Question 1

The majority of the individual tax returns that are audited are selected under the DIF program.

Accepted Answer

While the DIF program is used by the IRS to select potential audit targets, the majority of individual tax returns are actually selected for audit through other methods such as random selection, matching income and deduction information with third-party reports, and specific issue audits.

Question 2

The program specifically designed to identify returns with a high potential for a deficiency assessment is the

Accepted Answer

The DIF program, or Discriminant Function System, is specifically designed to identify returns with a high potential for a deficiency assessment, by using a mathematical formula to assign scores to certain return characteristics, such as income and deductions. The TCMP program is a more comprehensive audit program that selects returns based on a statistical sampling method. The instant audit program and 1040 program are not specifically designed to identify returns with a high potential for a deficiency assessment.

Question 3

The IRS provides advice concerning an issue that arises during an audit by issuing

Accepted Answer

The IRS provides advice concerning an issue that arises during an audit by issuing a technical advice memorandum. This type of document provides guidance to the auditor on how to apply tax law to a particular situation. Revenue rulings, audit memorandums, and private letter rulings are other types of guidance that the IRS may provide, but they are not specific to the audit process.

Question 4

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Accepted Answer

A letter ruling provides a taxpayer with guidance on how to apply the tax laws to their particular situation. It is binding on the IRS and can be relied upon by the taxpayer, as long as the facts and circumstances remain the same.

Question 5

Anyone who prepares a tax return is subject to the provisions of Circular 230.

Accepted Answer

The answer of Anyone who prepares a tax return is...

Question 6

The statute of limitations is unlimited for a tax return that is never filed.

Accepted Answer

For tax returns that are never filed, the IRS can technically pursue taxes owed indefinitely because the statute of limitations for assessing and collecting taxes does not begin until a return is filed.

Question 7

Identify which of the following statements is false.

Accepted Answer

B) is false because when dealing with an "appeals coordinated issue," an appeals officer does not have the authority to settle based on the "hazards of litigation" without getting further approval or following specific procedures, as these issues are of significant importance or complexity and require consistent treatment across different cases.

Question 8

Identify which of the following statements is true.

Accepted Answer

Option A is true. The special audit relief rule applies to taxpayers who have been audited in at least one of the two previous years on the same item, and the earlier audit did not result in any additional tax owed. This rule allows the IRS to forgo the audit if the taxpayer agrees to waive any refund or credit that may be due on the basis of the item being audited. Options B and C are incorrect. Option B is incorrect because there is no provision in the tax law that allows a taxpayer to request an exemption from an audit. Option C is incorrect because signing Form 870 means that the taxpayer agrees to pay the tax due in full, either immediately or in installments, and does not provide for any interest-free period.

Question 9

If the taxpayer has credible evidence,the IRS bears the burden of proof in a tax dispute.

Accepted Answer

According to the Taxpayer Bill of Rights, if a taxpayer has credible evidence, the IRS bears the burden of proof in a tax dispute.

Question 10

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.

Accepted Answer

The penalty for failing to file and failing to pay taxes is a combined 5% per month, with a maximum penalty of 25% of the unpaid tax amount.

Question 11

Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS.

Accepted Answer

Treasury Department Circular 230 does indeed regulate the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

Question 12

The Internal Revenue Service is part of the

Accepted Answer

The Internal Revenue Service (IRS) is a government agency responsible for collecting taxes and enforcing tax laws in the United States. It is part of the Treasury Department, which oversees various financial functions of the federal government.

Question 13

The 90-day letter (Statutory Notice of Deficiency)gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

Accepted Answer

The 90-day letter, also known as the Statutory Notice of Deficiency, gives the taxpayer 90 days to either file a petition with the Tax Court or to pay the disputed tax. If the taxpayer does not take any action within the 90-day period, the IRS can assess the tax and begin collection activities.

Question 14

The IRS will issue a 90-day letter (a Statutory Notice of Deficiency)if the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter.

Accepted Answer

If the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter, the IRS will issue a 90-day letter (Statutory Notice of Deficiency).

Question 15

The "automatic" extension period for filing an individual return is seven months.

Accepted Answer

The automatic extension period for filing an individual return is six months, extending the deadline from April 15 to October 15.

Question 16

The statute of limitations,which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due,usually expires 6 years after the date on which the return is filed.

Accepted Answer

The general statute of limitations for federal tax returns is 3 years from the date the return was filed or the due date of the return, whichever is later.

Question 17

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 18

The maximum failure to file penalty is a total of 25% of the underpayment.

Accepted Answer

The IRS imposes a failure-to-file penalty for late tax returns, which can accumulate until it reaches a maximum of 25% of the unpaid taxes.

Question 19

In order to appeal to the Appeals Division,a taxpayer must submit a protest letter to the IRS

Accepted Answer

The answer of In order to appeal to the Appeals...

Question 20

Identify which of the following statements is false.

Accepted Answer

If the taxpayer signs Form 870, they are not precluded from filing a refund suit. However, by signing this form, the taxpayer may be able to resolve the issue more quickly and without going through the appeals process.

Quiz 29: Administrative Procedures

The majority of the individual tax returns that are audited are selected under the DIF program.

The program specifically designed to identify returns with a high potential for a deficiency assessment is the

The IRS provides advice concerning an issue that arises during an audit by issuing

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Anyone who prepares a tax return is subject to the provisions of Circular 230.

The statute of limitations is unlimited for a tax return that is never filed.

Identify which of the following statements is false.

Identify which of the following statements is true.

If the taxpayer has credible evidence,the IRS bears the burden of proof in a tax dispute.

A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.

Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS.

The Internal Revenue Service is part of the

The 90-day letter (Statutory Notice of Deficiency)gives the taxpayer 90 days to file a petition with the Tax Court or to pay the disputed tax.

The IRS will issue a 90-day letter (a Statutory Notice of Deficiency)if the taxpayer does not file a protest letter within 30 days of the date of the 30-day letter.

The "automatic" extension period for filing an individual return is seven months.

The statute of limitations,which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due,usually expires 6 years after the date on which the return is filed.

Identify which of the following statements is false.

The maximum failure to file penalty is a total of 25% of the underpayment.

In order to appeal to the Appeals Division,a taxpayer must submit a protest letter to the IRS

Identify which of the following statements is false.