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Question;1947. TF #1;The tax professional can do more than just tax compliance work. He or she can;work with the client in consultation over the strategy and tactics of dealing;with a Federal tax audit.;a.;True;b. False;1948. TF #2;The IRS employs almost 90,000 personnel, making it one of the largest Federal;agencies.;a.;True;b. False;1949. TF #3;Recently, the overall Federal income tax audit rate for individual returns has;been about 3%.;a.;True;b. False;1950. TF #4;The IRS targets high-income individuals for an audit rate that is about double;that of the general populace.;a.;True;b. False;1951. TF #5;IRS computers use document matching programs for both individuals and business;taxpayers to keep the audit rate low.;a.;True;b. False;1952. TF #6;The ?IRS? attorney? is known as the Chief Counsel.;a.;True;b. False;1953. TF #7;One of the four operating divisions of the IRS deals exclusively with;manufacturing and exporting businesses.;a.;True;b. False;1954. TF #8;In a letter ruling, the IRS responds to a taxpayer request concerning the tax;treatment of a proposed transaction.;a.;True;b. False;1955. TF #9;An IRS letter ruling might determine that an employee?s compensation is;unreasonable in amount.;a.;True;b. False;1956. TF #10;A letter ruling is issued by the IRS at no charge.;a.;True;b. False;1957. TF #11;The IRS can require that the taxpayer produce its financial accounting records;to determine if taxable income is computed correctly.;a.;True;b. False;1958. TF #12;When a tax issue is taken to court, the burden of proof is on the taxpayer to;show that the items reported on the return are correct.;a.;True;b. False;1959. TF #13;When the IRS issues a notice of tax due, the taxpayer has 30 days to either pay;the tax or file a petition with the Tax Court. This is conveyed in the;?thirty-day letter.?;a.;True;b. False;1960. TF #14;An ?office audit? takes place at the headquarters office of the corporate;taxpayer.;a.;True;b. False;1961. TF #15;After a tax audit, the taxpayer receives the Revenue Agent?s Report as part of;the ?90-day letter.?;a.;True;b. False;1962. TF #16;Neither the taxpayer nor the government can appeal a decision of the Tax Court;Small Cases Division.;a.;True;b. False;1963. TF #17;Babs filed an amended return in 2011, claiming a refund relative to her 2009;tax computation. When the IRS approves the amended return, it will pay Babs;interest with respect to the overpayment.;a.;True;b. False;1964. TF #18;During any month in which both the failure-to-file and failure-to-pay penalties;apply, both penalties must be paid in full.;a.;True;b. False;1965. TF #19;Maria and Miguel Blanco are in the midst of negotiating a divorce. Because both;parties are unwilling to share any current financial information, their joint;Form 1040 for 2011 is not filed until October 31, 2012, when the respective;divorce attorneys forced them to cooperate. The Blancos should not be subject;to any Federal late-filing penalties, because of the reasonable cause exception.;a.;True;b. False;1966. TF #20;A negligence penalty is 20% of the underpayment attributable to negligence.;a.;True;b. False;1967. TF #21;Jaime?s negligence penalty will be waived, under the reasonable cause exception. He told the court, ?My taxes were wrong;because I couldn?t understand the tax law.?;a.;True;b. False;1968. TF #22;Because he undervalued property that he transferred by gift, Dan owes;additional gift taxes of $8,000. The penalty for undervaluation does not apply;in this situation, because the tax understatement was too small.;a.;True;b. False;1969. TF #23;In the context of civil tax fraud, the burden of proof is on the IRS to show by;a ?preponderance of the evidence? that the taxpayer had a specific intent to;evade a tax.;a.;True;b. False;1970. TF #24;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.;True;b. False;1971. TF #25;Yang, a calendar year taxpayer, did not file a tax return for 2005 because she;honestly believed that no additional tax was due. In 2011, Yang is audited by;the IRS and the agent assesses a deficiency of $17,000 for tax year 2005. Yang;need not pay this deficiency, since the statute of limitations expired on April;15, 2009.;a.;True;b. False;1972. TF #26;Keepert uses ?two sets of books.? She only reports one-half of her cash sales;on the records that she uses to complete her Federal income tax return. The;statute of limitations for Keepert?s return is six years.;a.;True;b. False;1973. TF #27;In the case of bad debts and worthless securities, the statute of limitations;on claims for refund is seven years.;a.;True;b. False;1974. TF #28;Jenny prepared Steve?s income tax returns for no compensation for 2008 and;2009. Jenny is Steve?s mother. In 2011, the IRS notifies Steve that it will;audit his returns for 2007-2009. If Steve so desires, Jenny may represent him;during the audit of all three returns.;a.;True;b. False;1975. TF #29;Circular 230 applies to all tax practitioners. This includes attorneys, CPAs;and enrolled agents, even though each of the groups has its own code of;conduct.;a.;True;b. False;1976. TF #30;Circular 230 requires that a tax preparer be aware of changes in the tax law.;Furthermore, office practices of the preparer must be up to industry standards.;a.;True;b. False;1977. TF #31;Under Circular 230, Burke cannot complete a client?s original Form 1040 and;charge a fee equal to one-third of the resulting refund.;a.;True;b. False;1978. TF #32;As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can;draft an amendment to the XYZ partnership agreement.;a.;True;b. False;1979. TF #33;Circular 230 prohibits a tax preparer from charging an unconscionable fee for;his/her services.;a.;True;b. False;1980. TF #34;A tax preparer cannot disclose to a mortgage banker the client?s income level;or other information acquired by preparing the return, without the client?s;permission.;a.;True;b. False;1981. TF #35;A VITA volunteer is exempted from the Code?s tax preparer penalties.;a.;True;b. False;1982. TF #36;Latrelle prepares the tax return for Whitehall Corporation. Latrelle includes a;$5,000 deduction on the return. This type of deduction previously has been;disallowed by the Tax Court, although there is a 15% chance that the holding;will be reversed on an appeal. The return does not make any special disclosure;that the deduction is being claimed. Whitehall paid Latrelle a fee of $3,000;for preparing the Form 1120. Latrelle will be assessed a preparer penalty of;$1,000 for taking an unreasonable position on the Whitehall return.;a.;True;b. False;1983. TF #37;A CPA and his/her client hold a privilege of confidentiality from the IRS, as;to their discussions about completing a tax return.;a.;True;b. False;1984. TF #38;The Statements on Standards for Tax Services apply to members of the AICPA.;a.;True;b. False;1985. TF #39;The AICPA?s Statements on Standards for Tax Services must be followed its;members, they are more than merely advisory.;a.;True;b. False;1986. TF #40;A CPA can take a tax return position for a client that is contrary to current;IRS interpretations of the law.;a.;True;b. False;1987. TF #41;Faye, a CPA, is preparing Judith?s tax return. Before computing Judith?s;deduction for business supplies, Faye must examine Judith?s records in support;of the deducted amount.;a.;True;b. False;1988. TF #42;In preparing a tax return, a CPA should verify ?to the penny? every item of;information submitted by a client.;a.;True;b. False;1989. TF #43;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.;a.;True;b. False;1990. TF #44;Henrietta has hired Gracie, a CPA, to complete this year?s Form 1040. Henrietta;uses software to keep the books for her business. She tells Gracie that a;$5,000 amount for business supplies is ?close enough? to constitute the;deduction. Gracie can use this estimate in completing the Form 1040.;a.;True;b. False;1991. TF #45;When a practitioner discovers an error in a client?s prior return, AICPA tax;ethics rules require that an amended return immediately be filed.;a.;True;b. False;1992. TF #46;It is advisable that an IRS audit be conducted at the office of the tax;advisor, and not of the client.;a.;True;b. False;1993. TF #47;When a ?prompt assessment? of the tax liability is requested, the taxpayer;essentially is volunteering for an IRS audit of the tax return.;a.;True;b. False


Paper#59254 | Written in 18-Jul-2015

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