Question 1

The Chief Counsel is appointed by the President and reports tothe Commissioner of the IRS.

Accepted Answer

The Chief Counsel for the IRS is appointed by the President with the advice and consent of the Senate and reports directly to the Commissioner of the IRS.

Question 2

The Tax Exempt and Government Entities (TEGE)Division of the IRS comprises three business divisions: employee plans, exempt organizations, and governmental entities.

Accepted Answer

The Tax Exempt and Government Entities (TEGE) Division of the IRS indeed comprises three primary business divisions focused on different sectors: Employee Plans (which deals with pension plans), Exempt Organizations (which oversees charities and non-profit organizations), and Governmental Entities (which addresses tax issues for federal, state, local, and tribal governments).

Question 3

The Tax Court will review a taxpayer's case, provided that he or she files a petition with the court within:

Accepted Answer

The Tax Court will review a taxpayer's case if the taxpayer files a petition within 90 days of the date of the statutory notice of deficiency. This period allows taxpayers sufficient time to respond to the IRS's determination.

Question 4

A "DIF" score is a type of:

Accepted Answer

A "DIF" score, or Discriminant Information Function score, is used by the IRS to identify tax returns that may have a higher probability of tax liability due to discrepancies, errors, or omissions, thereby requiring further review or audit.

Question 5

Sue filed her 2019 income tax return on April 10, 2020. In November she learned that 100 shares of stock that she owned had become worthless in 2019. Because she did not deduct this loss on the 2019 return, Sue intends tofile a claim for refund. This claim must be filed by nolater than April 15 of what year?

Accepted Answer

The answer of Sue filed her 2019 income tax return...

Question 6

Jackie filed her 2019 income tax return on February 15, 2020. There was nomaterial understatement of income on her return, and the return was properly signed and filed. The statute of limitations for Jackie's 2019 return expires on:

Accepted Answer

The statute of limitations for a tax return generally expires three years after the due date of the return or the date it was filed, whichever is later. For Jackie's 2019 return filed in 2020, the due date was April 15, 2020, making the statute of limitations expire on April 15, 2023.

Question 7

After the assessment has been made, the taxes assessed must be collected within:

Accepted Answer

The correct answer is 10 years. According to the Internal Revenue Code, the IRS has 10 years from the date of assessment to collect any taxes owed. This period is known as the Collection Statute Expiration Date (CSED).

Question 8

A taxpayer's return is classified for audit after receiving a high DIF score and being manually screened by an IRS classifier. Which of the following statements best describes whether the taxpayer will be contacted by an auditor or revenue agent?

Accepted Answer

The taxpayer will not necessarily be contacted because after the initial high DIF score and manual screening, the IRS may still decide that an audit is not warranted. This decision is made after a detailed review, indicating that not all high DIF scores lead directly to audits.

Question 9

Jimmy purposely omitted from his 2019 tax return $40,000 of the gross receipts that he collected as the owner of a restaurant. His 2019 return indicated collective gross receipts of $200,000. The IRS nolonger can pursue Jimmy with the threat of collection of the related tax, interest, and penalties, as of April 15 of what year?

Accepted Answer

The IRS has no statute of limitations for pursuing taxes in cases of fraud or for filing a false return. Since Jimmy purposely omitted a significant amount of his income, this could be considered fraudulent activity, thus the IRS can pursue him at any time without expiration.

Question 10

Madison and Robyn sold a piece of property for $250,000, claiming that their basis was $100,000, and reported a taxable gain of $150,000. Their 2019 return filed in February 2020 reported gross income of $250,000. Madison and Robyn later determine that the property's basis was actually $25,000, not $100,000, resulting in a $75,000 understatement of income on the 2019 return. The statute of limitations period in which the IRS may assess additional tax in this situation expires on April 15 of what year?

Accepted Answer

The statute of limitations for the IRS to assess additional tax is generally 3 years from the date the return was filed. However, if there is a substantial understatement of income (25% or more), the statute of limitations extends to 6 years. In this case, the understatement of $75,000 on reported income of $250,000 is more than 25%, extending the statute to 6 years from the filing date in February 2020, which expires in April 2026.

Question 11

Your client has just received an IRS summons toappear for an interview. The following statements are CORRECT concerning this interview EXCEPT:

Accepted Answer

Notes can be taken by both the IRS agent and the taxpayer during the interview, making option C incorrect.

Question 12

Which of the following is NOT a factor in favor of the Protest/Appeals Process?

Accepted Answer

The appeals process does not necessarily expedite the conclusion of the dispute; it is an additional step before litigation, which can actually extend the resolution timeline.

Question 13

Michelle accidentally omitted from her 2019 tax return $8,000 of gross receipts she collected as the owner of a restaurant. Her 2019 return indicated collective gross receipts of $40,000. The IRS nolonger can pursue Michelle with the threat of collection of the related tax, interest, and penalties as of April 15 of what year?

Accepted Answer

The answer of Michelle accidentally omitted from her 2019 tax...

Question 14

The IRS was established by Congress on July 1, 1862, tomeet the fiscal needs of the Civil War.

Accepted Answer

The IRS was indeed established by Congress on July 1, 1862, as part of the Revenue Act of 1862, primarily to meet the financial requirements of the Civil War through the imposition of the first income tax.

Question 15

If a taxpayer and the IRS cannot agree on the proposed adjustments after an appeals conference, the regional director of appeals will issue a:

Accepted Answer

The regional director of appeals issues a 90-day letter, also known as a Statutory Notice of Deficiency, giving the taxpayer 90 days to file a petition with the Tax Court to dispute the IRS's proposed adjustments.

Question 16

A taxpayer may be represented before the IRS only by attorneys.

Accepted Answer

Taxpayers can be represented by attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries who are eligible to practice before the IRS.

Question 17

Robert accidentally omitted from his 2019 tax return $80,000 of the gross receipts that he collected as the owner of a restaurant. His 2019 return indicated collective gross receipts of $200,000. The IRS nolonger can pursue Robert with the threat of collection of the related tax, interest, and penalties, as of April 15 of what year?

Accepted Answer

The IRS has a six-year statute of limitations for substantial underreporting of income, which is defined as omitting more than 25% of gross income. Since Robert omitted $80,000 from $280,000 total ($200,000 reported + $80,000 omitted), this is more than 25%. Therefore, the IRS can pursue him until April 15, 2026.

Question 18

Which of the following issues would most typically NOT be handled as a correspondence examination?

Accepted Answer

Correspondence examinations typically handle issues that can be resolved through mail and do not require in-depth review or face-to-face meetings, such as mathematical errors, unallowable deductions, and errors detected through document matching. Questions concerning gambling income may require more detailed documentation and possibly face-to-face discussions, making them less suitable for correspondence examinations.

Question 19

The statute of limitations refers toa:

Accepted Answer

The statute of limitations in the context of taxes refers to the specific period of time within which the IRS can assess and collect taxes or taxpayers can claim refunds. It limits the time for legal actions related to tax assessments and refunds.

Question 20

In absence of an administrative summons, a taxpayer cannot be required toaccompany the representative toan interview.

Accepted Answer

The IRS generally cannot require a taxpayer to accompany the representative to an interview unless an administrative summons has been issued. This is because the taxpayer has the right to appoint a representative to deal with the IRS on their behalf, and in most cases, their presence is not mandated unless specifically summoned.

Quiz 12: Working With the IRS