Question 1

Basu received a letter from the IRS that gave him the choice of (1)paying a proposed deficiency or (2)filing a petition with the U.S. Tax Court. Basu received the:

Accepted Answer

A 90-day letter, also known as a statutory notice of deficiency, gives the taxpayer the option to either pay the proposed deficiency or file a petition with the U.S. Tax Court within 90 days of receiving the letter. This is the only option presented in the given scenario and matches the description of Basu's situation.

Question 2

Lavonda discovered that the 5 ^th Circuit (where Lavonda resides)has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Accepted Answer

Lavonda can choose to hear her case in either the Tax Court or the U.S. District Court. The Tax Court has specialized expertise in tax law and provides a forum for taxpayers to litigate tax disputes without paying the disputed tax upfront. However, the decisions of the Tax Court are not binding and can be appealed to a higher court.

On the other hand, the U.S. District Court provides a more general forum for litigating legal disputes, including tax disputes. The decisions of the U.S. District Court are binding and can only be appealed to a higher court.

Therefore, Lavonda's best choice would be either the Tax Court or the U.S. District Court, depending on her specific needs and circumstances.

Question 3

Which of the following courts is the only court that provides for a jury trial?

Accepted Answer

The only court that provides for a jury trial is the U.S. District Court. The Tax Court and the Court of Federal Claims do not have a jury trial option, and the U.S. Circuit Court of Appeals is an appellate court that does not conduct trials.

Question 4

Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

Accepted Answer

The answer of Leslie made a mathematical mistake in computing...

Question 5

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?

Accepted Answer

The DIF (Discriminant Index Function) system is designed to identify returns that have a high probability of containing substantial errors or fraud. One of the factors that could trigger the selection of a return for audit under the DIF system is the claiming of unusually high deductions, such as charitable contributions, relative to other taxpayers with similar income levels. Therefore, if Tyrone's tax return is chosen for audit because of his large charitable contributions, it is likely that the DIF system identified his return for audit.

Question 6

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Accepted Answer

The answer of Lavonda discovered that the U.S. Circuit Court...

Question 7

Henry filed his 2020 tax return on May 15 ^th, 2021. The statute of limitations for IRS assessment on Henry's 2020 tax return should end:

Accepted Answer

The answer of Henry filed his 2020 tax return on...

Question 8

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

Accepted Answer

Correspondence audits are the most common and typically less comprehensive, often involving the taxpayer needing to send in documentation to clear up minor discrepancies.

Question 9

Martin has never filed a 2020 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2020 tax return?

Accepted Answer

The statute of limitations for the IRS to assess taxes on a return generally starts when the return is filed. Since Martin has never filed a 2020 tax return, the statute of limitations does not begin, and thus, it does not expire. Therefore, none of the provided years are correct.

Question 10

Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

Accepted Answer

The answer of Ramon's tax return was randomly selected for...

Question 11

Which of the following is not considered a primary authority?

Accepted Answer

Tax service refers to secondary sources, which are publications that provide interpretations and summaries of primary sources such as cases, regulations, and rulings. Primary authorities are sources that come directly from the government, such as Tax Court cases, Treasury Regulations, and Revenue Rulings.

Question 12

Allen filed his 2020 tax return on May 15 ^th, 2021, and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2020 tax return should end:

Accepted Answer

The standard statute of limitations for the IRS to assess taxes is 3 years from the date the return was filed or the due date of the return, whichever is later. However, if a taxpayer underreports their gross income by more than 25%, the statute of limitations extends to 6 years. Since Allen underreported his income by 30%, the correct statute of limitations would be 6 years from the filing date, which would be May 15, 2027, not any of the provided options.

Question 13

Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:

Accepted Answer

If Rowanda cannot pay the proposed tax deficiency, the Tax Court is the best option for litigation as it does not require payment of the tax deficiency prior to the hearing. In addition, the Tax Court is specifically designed to handle tax disputes and has the ability to settle cases prior to trial through stipulations and agreements with the IRS.

Question 14

Which of the following is not considered a secondary authority?

Accepted Answer

Textbooks, tax articles, and tax services are all forms of secondary authority as they provide analysis and interpretation of primary sources such as tax laws and regulations. Private letter rulings, on the other hand, are considered primary authority as they are official rulings made by the IRS on specific taxpayer situations. Therefore, Choice B, private letter ruling, is not considered a secondary authority.

Question 15

Which of the following audits is the least common, broadest in scope, and typically most complex?

Accepted Answer

Field audits involve an examination of the taxpayer's books and records at their place of business or residence, and are therefore the least common, broadest in scope, and typically most complex type of audit.

Question 16

Bill filed his 2020 tax return on March 15 ^th, 2021. The statute of limitations for IRS assessment on Bill's 2020 tax return should end:

Accepted Answer

The statute of limitations for IRS assessment on Bill's 2020 tax return is three years from the date the return was filed, which would be April 15, 2024 (since the original due date for filing tax returns was April 15, but was extended to May 17 for 2021 due to COVID-19). Therefore, option D is correct.

Question 17

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:

Accepted Answer

The 30-day letter is also known as a "Notice of Deficiency" or "Statutory Notice of Deficiency," and it gives taxpayers the option to petition the Tax Court or request a conference with an appeals officer before the IRS makes any changes to their tax liability. Option (1) requesting a conference with an appeals officer is consistent with the choices given in a 30-day letter. Therefore, the correct answer is A) 30-day letter.

Question 18

Andy filed a fraudulent 2020 tax return on May 1, 2021. The statute of limitations for IRS assessment on Andy's 2020 tax return should end:

Accepted Answer

The statute of limitations for the IRS to assess taxes on a fraudulent return does not expire, meaning none of the provided dates are correct.

Question 19

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

Accepted Answer

All of the other methods listed (DIF system, information matching, and document perfection) are commonly used by the IRS to select returns for audit. However, the "Tax Select system" is not a recognized method used by the IRS for selecting returns for audit.

Question 20

Which of the following has the highest authoritative weight?

Accepted Answer

Revenue rulings are issued by the IRS and have the highest authoritative weight. They provide guidance on how the IRS will interpret and apply the tax law. Textbooks, tax services, and tax articles provide useful information but are not considered official sources of guidance. Private letter rulings are specific to a particular taxpayer and therefore have limited authority.

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

Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the:

Lavonda discovered that the 5 ^th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Which of the following courts is the only court that provides for a jury trial?

Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

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?

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Henry filed his 2020 tax return on May 15 ^th, 2021. The statute of limitations for IRS assessment on Henry's 2020 tax return should end:

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

Martin has never filed a 2020 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2020 tax return?

Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

Which of the following is not considered a primary authority?

Allen filed his 2020 tax return on May 15 ^th, 2021, and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2020 tax return should end:

Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:

Which of the following is not considered a secondary authority?

Which of the following audits is the least common, broadest in scope, and typically most complex?

Bill filed his 2020 tax return on March 15 ^th, 2021. The statute of limitations for IRS assessment on Bill's 2020 tax return should end:

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:

Andy filed a fraudulent 2020 tax return on May 1, 2021. The statute of limitations for IRS assessment on Andy's 2020 tax return should end:

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

Which of the following has the highest authoritative weight?

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

Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the:

Lavonda discovered that the 5 th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Which of the following courts is the only court that provides for a jury trial?

Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

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?

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Henry filed his 2020 tax return on May 15 th, 2021. The statute of limitations for IRS assessment on Henry's 2020 tax return should end:

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

Martin has never filed a 2020 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2020 tax return?

Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

Which of the following is not considered a primary authority?

Allen filed his 2020 tax return on May 15 th, 2021, and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2020 tax return should end:

Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:

Which of the following is not considered a secondary authority?

Which of the following audits is the least common, broadest in scope, and typically most complex?

Bill filed his 2020 tax return on March 15 th, 2021. The statute of limitations for IRS assessment on Bill's 2020 tax return should end:

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:

Andy filed a fraudulent 2020 tax return on May 1, 2021. The statute of limitations for IRS assessment on Andy's 2020 tax return should end:

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

Which of the following has the highest authoritative weight?

Lavonda discovered that the 5 ^th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Henry filed his 2020 tax return on May 15 ^th, 2021. The statute of limitations for IRS assessment on Henry's 2020 tax return should end:

Allen filed his 2020 tax return on May 15 ^th, 2021, and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2020 tax return should end:

Bill filed his 2020 tax return on March 15 ^th, 2021. The statute of limitations for IRS assessment on Bill's 2020 tax return should end: