Question 1

Mr. Fiocchi filed his unextended 2019 Form 1040 on July 22, 2020, and had no reasonable cause for the delinquency. The return showed a $1,906 overpayment of tax (refund due). Compute Mr. Fiocchi's late-filing and late-payment penalty.

Accepted Answer

Since Mr. Fiocchi is due a refund, there are no penalties for late filing or late payment. The IRS only imposes penalties if taxes are owed.

Question 2

Ms. Dela filed her unextended 2019 Form 1040 on November 2, 2020, and had no reasonable cause for the delinquency. The return showed a $22,840 balance of tax due. Compute Ms. Dela's late-filing and late-payment penalty.

Accepted Answer

The late-filing penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%. The late-payment penalty is 0.5% of the unpaid taxes for each month or part of a month that the tax payment is late, up to a maximum of 25%. Ms. Dela filed her return 5 months late (May 1, 2020, was the deadline for filing 2019 taxes, making it 5 months late by November 2, 2020). The late-filing penalty is thus 5% * 5 months = 25% of $22,840, which is $5,710. However, the late-payment penalty also accrues from May 1, 2020, until the tax is paid, at 0.5% per month. For the first 5 months (up to the filing date), this penalty is 0.5% * 5 months = 2.5% of $22,840, which is $571. The question does not specify payment with the filing, so the calculation stops with the filing penalties. The total initial penalty is the sum of the late-filing penalty ($5,710) and the late-payment penalty for the first 5 months ($571), totaling $6,281. However, none of the provided options match this calculation, indicating a possible misunderstanding in the question's premise or an error in calculation. Given the options, the closest to a reasonable interpretation of penalties based on the provided details would be option C, but it requires assuming a different calculation basis or a mistake in the question's setup or the answer options.

Question 3

If a taxpayer has insufficient financial means to pay a deficiency, the IRS may accept the taxpayer's offer in compromise to settle the deficiency for a lesser amount.

Accepted Answer

When a taxpayer cannot pay the full amount owed, the IRS may accept an offer in compromise to settle for a reduced amount based on the taxpayer's ability to pay.

Question 4

A taxpayer who is disputing a deficiency of $50,000 or less may request an informal hearing by the Small Tax Case Division of the Tax Court.

Accepted Answer

This is true according to U.S. Tax Court rules. Taxpayers who meet certain criteria, including having a deficiency of $50,000 or less, may request an informal hearing with the Small Tax Case Division.

Question 5

Mr. and Mrs. Ibrah filed their 2019 Form 1040 on June 6, 2020. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2019 tax?

Accepted Answer

The IRS generally has three years from the date the return was filed to assess any additional tax. Since the return was filed on June 6, 2020, the latest date for assessment would be June 6, 2023.

Question 6

Mrs. Hepp completed her 2019 Form 1040 on April 13, 2020. The return showed a $923 balance due. Mrs. Hepp needs more time to double check all her computations. What should Mrs. Hepp do to give herself more time?

Accepted Answer

Mrs. Hepp can request an automatic extension of time to file her Form 1040 by April 15, but she must pay the estimated balance due with the extension request to avoid penalties. This allows her more time to file her return without incurring additional penalties for late payment of the tax owed.

Question 7

A taxpayer who wants a jury trial must pay the tax deficiency and then sue the government for a refund in U.S. District Court.

Accepted Answer

This is correct according to the rules outlined in the Internal Revenue Code. If a taxpayer wants to dispute their tax deficiency, they must pay the tax first and then seek a refund by filing a lawsuit in U.S. District Court, which may include a jury trial.

Question 8

The geographic location of the trial court in a tax dispute determines which of the appellate courts will hear an appeal.

Accepted Answer

This statement is true. The geographic location of the trial court determines which of the appellate courts with jurisdiction over that location will hear an appeal in a tax dispute.

Question 9

If the IRS assesses additional tax against a corporation after it has liquidated, the shareholders cannot be held liable for the tax due.

Accepted Answer

Shareholders can be held liable for taxes due if the IRS assesses additional tax against a corporation after it has liquidated, especially if the assets were distributed to the shareholders before paying all tax liabilities.

Question 10

Which of the following statements about the tax return filing process is false?

Accepted Answer

The statement that every income tax return that was not prepared by a professional tax service is audited for errors in applying tax law is false. While tax returns may be audited, it is not necessarily based on whether or not the return was prepared by a professional tax service. Audits are typically triggered by certain red flags or inconsistencies in the return, regardless of whether it was prepared by a professional or not.

Question 11

Which of the following statements about federal tax return filing dates is false?

Accepted Answer

The answer of Which of the following statements about federal...

Question 12

Tony Curtis filed her 2019 income tax return on May 2, 2020. Which of the following statements is false?

Accepted Answer

All of the statements are true. Tony is not subject to a penalty for filing late since she requested an automatic extension and paid her estimated tax by April 15. Even if she did not request an extension, the penalty for filing late is calculated based on the amount owed, so if she is due a refund, there is no penalty. The IRS may waive late filing penalties in certain circumstances, such as a death in the family. Therefore, statement D is the correct choice.

Question 13

Mr. and Mrs. Chung filed their unextended 2019 Form 1040 on May 30, 2020, and had no reasonable cause for the delinquency. The return showed a $10,479 balance of tax due. Compute the Chungs' late-filing and late-payment penalty.

Accepted Answer

The answer of Mr. and Mrs. Chung filed their unextended...

Question 14

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule unless that person was forced to sign the tax return under duress.

Accepted Answer

While duress may be a factor considered in determining innocent spouse relief, it is not the only factor. The IRS will also consider whether the requesting spouse had actual knowledge of the understatement of tax, and whether it is inequitable to hold the requesting spouse liable for the deficiency.

Question 15

Only one spouse must sign a jointly filed Form 1040.

Accepted Answer

Both spouses must sign a jointly filed Form 1040, as this indicates that they both agree to the information provided and are jointly responsible for the tax return.

Question 16

Ms. Hepp filed her 2019 Form 1040 on February 19, 2020. The return showed a $2,730 overpayment of tax, and Ms. Hepp received her refund check from the IRS on April 30, 2020. Which of the following statements is true?

Accepted Answer

The IRS does not pay interest on refunds issued within 45 days of the filing date. Since Ms. Hepp received her refund within this period, no interest is due.

Question 17

Mr. and Mrs. Dint filed their 2019 Form 1040 on January 28, 2020. Assuming that the return does not contain any significant errors, what is the latest date that the IRS can assess any additional 2019 tax?

Accepted Answer

The IRS generally has three years from the due date of the return or the date the return was filed, whichever is later, to assess any additional tax. For a 2019 return filed on January 28, 2020, the latest date would be April 15, 2023, since the due date of the return (April 15, 2020) is later than the filing date.

Question 18

Taxpayers who win their case in court are automatically entitled to recover litigation expenses from the government.

Accepted Answer

Taxpayers who win their case in court are not automatically entitled to recover litigation expenses from the government. The recovery of such expenses is subject to specific legal criteria and court discretion.

Question 19

Only the government may appeal a tax case to the U.S. Supreme Court.

Accepted Answer

Both the taxpayer and the government have the right to appeal a tax case to the U.S. Supreme Court if the case involves significant legal issues.

Question 20

If a taxpayer fails to pay a deficiency after receiving notice of the deficiency, the IRS can garnish the taxpayer's salary or wage to settle the liability.

Accepted Answer

This is true. The IRS can use wage garnishment as a method of collecting unpaid taxes.

Quiz 18: The Tax Compliance Process

Mr. Fiocchi filed his unextended 2019 Form 1040 on July 22, 2020, and had no reasonable cause for the delinquency. The return showed a $1,906 overpayment of tax (refund due) . Compute Mr. Fiocchi's late-filing and late-payment penalty.