Question 1

Which of the following individuals is most likely to be audited?
A)Lola has AGI of $35,000 from wages and uses the standard deduction.
B)Marvella has a $145,000 net loss from her unincorporated business (a horse farm).She also received $950,000 salary as a CEO of a corporation.
C)Melvin is retired and receives Social Security benefits.
D)Jerry is a school teacher with two children earning $55,000 a year.He also receives $200 in interest income on a bank account.

Accepted Answer

Marvella's large net loss from her unincorporated business and her high salary as a CEO raise red flags and increase the likelihood of an audit. The other individuals have lower incomes and simpler tax situations, making them less likely to be audited.

Question 2

When new tax legislation is being considered by Congress,
A)the tax bill will usually originate in the Senate.
B)different versions of the House and Senate bills are reconciled by the Speaker of the House and the President of the Senate.
C)different versions of the House and Senate bills are reconciled by a Joint Conference Committee.
D)after the President of the U.S.approves a tax bill,the Joint Conference Committee must then vote on passage of the bill.

Accepted Answer

When different versions of the House and Senate bills are created, they are reconciled by a Joint Conference Committee. This committee is made up of members of both the House and Senate and their role is to resolve any differences between the two bills and create a final version that will be presented to both chambers for a vote. After the President approves the bill, it becomes law without the need for the Joint Conference Committee to vote on passage.

Question 3

A tax bill introduced in the House of Representatives is then
A)referred to the House Ways and Means Committee for hearings and approval.
B)referred to the full House for hearings.
C)forwarded to the Senate Finance Committee for consideration.
D)voted upon by the full House.

Accepted Answer

Tax bills introduced in the House of Representatives are first referred to the House Ways and Means Committee, which is responsible for considering and approving or rejecting the legislation before it can be voted upon by the full House.

Question 4

Kate files her tax return 36 days after the due date.When she files the return,she sends a check for $2,000 which is the balance of the tax owed by her.Kate's penalty for failure to file a return will be
A)0)5% per month (or factor thereof)up to a maximum of 25%.
B)5% per month (or factor thereof)up to a maximum of 25%.
C)20% per month (or factor thereof).
D)25%.

Accepted Answer

According to the IRS guidelines, the penalty for filing a tax return after the due date is 5% per month (or factor thereof) up to a maximum of 25%. Therefore, Kate's penalty for filing her tax return 36 days after the due date is 5% x 1.2 (since 36 days is 1.2 months) = 6%. Since the maximum penalty is 25%, her penalty will be $2,000 x 6% = $120.

Question 5

Describe the steps in the legislative process for major tax reform.

Accepted Answer

The answer of Describe the steps in the legislative process...

Question 6

The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

Accepted Answer

The statement is true. The IRS is responsible for administering and enforcing the federal tax law in the United States.

Question 7

Latashia reports $100,000 of gross income on her 2015 tax return,filed April 15,2016.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?
A)April 15,2018
B)April 15,2019
C)April 15,2022
D)It never expires.

Accepted Answer

The statute of limitations for the IRS to examine a tax return is generally three years. However, if a taxpayer omits more than 25% of their gross income, the period extends to six years. Since Latashia omitted $30,000, which is 30% of her gross income, the six-year statute applies, expiring on April 15, 2022.

Question 8

The Senate equivalent of the House Ways and Means Committee is the Senate
A)Joint Committee on Taxation.
B)Ways and Means Committee.
C)Finance Committee.
D)Joint Conference Committee.

Accepted Answer

The Senate equivalent of the House Ways and Means Committee is the Senate Finance Committee.

Question 9

Peyton has adjusted gross income of $2,000,000 on his 2015 tax return,filed April 15,2016.He accidentally failed to include $200,000 that he received for a television advertisement.How long does the IRS have to audit Peyton's federal tax return?
A)until April 15,2018
B)until April 15,2019
C)until April 15,2022
D)The IRS can audit Peyton's return at any future date.

Accepted Answer

The IRS generally has three years from the date of filing to audit a tax return. Therefore, in this case, the IRS has until April 15, 2019 to audit Peyton's tax return.

Question 10

The IRS must pay interest on
A)all tax refunds.
B)tax refunds paid later than 30 days after the due date.
C)tax refunds paid later than 45 days after the due date.
D)The IRS never pays interest on tax refunds.

Accepted Answer

The answer of The IRS must pay interest on
A)all tax...

Question 11

Which of the following serves as the highest authority for tax research,planning,and compliance activities?
A)Internal Revenue Code
B)Income Tax Regulations
C)Revenue Rulings
D)Revenue Procedures

Accepted Answer

The Internal Revenue Code is the highest authority for tax research, planning, and compliance activities as it contains the actual laws passed by Congress related to taxation in the United States. The other options, Income Tax Regulations, Revenue Rulings, and Revenue Procedures, are all secondary sources that provide guidance and interpretations of the tax code.

Question 12

Which of the following steps,related to a tax bill,occurs first?
A)signature or veto by the President of the United States
B)consideration by the Senate
C)consideration by the House Ways and Means Committee
D)consideration by the Joint Conference Committee

Accepted Answer

A tax bill must first be considered by the House Ways and Means Committee before it can be brought to the House floor for a vote.

Question 13

Explain how returns are selected for audit.

Accepted Answer

The answer of Explain how returns are selected for audit....

Question 14

All of the following are executive (administrative)sources of tax law except
A)Internal Revenue Code.
B)Income Tax Regulations.
C)Revenue Rulings.
D)Revenue Procedures.

Accepted Answer

The Internal Revenue Code is a legislative source of tax law, not an executive source. The correct options for executive sources of tax law are B, C, and D, which are Income Tax Regulations, Revenue Rulings, and Revenue Procedures, respectively.

Question 15

Frederick failed to file his 2015 tax return on a timely basis.In fact,he filed his 2015 income tax return on October 31,2016,(the due date was April 15,2015)and paid the amount due at that time.He failed to make timely extensions.Below are amounts from his 2015 return:  Frederick sent a check for $1,671 in payment of his liability.He thinks that he has met all of his financial obligations to the government for 2015.For what additional amounts may Frederick be liable assuming any applicable interest rate is 6%?

Accepted Answer

The answer of Frederick failed to file his 2015 tax...

Question 16

When returns are processed,they are scored to determine their potential for yielding additional tax revenues.This program is called
A)Taxpayer Compliance Measurement Program.
B)Discriminant Function System.
C)Standard Audit Program.
D)Field Audit Program.

Accepted Answer

The program that is used to score returns and determine their potential for yielding additional tax revenues is called the Discriminant Function System (DFS). The DFS assigns a score to each tax return, based on various factors such as income level, deductions claimed, and other tax-related activities. The scores are used to identify returns that are more likely to have errors or areas of non-compliance, and these returns may then be selected for audit or further review. The other choices (A, C, and D) are all audit programs or methods, but are not specifically related to the process of scoring returns.

Question 17

Generally,the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Accepted Answer

The statute of limitations for most tax assessments is three years from the later of the date the tax return is filed or the due date. There are some exceptions to this rule, such as situations involving fraud or failure to file a return, which may extend the statute of limitations.

Question 18

Generally,tax legislation is introduced first in the Senate and referred to the Senate Finance Committee.

Accepted Answer

The answer of Generally,tax legislation is introduced first in the...

Question 19

What are the correct monthly rates for calculating failure to file and failure to pay penalties?
A) 
B) 
C) 
D)

Accepted Answer

The answer of What are the correct monthly rates for...

Question 20

Alan files his 2015 tax return on April 1,2016.His return contains no misstatements or omissions of income.The statute of limitations for changes to the return expires
A)April 1,2019.
B)April 15,2019.
C)April 15,2018.
D)The statute of limitations never expires.

Accepted Answer

The statute of limitations for tax returns is generally three years from the due date of the return or the date it was filed, whichever is later. Since the due date for the 2015 tax return was April 15, 2016, the statute of limitations would expire on April 15, 2019.

Quiz 2: an Introduction to Taxation

Which of the following individuals is most likely to be audited?

When new tax legislation is being considered by Congress,

A tax bill introduced in the House of Representatives is then

Kate files her tax return 36 days after the due date.When she files the return,she sends a check for $2,000 which is the balance of the tax owed by her.Kate's penalty for failure to file a return will be

Describe the steps in the legislative process for major tax reform.

The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

Latashia reports $100,000 of gross income on her 2015 tax return,filed April 15,2016.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?

The Senate equivalent of the House Ways and Means Committee is the Senate

Peyton has adjusted gross income of $2,000,000 on his 2015 tax return,filed April 15,2016.He accidentally failed to include $200,000 that he received for a television advertisement.How long does the IRS have to audit Peyton's federal tax return?

The IRS must pay interest on

Which of the following serves as the highest authority for tax research,planning,and compliance activities?

Which of the following steps,related to a tax bill,occurs first?

Explain how returns are selected for audit.

All of the following are executive (administrative) sources of tax law except

When returns are processed,they are scored to determine their potential for yielding additional tax revenues.This program is called

Generally,the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Generally,tax legislation is introduced first in the Senate and referred to the Senate Finance Committee.

What are the correct monthly rates for calculating failure to file and failure to pay penalties?

Alan files his 2015 tax return on April 1,2016.His return contains no misstatements or omissions of income.The statute of limitations for changes to the return expires