changes were made to both income and expenses on the return, but no additional tax was due. These changes were the direct result of negligent actions on the part of Trent’s Tax Service. Trent’s Tax Service may be liable for a penalty for understatement of the taxpayer’s liability due to an unreasonable position under Sec. 6694.

False

Late payments by a taxpayer on an installment agreement to pay a tax liability will

Generate a 30-day notice as to the cessation of the agreement.

Certain operations of administrative agencies such as the IRS are apparent exceptions to the doctrine of separation of powers. This follows from the exercise by administrative agencies of all but which of the following powers?

Hearing appeals from certain federal courts.

Which of the following disqualifies a taxpayer’s income tax liability from being discharged in bankruptcy? (I) Being charged of tax evasion or fraudulent tax activities (II)Being convicted of tax evasion or fraudulent tax activities

II only.

Mr. Alomar’s income tax return was examined by the IRS, and he agreed with the proposed changes. He has several ways by which he may settle his account and pay any additional tax that is due. Which of the following statements with respect to this situation is false?

If the bill is delayed, he will not be billed for additional interest for more than 60 days from the date he signed the agreement.

With regard to seizure of property in satisfaction of a tax liability, all of the following are true except

If the proceeds of a sale by the IRS are less than the total of the tax bill and the expenses of the levy and sale, the taxpayer will not have to pay the balance.

Mr. Smith’s 2012 income tax return, which he filed on May 3, 2013, was examined by the IRS. Smith did not have an extension of time to file. On October 20, 2014, he signed a report agreeing to a deficiency of $10,000. He received a notice and demand showing additional tax, interest, and penalties. The notice was dated November 7, 2014. If Mr. Smith paid the bill on November 12, 2014, which of the following reflects the date interest started accruing and the date it stopped?

Interest Started 5/3/13 Interest Ended 11/07/14

Identify the correct statement regarding the calculation of interest on a tax liability.

Interest is figured from the return due date to the billing date, if paid within 21 days.

Which of the following is the most authoritative source of tax law?

Internal Revenue Code.

What is the type of collection that allows the IRS to waive the 10-day period of Notice and Demand for Tax?

Jeopardy levy.

All of the following are types of offer in compromise payment terms, except

Lump sum cash payments must be paid within 24 months.

Maria received a Notice of Tax Due and Demand for Payment in the amount of $30,000 as a result of an examination of her 2014 Form 1040. She is not able to pay the entire amount at this time and would like to set up an installment agreement. Which of the following statements are not true regarding setting up an installment agreement?

Maria must wait for a Notice of Federal Tax Lien to be filed before she can request an installment agreement.

The IRS must enter into a guaranteed installment agreement with a taxpayer as long as, during the past 10 years, the taxpayer has not

None of the answers are correct.

With regard to an installment agreement with the IRS to pay a federal tax debt, which of the following statements is false?

Once an installment payment plan has been approved, the IRS will not continue to charge the taxpayer’s account with interest on the taxpayer’s unpaid balance of penalties and interest.

A guaranteed installment agreement is one of the acceptable methods of paying off a tax debt to the United States Treasury. The IRS must enter into an installment agreement provided all of the following requirements are met, except the taxpayer

Previously entered into a nonguaranteed installment agreement.

Which of the following represents the conclusion of the IRS for an individual taxpayer, and is confined to the specific case for which it was issued?

Private Letter Ruling (PLR).

Which of the following is not a miscellaneous document published in the Internal Revenue Bulletin?

Private Letter Ruling.

Which of the following should not be cited to sustain a position?

Private Letter Rulings.

Which of the following types of regulations appear to be given the force and effect of law when describing obligations to file forms and information?

Procedural regulations.

Which of the following lists the proper hierarchy of authority from lowest to highest for Treasury Regulations?

Proposed, temporary, final.

Which of the following statements relating to Treasury Regulations is false?

Public hearings are always held on temporary regulations.

Which of the following statements with respect to regulations is false?

Public hearings are not held on proposed regulations.

Which of the following properties is not exempt from levy?

State income tax refunds.

Decisions of which federal court require the IRS to alter its position for all taxpayers?

Supreme Court.

If the IRS must seize (levy) a taxpayer’s property, the taxpayer has the right by federal law to keep all of the following except

Tangible personal business property if the collection of tax is in jeopardy.

After assessment, as a general rule, the Internal Revenue Service has the authority to collect outstanding federal taxes for which of the following?

Ten years.

A taxpayer’s business real property may not be seized and sold by the IRS unless the collection of the tax is in jeopardy or approval has been secured from

The IRS area director or assistant area director.

With regard to the levy method used by the IRS to collect tax that has not been paid voluntarily, which of the following statements is false?

The IRS cannot levy any state income tax refund checks and apply the state refund to a federal tax debt.

With regard to the IRS filing a Notice of Federal Tax Lien, which of the following statements is not a requirement?

The IRS must give individual notices to all of the taxpayer’s creditors.

Which of the following statements with respect to IRS seizure and sale of a taxpayer’s property to satisfy the taxpayer’s tax bill is false?

The IRS must wait 30 days after seizure before conducting a sale.

Once a notice of federal tax lien has been filed, all of the following are true except

The IRS will issue a release of the notice of federal tax lien within 15 business days after the taxpayer satisfies the tax due (including interest and other additions) by paying the debt, by having it adjusted, or if the IRS accepts a bond that the taxpayer submits, by guaranteeing a payment of the debt.

With regard to the trust fund recovery penalty assessments for employers, which of the following statements is false?

The amount of the penalty is equal to the unpaid income taxes withheld.

The federal court system includes

The following trial courts: District Courts, the U.S. Tax Court, and the bankruptcy courts.

Identify the true statement regarding when innocent spouse relief can be requested.

The innocent spouse did not know or have reason to know of the understatement of tax.

Which of the following statements regarding the use of the national and local expense standards to determine whether the taxpayer can provide for basic living expenses is false?

The taxpayer should not consider the taxpayer’s family to determine whether or not the taxpayer can provide for basic living expenses.

Which title of the U.S. Code contains the Internal Revenue Code?

Title 26 (IRC).

Which of the following is a primary tax source?

Treaties

A dictum is a court statement of opinion on a legal point that is not necessary for the decision of the case.

True

A memorandum decision is a report of a Tax Court decision thought to be of little value as a precedent because the issue has been decided many times.

True

A return preparer can, within 30 days after notice and demand for payment were made, appeal an assessment of Sec. 6694(a) and Sec. 6694(b) penalties by paying an amount that is not less than 15% of the entire amount assessed with respect to each return or claim for refund and then file a claim for refund.

True

A revenue ruling holds that certain expenses incurred in the purchase of a business must be capitalized. The Code is silent as to whether these expenses must be capitalized or may be deducted currently, but several cases from different courts hold that these particular expenses may be deducted currently. There is no other authority. Under these circumstances, a return preparer taking a position contrary to the revenue ruling is not subject to the penalty for understatement due to willful or reckless conduct [Sec. 6694(b)].

True

All regulations are written by the Office of the Chief Counsel, IRS, and approved by the Secretary of the Treasury.

True

An individual shall be considered a preparer of a return if (s)he furnishes to a taxpayer or other preparer sufficient information and advice so that the completion of the return or claim for refund is simply a mechanical or clerical matter, even though that person does not actually place or review placement of information on the return or claim for refund.

True

Circular 230 never permits a practitioner to sign a return as a preparer if the return contains a frivolous position.

True

Decisions of the courts, other than the Supreme Court, are binding on the Commissioner of Internal Revenue only for the particular taxpayer and for the years litigated.

True

If a position on a tax return has a more likely than not possibility of being sustained on its merits, then there is a reasonable belief of its being sustained on the merits.

True

If the Supreme Court determines that various lower courts are deciding a tax issue in an inconsistent manner, it may review a decision and resolve the contradiction.

True

Joni is a tax return preparer. She is not a preparer bank. Joni prepared Judy’s income tax return and then cashed Judy’s refund check. Joni is subject to a penalty of $500.

True

More than one preparer may be subject to the penalty for willful understatement of tax liability on the same tax return.

True

Nonacquiescence by the Commissioner of Internal Revenue to an adverse decision in a regular Tax Court case means the Internal Revenue Service will not accept the decision and will not follow it in cases involving similar facts.

True

Proposed regulations do not replace the temporary regulations unless the proposed regulations specifically say they replace them.

True

Revenue procedures are official IRS statements of procedure that either affect the rights or duties of taxpayers or other members of the public or concern matters that are considered to be matters of public knowledge.

True

Revenue rulings are the published conclusions of the IRS concerning the application of tax law to a specific set of facts.

True

The Commissioner of Internal Revenue will announce acquiescence or nonacquiescence only when the Tax Court’s decision is adverse to the IRS’s position.

True

The Internal Revenue Code is binding on all courts except when held to violate the Constitution.

True

The courts give great importance to the literal language of the Internal Revenue Code, but they also consider, among other things, the history of a particular section of the Code, its relationship to other Code sections, and the reports of Congressional committees.

True

The purpose of revenue rulings is to promote a uniform application of the tax law to an entire set of facts. Therefore, IRS employees must follow the rulings, while taxpayers may contest in court adverse return examination decisions based on these findings.

True

Under the provisions of Sec. 6060 and Reg. 1.6060-1, each person who is an employer of return preparers must retain a record that contains certain information on these preparers and must have the record available for inspection at the request of the commissioner for 3 years following the close of the return period to which the record relates.

True

Unless a tax return preparer can show reasonable cause, (s)he is subject to a penalty for failure to retain and keep available for a 3-year period a copy of any return prepared, or a record of the name, taxpayer identification number, and taxable year of the taxpayer for whom the return was prepared, including the type of return prepared.

True

Whether or not the Commissioner of Internal Revenue decides to appeal an adverse Tax Court decision, (s)he may nonacquiesce in the case, which means that the IRS does not accept the adverse decision and will not follow it in cases on the same issue.

True

Appeal from the U.S. Court of Federal Claims is to the

U.S. Court of Appeals for the Federal Circuit.

Select the correct statement concerning a taxpayer’s appeal of the filing of a Notice of Federal Tax Lien.

Upon the conclusion of the CDP hearing, the IRS will issue a determination.

If the IRS seizes property that is not perishable, the IRS will

Wait at least 10 days after seizure before conducting the sale.

Which of the following statements with respect to resolving tax problems involving the collection process is false?

While a taxpayer is making installment payments, interest will continue to accrue only on the tax liability due.

Under which of the following circumstances is the IRS allowed to take collection actions?

While it considers a request for an installment agreement.

IRS notices and announcements are identified by a number representing the

Year and a sequence number.

A levy on wages ends under all of the following circumstances, except

he penalties and interest on the tax liability are satisfied.

All of the following persons may be responsible for the trust fund tax except

An employee in the payroll department.

Which of the following may be cited to sustain a position?

Announcements

In cases where the literal language of the Code is ambiguous, the courts may consider which of the following?

Both the history of the Code section and its relationship to other Code sections.

The trust fund recovery penalty was enacted to encourage prompt payment of which taxes?

Collected excise taxes.

What is the name given to the last date the IRS can collect unpaid tax from the taxpayer?

Collection Statute Expiration Date (CSED).

With regard to terminology relating to court decisions, which of the following statements is false?

A writ of certiorari is a petition issued by the lower appellate court to the Supreme Court to hear a case that is not subject to obligatory review by the Supreme Court.

Which of the following statements regarding a Notice of Federal Tax Lien is true?

All fees charged by the state or other jurisdiction for both filing and releasing the lien will be added to the balance the taxpayer owes.

Which of the following is true with respect to an offer in compromise?

All of the answers are correct.

Which statement is true about the IRS providing notice and demand relating to a tax levy?

All of the answers are correct.

During the period of an installment agreement

All payments must be made timely, and interest and penalties must continue to accrue.

The collection process begins

At the IRS service center where notices are generated requesting payment.

Sam timely filed his U.S. individual income tax return for calendar year 2014 without any extensions. The return showed a balance of income taxes due in the amount of $75,000. Sam has not paid his IRS liability, nor has he entered into any installment agreement extending the statute of limitations or submitted any offer in compromise. The statute of limitations for collection of Sam’s tax liability expires on which of the following dates?

April 15, 2025.