Final

A frivolous income tax return is one that does not include enough information to figure the correct tax or that certain information clearly showing that the tax that was reported is substantially incorrect. If a taxpayer files a frivolous return, which penalty applies specifically to the taxpayer for the frivolous return?

$5,000 frivolous return penalty, applied in addition to any other applicable penalty or penalties.

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

Mr. K, who lives in Dallas, Texas, received a letter from the IRS stating that the result of a recent field examination is a tax deficiency of $26,000. The examination was handled at Mr. K’s place of business by a revenue agent. The letter also states that Mr. K has a right to file a protest if he does not agree with the proposal. Generally, how many days does K have to file a written protest?

30 days.

The Statutory Notice of Deficiency is also known as

A 90-day letter because the taxpayer generally has 90Â days from the date of the letter to file a petition with the Tax Court.

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 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 in respect to IRS seizure and sale of a taxpayer’s property to satisfy his or her federal tax bill is false?

A taxpayer does not have the right to redeem any property seized once the IRS has sold it.

A taxpayer may choose to pay a disputed deficiency and then file a claim for refund. If the claim is denied by the Internal Revenue Service or if no decision is made in 6 months, the taxpayer may petition

Either the appropriate U.S. District Court or the U.S. Court of Federal Claims.

The Tax Court has jurisdiction over all of the following taxes except

Employment.

A preparer depreciated furniture that the taxpayer purchased in the current year by using the wrong class life because the preparer did not understand the MACRS method. This position was not disclosed on the tax return, and it resulted in an understatement of tax. The preparer would not be subject to the penalty for negligent or intentional disregard of rules and regulations.

False

A taxpayer can appeal to a court only after an unsuccessful appeal before an Internal Revenue Service Appeals Officer.

False

Before you take your case to the Tax Court, the IRS must send you a notice of deficiency. Then you have 60 days to file a petition with the Tax Court.

False

For court proceedings, the IRS has the burden of proof for any factual issue. Therefore, taxpayers are no longer required to maintain records to substantiate items claimed on tax returns.

False

Generally, the Tax Court hears cases before any tax has been assessed and paid; however, if you pay the tax after the notice of deficiency has been issued, you cannot petition the Tax Court for review.

False

If a taxpayer agrees with proposed audit changes and signs an agreement form at the conclusion of the audit, no interest will be charged on any balance due.

False

If the IRS disallows or rejects your timely filed claim for a refund or does not act on your claim within 6 months after you file it, you can only take your claim to Appeals.

False

If you agree to changes made during an examination and you sign an agreement but do not pay the taxes due, interest and penalty will generally be charged on the additional taxes from the due date of your return to the payment date.

False

If you do not agree with the proposed changes from an examination, you must go directly to Appeals within 15 days.

False

In the process of examining or collecting your tax liability, the Internal Revenue Service may contact third parties. The Internal Revenue Service must give the taxpayer reasonable notice before making any inquiries of third parties such as neighbors, banks, employers, and other employees. This notification must include the specific names of those it intends to contact.

False

Jack and Jill Hill’s return was selected for examination in Year 1. There was no change to the one issue examined -- medical expense. In Year 2, they received a notice that their return was selected for examination and the issues were exemptions and contributions. Because they received a no-change in Year 1, they should contact the IRS to see if the examination should be discontinued in Year 2.

False

Peter did not want to use the administrative appeal process within the IRS to contest income tax issues considered in the audit of his return. He filed a claim for refund and requested that the claim be immediately rejected. The IRS promptly sent him a notice of claim disallowance. Peter has 2 years from the date of the notice of disallowance to file a refund suit in a United States District Court or in the United States Court of Federal Claims.

False

Richard’s Year 1 and Year 3 returns were examined for charitable contributions and employee business expenses. Both examinations resulted in no change to the return as filed. Richard has been notified that his Year 2 return has been selected for examination for claimed business bad debts. Since Richard has two prior no-change audits, upon notifying the Internal Revenue Service, the examination should be discontinued.

False

Within 6 months from the date he filed it, Y received a formal notice from the IRS by certified mail disallowing his $10,000 tax refund claim. What is Y’s appeal?

File suit in his U.S. District Court or the U.S. Court of Federal Claims no later than 2 years after the time of mailing of the notice.

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.

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.

Which of the following statements relating to the statutory Notice of Deficiency is false?

If a taxpayer receives a Notice of Deficiency and sends money to the IRS without written instructions, the IRS will treat it as a payment, and the taxpayer will not be able to petition the Tax Court.

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

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.

The IRS has begun an examination of Mark’s 2012 income tax return. The IRS would like to ask Mark’s neighbors questions with respect to that examination. There is no pending criminal investigation into the matter, and there is no evidence that such contact will result in reprisals against the neighbors or jeopardize collection of the tax liability. Before the IRS contacts the neighbors, the IRS must

Provide Mark with reasonable notice of the contact.

Which of the following properties is not exempt from levy?

State income tax refunds.

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.

Nicholas wants his income tax case to be handled under the Tax Court’s small tax case procedure. All of the following statements regarding the small tax case procedure are true except

The amount must be paid before going to Tax Court.

The Secretary is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, for all of the following, except:

The penalty is assessed for the filing of a frivolous income tax return.

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.

A Statutory Notice of Deficiency is also known as a 90-day letter because the taxpayer generally has 90 days from the date the notice is mailed to file a petition with the United States Tax Court.

True

An income tax case not resolved at an appeals conference can proceed to the U.S. Tax Court without the taxpayer paying the disputed tax, but generally, the U.S. District Courts and U.S. Court of Federal Claims hear tax cases only after the tax is paid and a claim for credit or refund is filed by the taxpayer and is rejected by the IRS or the IRS has not acted on the taxpayer’s claim within 6 months from the date of filing the claim for refund.

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

An interview with the IRS must be suspended immediately if the taxpayer indicates a desire to consult with a representative.

True

If a taxpayer does not respond to a 30-day letter or if (s)he does not reach an agreement with an appeals officer, (s)he will receive a statutory notice of deficiency. A statutory notice of deficiency allows a taxpayer 90 days (150 days if mailed when the taxpayer is outside the United States) from the date this notice is mailed to file a petition with the Tax Court.

True

If the proposed increase or decrease in tax resulting from an IRS examination, conducted at the taxpayer’s place of business, exceeds $25,000, the taxpayer or the taxpayer’s representative must provide a formal written protest explaining the disputed issues within 30 days of the issuance of the 30-day letter.

True

In any case in which a recognized representative is unable or unwilling to declare his or her own knowledge that the facts are true and correct, the Internal Revenue Service may require the taxpayer to make such a declaration under penalty of perjury.

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

Karl has his 2013 income tax return examined resulting in adjustments. Karl has administratively appealed the adjustments. Some of them were sustained, resulting in an income tax deficiency in the amount of $45,000. Karl now wants to appeal his case to the U.S. Tax Court. He will handle the case himself since he cannot afford a lawyer. Karl is entitled to request the small tax case procedure.

True

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

True

Ned’s individual income tax return was under IRS examination. Five months before the expiration of the statute of limitations, the Revenue Agent wanted Ned to agree to extend the statute of limitations. Generally, the Revenue Agent must advise Ned that he has a right to refuse to extend the statute of limitations, and if he does agree to an extension, the agreement can be restricted as to particular issues on the tax return.

True

The maximum penalty that can be imposed on a tax return preparer for failure to provide copies of tax returns as required under Sec. 6107(a) is $25,000.

True

The penalty, if you understate your income tax because you show negligence or disregard of the rules or regulations, is 20% of the underpayment. Negligence includes the failure to keep adequate books and records.

True

The taxpayer must file a claim for a credit or refund within 3 years from the date (s)he filed his or her original return or 2Â years from the date (s)he paid the tax, whichever is later.

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

With respect to docketed Tax Court cases, status solely as an enrolled agent or a CPA will not allow that person to practice before the Tax Court.

True

You can request your tax return examination be moved to another IRS area if your books and records are located in the other area.

True

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.

At the conclusion of an audit, the taxpayer can appeal the tax decision to a local appeals office. Which statement regarding appeal procedures is false?

Written protests do not require a signature.

If the IRS selects a return for audit and the taxpayer responds that (s)he has been audited within the prior 5Â years, the IRS will discontinue the examination.

f

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

false

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

he penalties and interest on the tax liability are satisfied.

A taxpayer can submit an offer in compromise only if it is submitted based on doubt as to the liability owed and doubt as to the ability of the taxpayer to fully pay the amount owed.

t

A taxpayer’s appeal to the Internal Revenue Service regarding the IRS’s filing of a Notice of Federal Tax Lien may succeed if the IRS made a procedural error in making the assessment.

t

Before the initial in-person interview between the IRS and the taxpayer to determine or collect any taxes, the taxpayer should receive a publication from the IRS informing the taxpayer of his or her rights as a taxpayer.

t

If at any step of the collection process a taxpayer does not agree with the recommendations of an IRS collection employee, the taxpayer has the right to discuss the matter with the employee’s manager.

t

Late payments by a taxpayer on an installment agreement to pay a tax liability will generate a letter 30 days in advance of any change the IRS would make to the installment agreement plan.

t

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

Collection Statute Expiration Date (CSED).

Liam does not agree with the findings of the Tax Court, and his case was not handled under the “small tax case procedure.†Which of the following courts would he appeal to first?

Court of Appeals.

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.

The IRS has the burden of proof for any factual issue in a court proceeding if the taxpayer has

All of the answers are correct (Provided credible evidence relating to the issue in a court proceeding, Cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on the return, Complied with all substantiation requirements and maintained all required records)

Under what circumstances may the examination of a tax return be transferred to another district?

All of the answers are correct (The taxpayer moved and now resides in another district, The books and records are located in another district, The taxpayer requests a transfer to another district)

If a taxpayer and the IRS still disagree after an appeals conference, the taxpayer can take his or her case to

All of the answers are correct.

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.

A disagreement with the Internal Revenue Service can be taken to the United States Tax Court if

All of the answers are correct. (A statutory Notice of Deficiency has been issued, A petition is filed within 90 days from the date a statutory Notice of Deficiency is mailed (150Â days if it is addressed to the taxpayer outside the United States), It pertains to income tax)

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

An employee in the payroll department.

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, 2019.

The collection process begins

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