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Exam 26: Tax Practice and Ethics

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Question 41

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The IRS processes about ____________________ million individual tax returns every year, about ____________________ million of which are filed electronically.

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Question 42

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Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment.What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

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Carole might be reacting to the general ...

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Question 43

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The taxpayer or a tax advisor may be subject to penalties if there is a misstatement of the valuation of an item reported on the tax return. Describe how these penalties work.

Clara underpaid her taxes by $50,000.Of this amount, $15,000 was due to negligence on her part, as her record-keeping system is highly inadequate.Determine the amount of any negligence penalty

The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

A(n) ____________________ should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a proposed transaction.

Michelle, a calendar year taxpayer subject to a 30% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $275,000 for a sculpture that the IRS later valued at $200,000.The applicable overvaluation penalty is:

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

Compute the overvaluation penalty for each of the following independent cases involving the taxpayer's reporting of the fair market value of charitable contribution property.In each case, assume a marginal income tax rate of 35%.

If the auditor comes to the taxpayer's office to review a tax return, the review is called a(n) ____________________ audit.

When a tax dispute is resolved, interest is paid by or to the government. List three or more features of the interest computations that arise when a tax return is audited.

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 taxpayer can take a dispute to the Small Cases Division of the Tax Court when the disputed amounts do not exceed $____________________. or

Which statement appearing below does not correctly describe the IRS letter ruling process?

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

In preparing a tax return, a CPA should verify "to the penny" every item of information submitted by a client.

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.

According to the IRS, the annual "Tax Gap" totals about $______________________ billion. or

A tax preparer is in violation of Circular 230 if he or she:

Marco, a cash basis, calendar year taxpayer, filed his income tax return 50 days after the due date.Marco never extended his return, and with the return he paid the taxes that were due.What penalties will Marco incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.