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Exam 2: Tax Compliance, the Irs, and Tax Authorities

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Question 21

Multiple Choice

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Which of the following is not a common tool used in conducting tax research?

A) citator.
B) annotated tax service.
C) topical tax service.
D) keyword search.
E) None of the above.

F) D) and E)
G) B) and D)

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Question 22

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The "90-day" letter gives the taxpayer the opportunity to pay a proposed IRS tax adjustment or file a petition in the U.S. District Court to contest the adjustment and hear the case.

A) True
B) False

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Question 23

Multiple Choice

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Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?

If an individual taxpayer is unable to file a tax return by its original due date, the taxpayer can request an automatic 9-month extension to file the return.

A taxpayer can avoid a substantial understatement of tax penalty:

If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is:

Rebecca is at a loss. A new tax law was recently passed, and she needs to get a better understanding of why the tax law was passed and the intent of the law from an official authority. Describe what authorities may be especially helpful to Rebecca and why she can't find many authorities that discuss the new law.

According to Statement on Standards for Tax Services No. 1, a tax practitioner can recommend a tax return position:

Tina has a very complex tax return and it looks like she will not be able to file her tax return by its due date. When is her tax return due? What are Tina's options for paying her tax due and filing her tax return this year? What are the consequences if Tina does not file or pay her tax timely? Be specific. Tina's tax return is due April 15^th. Tina may request an automatic 6-month extension to file her tax return (i.e., until October 15^th). Extensions allow the taxpayer to delay filing a tax return but extend the due date for tax payments. If a taxpayer fails to pay the entire balance of tax owed by the original due date of the tax return, the IRS charges the taxpayer interest on the underpayment from the due date of the return until the taxpayer pays the tax. The interest rate charged depends on taxpayer type (e.g., individual vs. corporation) and varies quarterly with the federal short-term interest rate. The interest rate for tax underpayments for individuals equals the federal short-term rate plus three percentage points. Penalties are also imposed when a taxpayer fails to file a tax return. Also, there is no statute of limitations if Tina fails to file her return.

Which of the following is not a common method that the IRS uses to select returns for audit?

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic will have zero tax liability this year, he:

Which of the following has the highest authoritative weight?

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

Which of the following audits is the most common and typically less comprehensive?

Kim has decided to litigate a tax issue with the IRS. Describe the trial level courts that Kim may use to litigate the case.

The tax return filing requirements for individual taxpayers only depend on the taxpayer's filing status.

Generally, code sections are arranged (grouped together) :

Chris and Chuck were recently debating whether the Internal Revenue Code is "logical." Chris offers that she has briefly reviewed the Code and could hardly understand its organizational structure, if there is one. Please describe the basic organization of the code and how understanding its organization may be especially beneficial to the tax researcher.

Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:

Which of the following committees typically initiates tax legislation?