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

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Question 61

True/False

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The "30-day" letter gives the taxpayer the opportunity to request an appeals conference or agree to the proposed IRS adjustment.

A) True
B) False

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Question 62

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If April 15th falls on a Saturday, the due date for individual tax returns will be on Monday, April 17th.

A) True
B) False

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Question 63

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The three basic types of IRS examinations are computer exams, office exams, and business exams.

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 15th. Tina may request an automatic 6 month extension to file her tax return (i.e., until October 15th). Extensions allow the taxpayer to delay filing a tax return but

For the following tax returns, identify the method the IRS likely used to select the return for audit. a. Dan made a mistake in adding his income on his tax return. b. Juanita failed to report her salary from her 2nd job on her tax return. c. Michael and Venita deducted a relatively large amount of travel expenses on their tax return for their business. The travel expense is large relative to other taxpayers in similar businesses with similar levels of income. d. Paul and Melissa recently went through a very nasty divorce. One of the issues was Paul's less than forthright accounting of his income in determining the appropriate level of alimony.

Joel claimed a high amount of charitable contributions as a deduction on his tax return relative to taxpayers with similar income levels. The information matching program is the IRS program most likely to identify Joel's tax return for audit.

Lakeisha, a 1st year staff accountant, was researching a tax issue and found what appears to be the answer to her question in her introductory tax textbook that she bought three years ago. She is thrilled because she thought it would take much longer to find her answer. What type of authority is the textbook? What are other examples of this type of authorities? Can Lakeisha base her research conclusion on the textbook or similar authorities? Any suggestions for Lakeisha?

A tax practitioner can avoid IRS penalty relating to a tax return position:

Corporations are required to file a tax return annually regardless of their taxable income.

Martin has never filed a 2014 tax return despite earning approximately $20,000 providing landscaping work in the community. When does the statute of limitations expire for Martin's 2014 tax return?

In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court.