Deck 13: Working With the IRS

Question 1

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

Answer 1

B

Question 2

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

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

Answer 2

C

Question 3

A statutory notice of deficiency is also known as a:

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

Answer 3

C

Question 4

What is the formula that assigns numeric weights to certain (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 5

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

A)belong to taxpayers who were 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 6

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 7

The program that is designed to furnish 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 8

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 9

The procedure used to match the information recorded on a return with corresponding data received from third parties is referred to as the:

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

Question 10

The IRS Oversight Board:

A)has the authority to affect tax policy
B)has the authority to affect the processing of individual tax cases
C)can intervene in IRS personnel or procurement matters
D)can review and approve the IRS annual budget request

Question 11

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 12

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 to the taxpayer
C)considers the contact that it makes with a taxpayer under this circumstance to be an examination
D)cancels the return and asks the taxpayer to file his return again

Question 13

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

Question 14

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 15

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

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

Question 16

The highest ranking legal adviser of the IRS is the:

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

Question 17

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 18

To whom 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 19

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

A)belongs to a taxpayer who previously was found guilty of manipulating a return
B)belongs to a taxpayer who resides 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 20

Signed into law in 1996, it guarantees taxpayers various rights to representation 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 21

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 22

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 23

The IRS Oversight Board is made up of only IRS officials.

Question 24

Some of the factors believed to be perused in an economic-reality audit include the which of the following?

A)significant increases in interest, dividend, and other investment income
B)significant decreases in mortgage and other reportable interest paid
C)significant variance in self-employment or farming income during the period relative to industry norms
D)all of these are correct

Question 25

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 26

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 27

The IRS has increased the number of tax return processing centers with the increase in electronic filing of returns.

Question 28

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 29

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

Question 30

The IRS is responsible for administering and enforcing the internal revenue laws of the United States.

Question 31

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

Question 32

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 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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 to decide 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 38

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

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

Question 39

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

Question 40

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

A)Provided your client gives prior notice to the IRS, the taxpayer may record the interview.
B)The IRS may record the interview but must provide a transcript of the recording to the 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 to your client before commencing the interview.

Question 41

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

Question 42

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

Question 43

A power of attorney is necessary when a qualified representative goes to the IRS to represent a taxpayer.

Question 44

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

Question 45

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

Question 46

What are the major duties of the IRS Oversight Board?

Question 47

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 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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 53

Explain how the discriminant function system works.

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

Form 911 is a Request for Taxpayer Advocate Assistance.

Question 59

"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 60

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

Question 61

Enumerate how the IRS conducts a field examination.

Question 62

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

Question 63

Why would a taxpayer choose to go to District Court or the Court of Federal Claims and not to U.S. Tax Court?