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Exam 26: Tax Practice and Ethics

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Question 31

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The IRS can pay an informant's fee of up to % of the recovered tax, interest, and penalty amounts. The reward can be as high as % for information provided by a "whistle blower."

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15, 30
fif...

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Question 32

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Silvio, a cash basis, calendar year taxpayer, filed his income tax return 75 days after the due date. Silvio never extended his return, and with the return he paid the full amount of taxes that were due. What penalties will Silvio incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

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The penalties cannot overlap. They apply...

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Question 33

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Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court. This is conveyed in the "ninety­day letter."

With respect to the Small Cases Division of the Tax Court,

CPA Liam discovers that last year's Form 1120 for his client PollCo claimed a $100,000 advertising deduction for a gift to candidates of the Green Party. AICPA tax ethics rules require that an amended return immediately be filed, as political expenditures are not deductible.

In the context of civil tax fraud litigation, the burden of proof is on the taxpayer to show the court by a "preponderance of the evidence" that he or she was not acting with an intent to evade a tax.

Concerning the penalty for civil tax fraud:

A(n) member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. -Misstatement of withholding allowances.

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

Quon filed his Federal income tax return on time, but he did not remit the full balance due. Compute Quon's failure to pay penalty in each of the following cases. The IRS has not yet issued a deficiency notice. a. Three months late, $5,000 additional tax due. b. Nine months late, $5,000 additional tax due. c. Five years late, $5,000 additional tax due.

During an audit, the IRS might require that the taxpayer produce the that underlie the tax return data.

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

If the taxpayer refuses to pay an assessed tax, the IRS can seize taxpayer property under the ____________________ process.

The Commissioner of the IRS is appointed by the:

The "IRS's attorney" is known as the Chief Counsel.

Last year, Ned's property tax deduction on his residence was $22,500. Although he lives in the same house, he tells his CPA that this year's taxes will be only $7,500. The CPA can use this estimate in computing Ned's itemized deductions, under the Statements of Standards for Tax Services.

Jenny prepared Steve's income tax returns for no compensation for 2011 and 2012. Jenny is Steve's mother. In 2014, the IRS notifies Steve that it will audit his returns for 2010-2012. Jenny cannot represent Steve during the audit of the returns, as she is not a "registered tax return preparer."

Yin-Li is the preparer of the Form 1120 for Cloves Corporation. On the return, Cloves claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations. $\begin{array}{lccc}\text {Form 8275 disclosure }&\text {Tax reduction that}&\text { Probability that the }&\text {Yin-Li's fee to}\\\text {on the return of the}&\text {resulted from the}&\text {deduction would be}&\text {complete the Cloves}\\\text {disputed deduction?}&\text {deduction (\$)}&\text {approved by the}&\text {return (\$)}\\\end{array}$ A) $\begin{array}{rccc}& \text { No } &&&&&&&&& 40,000 &&&&&&&& 75 &&&&&&& 10,000 \\\end{array}$ B) $\begin{array}{rccc}& \text { No } &&&&&&&&& 50,000 &&&&&&&& 30 &&&&&&& 500 \\\end{array}$ C) $\begin{array}{rccc}&\text { No } &&&&&&&&& 60,000 &&&&&&&& 40 &&&&&&& 3,000 \\\end{array}$ D) $\begin{array}{rccc}&\text { Yes } &&&&&&&&& 70,000 &&&&&&&& 30 &&&&&&& 6,000 \\\end{array}$ E) $\begin{array}{rccc}&\text { Yes } &&&&&&&&& 80,000 &&&&&&&& 20 & &&&&&&6,000\end{array}$