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Exam 17: Tax Practice and Ethics

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Question 41

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Certain individuals are more likely than others to have the Form 1040 audited by the IRS. List at least five factors that may increase above the national norms one's chances of audit.

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Question 42

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The IRS can waive the penalty for understating a tax liability if the taxpayer shows ____________________ for the position taken on the tax return.

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Question 43

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The IRS can pay an informant's fee of up to ____________________% of the recovered tax, interest, and penalty amounts. In the typical year, about ____________________ such rewards are paid. The reward can be as high as ____________________% for information provided by a "whistle blower." or

The taxpayer might secure a(n) ____________________ to assure that a homeless shelter qualifies for tax exempt treatment.

The IRS targets high-income individuals for an audit rate that is about double that of the general populace.

How is the tax law affected by Federal criminal statutes?

The IRS is a subsidiary agency of the Department of the ____________________.

A negligence penalty can be waived if the taxpayer has used Form 8275 to ____________________ a tax return position that is contrary to a judicial precedent.

The tax preparer penalty for taking an unreasonable tax return position is the greater of $1,000 or ____________________ of the tax professional's income from preparing the return.

Mickey, a calendar year taxpayer, was not required to file a 2010 Federal income tax return. During 2011, his AGI is $120,000 and his tax liability is $20,000. To avoid a penalty for tax underpayments for 2011, Mickey must make aggregate estimated tax payments of at least:

It is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.

Carrie's AGI last year was $180,000. Her Federal income tax came to $60,000, which she paid through a combination of withholding and estimated payments. This year, her AGI will be $250,000, with a projected tax liability of $80,000, all to be paid through estimates. Ignore the annualized income method. Compute Carrie's quarterly estimated payment schedule for this year.

The IRS periodically updates its list of "audit initiatives," the areas of tax enforcement that will receive special attention during the current tax year. List five or more of the current IRS audit initiatives. The IRS has engaged in the following initiatives, among others.

The IRS processes about ____________________ million individual tax returns every year.

A(n) $____________________ penalty applies if the tax preparer does not sign the client's tax return. or

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation, in the amount of the lesser of ____________________% of the tax understatement or ____________________ % of the appraisal fee collected. or

In a criminal fraud case, the burden is on the taxpayer to show that he or she was innocent "beyond the shadow of any reasonable doubt."

A taxpayer's return might be selected for audit on the basis of the ____________________ score that the IRS computes.

IRS computers use document matching programs for both individuals and business taxpayers to keep the audit rate low.