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

Basu received a 90-day letter from the IRS, also known as a statutory notice of deficiency. This letter gives the taxpayer the option to either pay the proposed deficiency or file a petition with the U.S. Tax Court. Choosing to file a petition with the Tax Court allows Basu to dispute the proposed deficiency and potentially reach a settlement or agreement with the IRS outside of a court trial.

Question 2

Dominic earned $1,500 this year,and his employer withheld $200 of federal income tax from his salary.Assuming that Dominic will have zero tax liability this year,he:

Accepted Answer

The answer of Dominic earned $1,500 this year,and his employer...

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, as it is the trial court of the federal system and has the authority to conduct both criminal and civil trials with a jury. The Tax Court and U.S. Court of Federal Claims do not provide for a jury trial. The U.S. Circuit Court of Appeals also does not provide for a jury trial, as it is an appellate court that reviews decisions made by lower courts.

Question 4

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

Accepted Answer

Field audits are the least common as they require physical inspection of the premises and operations of the auditee, making them more complex and time-consuming. They are also broader in scope compared to other audits, such as office or correspondence audits, which can be done remotely. Targeted audits, on the other hand, focus on specific areas or transactions of the auditee and are not as comprehensive as field audits.

Question 5

Greg earned $20,500 this year and had $1,500 of federal income taxes withheld from his salary.Assuming that Greg will have a total tax liability of $1,000 (and thus will receive a $500) refund,he:

Accepted Answer

The answer of Greg earned $20,500 this year and had...

Question 6

Which of the following is not considered a secondary authority?

Accepted Answer

Private Letter Rulings are considered primary authority because they are official rulings issued by the IRS. Textbooks, tax articles, and tax services are all examples of secondary authorities as they are not official rulings but rather sources that interpret and explain the law.

Question 7

Henry filed his 2013 tax return on May 15^th,2014.The statute of limitations for IRS assessment on Henry's 2013 tax return should end:

Accepted Answer

The statute of limitations for IRS assessment on Henry's 2013 tax return should end on May 15th, 2017, which is three years from the date the tax return was filed.

Question 8

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 9

Which of the following is not considered a primary authority?

Accepted Answer

A tax service is a secondary authority that provides interpretations and explanations of primary authority sources such as cases and regulations but is not considered a primary authority in itself.

Question 10

Allen filed his 2013 tax return on May 15^th,2014 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 2013 tax return should end:

Accepted Answer

According to the question, since Allen underreported his gross income by 30 percent, the SOL ends six years from the later of (1) the date the tax return was filed or (2) the tax return's original due date. Therefore, the SOL for IRS assessment on Allen's 2013 tax return should end on April 15, 2020 (6 years after the original due date of April 15, 2014). None of the given choices match this answer, hence the correct answer is E (None of these).

Question 11

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

Accepted Answer

The IRS uses various methods to select returns for audit, including the DIF system, which scores tax returns based on certain criteria; information matching, which compares the information reported on the tax return with third-party sources; and document perfection, which involves verifying specific pieces of information on a tax return. However, there is no such method as the Tax Select system.

Question 12

Rowanda could not settle 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

Rowanda should litigate in the U.S. Tax Court, as it is the only court specifically designated to hear tax cases. Additionally, taxpayers do not need to pay the proposed tax deficiency before litigating in the Tax Court.

Question 13

Andy filed a fraudulent 2013 tax return on May 1,2014.The statute of limitations for IRS assessment on Andy's 2013 tax return should end:

Accepted Answer

There is no statute of limitations for fraudulent tax returns, meaning the IRS can assess taxes at any time.

Question 14

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

Accepted Answer

The National Research Program (NRP) is known for randomly selecting tax returns for audit to gather data and improve the IRS's audit selection process.

Question 15

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 16

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 of...

Question 17

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 Discriminant Function System (DIF) is an audit selection tool used by the IRS to identify tax returns with a high likelihood of containing significant underreported tax liabilities. One of the factors considered in the DIF System is the taxpayer's deductions relative to their level of income. In Tyrone's case, his large charitable contributions, when compared to taxpayers with similar levels of income, may have triggered the DIF System to identify his tax return for audit.

Question 18

Bill filed his 2013 tax return on March 15^th,2014.The statute of limitations for IRS assessment on Bill's 2013 tax return should end:

Accepted Answer

The answer of Bill filed his 2013 tax return on...

Question 19

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

Accepted Answer

The answer of Which of the following audits is the...

Question 20

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" and gives the taxpayer the option to either request a conference with an Appeals Officer or agree to the proposed tax adjustment. This closely aligns with the scenario described in the question, making answer choice A the best option. The 90-day letter is also known as a "Statutory Notice of Deficiency" and gives the taxpayer 90 days to petition the Tax Court, which is not mentioned in the question. Answer choices C and D refer specifically to letters related to the appeals process and tax adjustments, respectively, but do not necessarily match the described scenario. Answer choice E is incorrect as a letter was indeed received by Dan.

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