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Exam 26: Tax Practice and Ethics

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Question 71

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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

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$3,000 (20...

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Question 72

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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.

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B) False

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Question 73

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

CPA Jennifer has heard about the AICPA's Statements on Standards for Tax Services. Although Jennifer is a licensed CPA in her state, she is not a member of the AICPA. How do the Statements affect Jennifer's tax practice?

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000.The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

The tax preparer penalty for taking an unreasonable tax return position is the greater of $____________________ or ____________________ of the tax professional's income from preparing the return.

Megan prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Megan is not liable for a preparer penalty for taking an unreasonable tax return position if:

The Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Freddie has been assessed a preparer penalty for willful and reckless conduct.When he completed Peggy's Federal income tax return (who is in the 35% tax bracket) , Freddie purposely omitted $100,000 of cash receipts that should have been reported as gross income.Freddie charged Peggy $4,000 to prepare the return.What is Freddie's preparer penalty?

Mickey, a calendar year taxpayer, was not required to file a 2011 Federal income tax return because his AGI was negative due to business losses.During 2012, his AGI is $120,000 and his tax liability is $10,000.To avoid a penalty for tax underpayments for 2012, Mickey must make aggregate estimated tax payments of at least:

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

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

An "office audit" takes place at the headquarters office of the corporate taxpayer.

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

Concerning a taxpayer's requirement to make quarterly estimated tax payments:

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

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

Currently, the IRS charges a ____________________% interest rate on taxes that the taxpayer underpays. or