Question 1

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

Accepted Answer

The DIF (Discriminant Function) program is just one of many ways that the IRS selects tax returns for audit. Other factors that could trigger an audit include large deductions or losses, self-employment income, international transactions, and discrepancies in reported income. Therefore, the majority of individual tax returns are not selected under the DIF program alone.

Question 2

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 3

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 Statutory Notice of Deficiency, does give the taxpayer 90 days to either file a petition with the Tax Court or to pay the disputed tax.

Question 4

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 5

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, the IRS has the burden of proving the taxpayer's tax liability when there is credible evidence presented by the taxpayer. This is known as the burden of production. Once the IRS meets this burden, the burden of proof shifts back to the taxpayer to prove that the IRS's determination is incorrect.

Question 6

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

The 90-day letter is issued if the taxpayer does not file a petition in tax court within 90 days of the date of the Statutory Notice of Deficiency, not if they fail to file a protest letter within 30 days of the 30-day letter.

Question 7

The Internal Revenue Service is part of the

Accepted Answer

The IRS is part of the Treasury Department, which is responsible for managing the government's revenue. The Congress is the legislative branch of the federal government that makes the laws. The Federal Bureau of Investigation is part of the Department of Justice and is responsible for enforcing federal laws. The U.S. Customs Department is part of the Department of Homeland Security and is responsible for regulating international trade and enforcing U.S. trade laws.

Question 8

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

Question 9

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

Accepted Answer

The DIF (Discriminant Index Function) program is specifically designed to identify returns with a high potential for a deficiency assessment. It uses a complex formula to assign a score to each return and the higher the score, the more likely it is to be selected for audit. The other options (TCMP, instant audit program, 1040 program) do not have a specific focus on identifying returns with a high potential for deficiency assessment.

Question 10

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 11

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 12

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

Accepted Answer

A technical advice memorandum (TAM) is the IRS's official response to a request for advice from an IRS field agent while conducting an audit. The TAM contains the IRS's position on how the tax law applies to a specific set of facts or circumstances. TAMs are only issued to IRS employees and are not available to the public.

Question 13

Identify which of the following statements is false.

Accepted Answer

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

Question 14

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 15

Identify which of the following statements is false.

Accepted Answer

This statement is false. If a taxpayer signs Form 870 and pays the tax assessed, they can still file a claim for refund, but only within the time frame specified by law.

Question 16

Identify which of the following statements is true.

Accepted Answer

Option A is true, while B and C are false. A taxpayer cannot request or guarantee exemption from an IRS audit, and signing Form 870 does not provide interest-free days to pay tax.

Question 17

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 18

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

Accepted Answer

According to the IRS, a taxpayer who fails to file and pay taxes is subject to a combined penalty of 5% per month on the underpayment, up to a maximum of 25%.

Question 19

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

Accepted Answer

Treasury Department Circular 230 establishes the standards of practice and rules governing the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

Question 20

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.

Quiz 15: Administrative Procedures

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

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

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

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

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 Internal Revenue Service is part of the

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

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

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.

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

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

Identify which of the following statements is false.

Identify which of the following statements is false.

Identify which of the following statements is false.

Identify which of the following statements is true.

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

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