Tax Ch 12

In which of the following ways are tax returns selected for most audits? a. Through the Discriminant Function System b. Through informants c. Through news sources d. Through information matching

A

The IRS does not have to furnish the taxpayer with information concerning which of the following items? a. The way the taxpayer's return was selected for audit b. The procedures for appealing an IRS ruling c. The refund claims process d. The IRS collection process e. All of the above must be provided to the taxpayer

A

If a U.S. tax court agrees with the taxpayer on appeal that the IRS position was largely unjustified, which of the following is correct? a. The taxpayer must still pay administrative and litigation costs b. The taxpayer may recover administrative but not litigation costs c. The taxpayer may recover litigation but not administrative costs d. To be eligible to recover some of the administrative and litigation costs, the taxpayer must have tried to resolve the case administratively, including going through the appeals process, and must have given the RIS the information necessary to resolve the case e. None of the above

D

Taxpayers have the right to have an IRS examination take place at: a. The IRS office b. Any city of the taxpayer's choosing c. A neutral site d. A reasonable time and place e. None of the above

D

The burden of proof remains on the taxpayer for corporations, trusts, and partnerships with net worth exceeding: a. $1 million b. $3 million c. $5 million d. $7 million e. Some other amount

D

Which of the following has a 6-year statute of limitations? a. Depreciation b. Salaries c. Travel and entertainment d. A return in which the taxpayer omitted gross income in excess of 25 percent of the gross income shown on the return e. Worthless securities

D

Which of the following tax preparers may not represent their clients in all IRS proceedings? a. An enrolled agent b. A certified public accountant c. An attorney d. All of the above may represent their clients in IRS proceedings

D

Which of the following have privileged communication with a client in a noncriminal tax matter? a. CPAs b. Enrolled agents c. Attorneys d. A and c e. A, b, and c

E

Which of the following is a responsibility of a local office of the IRS? a. Advising the Treasury department on legislation b. Intelligence operations c. Appellate procedures d. Developing IRS rules and regulations e. None of the above

E

Which of the following is not a penalty that may be imposed by the IRS? a. Failure-to-file penalty b. Failure-to-pay penalty c. Penalty for negligence d. Fraud penalty e. All of the above may be imposed by the IRS

E

Melodie's taxable income is $40,000 and she pays income tax of $5,800. If Melody's taxable income increases to $41,000, she would pay income taxes of $6,050. What is Melody's marginal tax rate? a. 14.66% b. 25.00% c. 14.91% d. 15.00% e. Some other amount

B

Which of the following does not result in a minimum $50 fine for an income tax preparer? a. Failure to provide a tax preparer identification number b. Cashing a refund check from a customer c. Failing to keep any record of the returns prepared d. Failing to provide a copy of their prepared return to a customer

B

Which of the following is the most common type of audit for an individual taxpayer who conducts no significant business activities? a. Office audit b. Correspondence audit c. Telephone audit d. Field audit e. Service center audit

B

If a taxpayer's 2016 individual income tax return was filed on March 3, 2017, the statute of limitations would normally run out on: a. April 15, 2019 b. March 3, 2016 c. April 15, 2020 d. March 3, 2020 e. None of the above

C

In which of the following situations does the burden of proof in a tax matter not automatically shift to the IRS? a. The IRS uses statistics to reconstruct an individual's income b. A court proceeding against an individual taxpayer involves a penalty or addition to tax c. A taxpayer who did not maintain records d. A and b are correct e. A, b, and c are correct

C

Jim has a house payment of $2,000 per month of which $1,700 is deductible interest and real estate taxes with the remaining $300 representing a repayment of the principal balance of the note. Jim's marginal tax rate is 30 percent. What is Jim's after-tax cost of his house payment? a. $600 b. $540 c. $1,490 d. $1,460 e. Some other amount

C

Which of the following is not required to participate in the Annual Filing Season Program? a. 18 total hours of continuing education from an approved provider b. An annual federal tax refresher course lasting at least 6 hours c. A comprehensive oral exam administered by the IRS that tests preparer knowledge d. A PTIN if the preparer wishes to prepare and file tax returns e. All of the above are required

C

A taxpayer's rights are explained in: a. Publication 5 b. Publication 17 c. Publication 556 d. Publication 1 e. None of the above

D

Both spouses are responsible, jointly and individually, for paying the full amount of any tax, interest, or penalties due to a joint return. a. This does not apply to spouses who have divorced after the return was filed b. Spouses are responsible jointly but not individually c. Spouses are responsible individually but not jointly d. Innocent spouses may be relieved of the liability for tax, interest, and penalties e. None of the above

D

Glen's taxable income is $50,000 and he pays income tax of $8,300. If his income were $60,000, he would pay taxes of $10,800. What is Glen's marginal tax rate? a. 18.23% b. 17.87% c. 15.00% d. 25.00% e. Some other amount

D

If the IRS owes a taxpayer a refund, the law generally provides that the IRS must pay interest on the refund if it is not paid within ____ days of the date the taxpayer filed her or her tax return or claim for refund. a. 30 b. 45 c. 60 d. 90 e. None of the above

B