Deck 12: Working With the IRS

Question 1

A written revenue agent's report (RAR)is prepared by the IRS agent and is given tothe taxpayer:

A)before the commencement of the examination
B)upon conclusion of the examination
C)during the examination
D)none of these are correct

Answer 1

B

Question 2

If a return is identified as including an unallowable item, the IRS:

A)computes the seemingly necessary adjustment in taxes and notifies the taxpayer by mail
B)sends a formal notice of deficiency tothe taxpayer
C)considers the contact that it makes with a taxpayer under this circumstance tobe an examination
D)cancels the return and asks the taxpayer tofile his return again

Answer 2

A

Question 3

When a taxpayer does not agree with the IRS agent's proposed adjustments a:

A)30-day letter is issued
B)RAR is issued
C)10-day notice is issued
D)21-day notice is issued

Answer 3

A

Question 4

The procedure used tomatch the information recorded on a return with corresponding data received from third parties is referred toas the:

A)Information Document Reconciliation Program
B)Information Document Review Program
C)Information Document Check Program
D)none of these are correct

Question 5

Signed intolaw in 1996, it guarantees taxpayers various rights torepresentation before the IRS. What is it called?

A)the Constitution
B)the Sixteenth Amendment
C)the Taxpayer Bill of Rights
D)the Taxpayer Advocate

Question 6

The program that is designed tofurnish the IRS with statistics concerning the type and number of errors that are made on a representative sample of individual income tax returns is the:

A)Unallowable Items Program
B)Mathematical/clerical Error Program
C)National Research Program
D)Discriminant Function Program

Question 7

Towhom does the Chief Counsel of the Internal Revenue Service report?

A)Commissioner of the Internal Revenue Service
B)Secretary of the Treasury
C)Regional Council in National Office
D)Attorney General

Question 8

An office examination is scheduled when a selected return for examination:

A)belongs toa taxpayer whopreviously was found guilty of manipulating a return
B)belongs toa taxpayer whoresides near the IRS local office
C)requires a mere verification of record-keeping
D)involves one or more issues that will require some analysis and the exercise of the IRS personnel's judgment

Question 9

Which of the following examinations involves complex issues that require more advanced knowledge of the internal revenue laws and accounting skills?

A)correspondence examination
B)field examination
C)office examination
D)arithmetical error examination

Question 10

A Form 911 is filed by the taxpayer as a request for which of the following?

A)National Research Program
B)Appeals Conference
C)Tax Court Hearing
D)Taxpayer Advocate Service Assistance

Question 11

The Commissioner of the Internal Revenue Service (IRS)is appointed by the:

A)President of the United States
B)Secretary of the Treasury
C)Senate
D)Congress

Question 12

How much time from the date of issue of a 30-day letter does a taxpayer have torequest a conference with an appeals officer?

A)30 days
B)90 days
C)10 days
D)21 days

Question 13

The Taxpayer Assistance Order (TAO)is issued by the:

A)Secretary of Treasury
B)Chief Counsel
C)National Taxpayer Advocate
D)Commissioner of IRS

Question 14

The IRS:

A)facilitates the processing of tax returns
B)enforces the internal revenue laws of the United States
C)is a bureau within the U.S. Department of Finance
D)all of these are correct

Question 15

A statutory notice of deficiency is alsoknown as a:

A)30-day letter
B)10-day letter
C)90-day letter
D)21-day letter

Question 16

In selecting returns for examination, the primary goal of the IRS is toreview only those returns that:

A)belong totaxpayers whowere found guilty previously
B)will result in a satisfactory increase in the tax liability
C)have been filed for the first time
D)contain mathematical/clerical errors

Question 17

The National Taxpayer Advocate:

A)represents the IRS in Tax Court cases
B)administers a taxpayer-intervention system
C)assists the IRS in preparing proposed legislation, treaties, regulations, and executive orders
D)prepares IRS rulings and other written determinations

Question 18

In case of underpayment of taxes, if the deficiency is not paid in a timely fashion, interest is imposed on the unpaid amount for a period that begins on the date of:

A)filing the return and ends on the date of payment or the last working day of the respective year, whichever is later
B)filing the return and ends on the date of payment
C)the notice and demand and ends on the date of payment
D)the notice and demand and ends on the date when the taxpayer receives the notice

Question 19

What is the formula that assigns numeric weights tocertain (undisclosed by the IRS)return items, generating a composite score for the return?

A)selection of returns formula
B)unallowable items formula
C)discriminant function formula (DIF)
D)mathematical errors formula

Question 20

The highest ranking legal adviser of the IRS is the:

A)Attorney General
B)Chief Attorney
C)District Attorney
D)Chief Counsel

Question 21

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

Question 22

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

Question 23

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

A)10 days of the date of his or her statutory notice of deficiency
B)60 days of the date of his or her statutory notice of deficiency
C)30 days of the date of his or her statutory notice of deficiency
D)90 days of the date of his or her statutory notice of deficiency

Question 24

A "DIF" score is a type of:

A)fraud definition used by the IRS
B)composite score that rates returns for potentially higher tax liability
C)negligent penalty score
D)score used for information purposes in collateral agreements

Question 25

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?

A)2021
B)2024
C)2026
D)2027
E)There is noexpiration date for the statute of limitations in this context.

Question 26

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:

A)February 15, 2023
B)April 15, 2023
C)February 15, 2026
D)April 15, 2026

Question 27

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

A)2 years
B)10 years
C)5 years
D)8 years

Question 28

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?

A)The taxpayer will be contacted since a high DIF score always will mean some type of audit.
B)The taxpayer will be contacted because only the National Office has the power todecide that after screening, the return need not be audited.
C)The taxpayer will not necessarily be contacted since after the Service Center review, it may be decided that an audit is unwarranted because the return will be manually inspected for audit determination.
D)The taxpayer will not necessarily be contacted by an auditor or revenue agent since after the return is screened by the Service Center, it then is randomly selected for audit.

Question 29

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?

A)2022
B)2025
C)2027
D)2028
E)There is noexpiration date for the statute of limitations in this context.

Question 30

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?

A)2022
B)2023
C)2026
D)There is noexpiration date for the statute of limitations in this context.

Question 31

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

A)Provided your client gives prior notice tothe IRS, the taxpayer may record the interview.
B)The IRS may record the interview but must provide a transcript of the recording tothe taxpayer if he requests a copy and pays for the duplication charges.
C)Notes may not be taken by either the IRS agent or the taxpayer during the interview.
D)The IRS investigator must explain various taxpayer rights toyour client before commencing the interview.

Question 32

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

A)An appeals officer can consider the hazards of litigation.
B)The litigation path remains a possibility even if an appeal is pursued.
C)The conclusion of the dispute, whether for or against the taxpayer, is expedited.
D)The appeals process allows a further delay in the payment of the disputed tax.

Question 33

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?

A)2021
B)2023
C)2026
D)2027
E)There is noexpiration date for the statute of limitations in this context.

Question 34

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

Question 35

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

A)30-day letter
B)90-day letter
C)21-day letter
D)10-day letter

Question 36

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

Question 37

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?

A)2021
B)2024
C)2026
D)2027
E)There is noexpiration date for the statute of limitations in this context.

Question 38

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

A)mathematical errors
B)clearly defined unallowable deductions
C)errors detected through matching of Forms 1099 and W-2
D)questions concerning gambling income

Question 39

The statute of limitations refers toa:

A)set of provisions that limits a tax return preparer's rights
B)specific period of time within which returns must be filed
C)set of provisions that limits a taxpayer's rights
D)specific period of time within which all taxes must be assessed and collected and all refund claims must be made

Question 40

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

Question 41

Economic-reality factors are considered by the IRS in selection of returns for audit only where it has some other evidence that the taxpayer has over reported taxable income for the year.

Question 42

A field audit by the IRS is always conducted at the taxpayer's premises.

Question 43

In cases where an IRS examiner questions only one or twoitems on a selected return, an examination is typically conducted by mail, called a correspondence examination.

Question 44

The objective of the Appeals Office is toresolve tax controversies without litigation on a basis that is fair and impartial toboth the government and the taxpayer.

Question 45

Under various provisions of the Internal Revenue Code, what are some of the various rights guaranteed totaxpayers?

Question 46

The IRS treats an adjustment in tax resulting from an unallowable item identified in a return as a correction of a mathematical or clerical error.

Question 47

"If a taxpayer cannot resolve his or her dispute with the IRS administratively, he or she may seek judicial relief." Explain how a taxpayer can seek relief through the judicial system.

Question 48

Form 911 is a Request for Taxpayer Advocate Assistance.

Question 49

There is a general common law privilege of confidentiality for non-criminal tax matters that exists between a taxpayer and his or her tax practitioner.

Question 50

A field examination is usually limited toan examination of corporations and individual business returns.

Question 51

What are the functions performed by the mathematical/clerical error program?

Question 52

A RAR contains a brief explanation of the proposed adjustments and lists the balance due or the overpayment.

Question 53

The National Research Program (NRP)provides statistics that are used in the development and update of the DIF formulas.

Question 54

A taxpayer's appeal must be in written form if the total proposed additional tax and penalties exceed $2,500.

Question 55

A power of attorney is necessary when a qualified representative goes tothe IRS torepresent a taxpayer.

Question 56

Generally, the IRS selects returns for examination through the use of mathematical models, including correlations and discriminant functions.

Question 57

Individual taxpayers have less than a 1 percent chance of being audited.

Question 58

The IRS examines each and every return critically in order togenerate additional revenue for the Treasury.

Question 59

The Appeals Office has the exclusive and final authority tosettle cases that originate in any district irrespective of its jurisdiction.

Question 60

The number of routine math errors has increased sharply due toincrease in electronic filing.

Question 61

Enumerate how the IRS conducts a field examination.

Question 62

Explain how the discriminant function system works.

Question 63

What are the "dos and don'ts" in negotiating with a government auditor?

Question 64

Why would a taxpayer choose togotoDistrict Court or the Court of Federal Claims and not toU.S. Tax Court?

Question 65

What are the "pros" and "cons" of filing a protest toan IRS Audit?