Question 1

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
-Preparer penalty for reckless conduct.

Accepted Answer

The answer of For each of the indicated tax penalties,...

Question 2

Compute the failure to pay and failure to file penalties for John, who filed his 2018 income tax return on December
14, 2019, paying the $10,000 amount due. On April 1, 2019, John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request. He has no reasonable cause for failing to file his return by October 15, or for failing to pay the tax that was due on April 15, 2019. John's failure to comply with the tax laws was not fraudulent.

Accepted Answer

The answer of Compute the failure to pay and failure...

Question 3

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, because her record-keeping system is highly inadequate. Determine the amount of any negligence penalty.

Accepted Answer

The answer of Clarita underpaid her taxes by $50,000. Of...

Question 4

Chung's AGI last year was $180,000. Her Federal income tax came to $45,000, which she paid through a combination of withholding and estimated payments. This year, her AGI will be $250,000 with a projected tax liability of $60,000, all to be paid through estimates. Ignore the annualized income method. Compute Chung's quarterly estimated payment schedule for this year.

Accepted Answer

The answer of Chung's AGI last year was $180,000. Her...

Question 5

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000)
and to civil fraud ($40,000). Compute the total penalties incurred.

Accepted Answer

The answer of Linwell underpaid his taxes by $250,000. Portions...

Question 6

Four Square Services Corporation estimates that its 2019 taxable income will be $1,000,000. Thus, it incurs a
$210,000 liability. For the following independent cases, compute Four Square's minimum quarterly estimated tax payments that will avoid an underpayment penalty.
a. For 2018, taxable income was $800,000, and tax liability was $168,000.
b. For 2017, taxable income was $2 million, and tax liability was $680,000. For 2018, taxable income was $100,000, and tax liability was $21,000.

Accepted Answer

The answer of Four Square Services Corporation estimates that its...

Question 7

Silvio, a cash basis calendar year taxpayer, filed his income tax return 75 days after the due date. He never extended his return, and with the return, he paid the full amount of taxes that were due. What penalties will Silvio incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

Accepted Answer

The answer of Silvio, a cash basis calendar year taxpayer,...

Question 8

Maria did not pay her Federal income tax on time. When she eventually filed the return, she reported a balance due.
Compute Maria's failure to file penalty in each of the following cases. Disregard any failure to pay penalty.
a. Three months late, $500 additional tax due.
b. Four months late, $2,000 additional tax due.
c. Ten months late, $10,000 additional tax due.
d. Four months late due to fraud by Maria, $10,000 additional tax due.
e. Fifteen months late due to fraud by Maria, $10,000 additional tax due.

Accepted Answer

The answer of Maria did not pay her Federal income...

Question 9

Lori, a calendar year individual taxpayer, files her 2018 return on February 10, 2020. She had obtained a six-month extension for filing her return. There was additional income tax of $30,000 due with the return.
a. What are Lori's penalties for failure to file and to pay?
a. change if Lori, before the due date of the return, had retained a CPA
to prepare the return and it was the CPA's negligence that caused the delay?
b. Would your answer to

Accepted Answer

The answer of Lori, a calendar year individual taxpayer, files...

Question 10

Quon filed his Federal income tax return on time, but he did not remit the full balance due. Compute the amount of his failure to pay penalty in each of the following cases. The IRS has not yet issued a deficiency notice.
a. Three months late, $5,000 additional tax due.
b. Nine months late, $5,000 additional tax due.
c. Five years late, $5,000 additional tax due.

Accepted Answer

The answer of Quon filed his Federal income tax return...

Question 11

Loren Ltd., a calendar year taxpayer, had the following transactions, all of which were properly reported on a timely filed return. Presuming the absence of fraud, how much of an omission from gross income must occur for Loren before the six-year statute of limitations applies? Show your computations. $\begin{array} { l  } 
 \text { Gross receipts}&&\$3,500,000\
 \text {Cost of sales }&&(1,000,000)\
 \text {Gross profit }&&\$2,500,000\
 \text { Capital gain}&\$100,000\
 \text {Capital loss }&(30,000)&70,000\
 \text {Total income }&&\$2,570,0000\
\end{array}$

Accepted Answer

The answer of Loren Ltd., a calendar year taxpayer, had...

Question 12

LaCharles made a charitable contribution of property that he valued at $80,000. He deducted this amount as an itemized deduction on his tax return. The IRS can show that the actual value of the property is $50,000. LaCharles is in the 32% Federal income tax bracket. Determine the amount due for any penalty.

Accepted Answer

The answer of LaCharles made a charitable contribution of property...

Question 13

The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are the responsibility of each division. List the four IRS operating divisions.

Accepted Answer

The answer of The IRS national office is organized into...

Question 14

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate. In each case, assume a marginal Federal estate tax rate of 40%. $\begin{array}{rr}
&\text { Reported Value } & \text { Corrected IRS Value } \
a.&\$ 10,000 & \$ 20,000 \
b.&60,000 & 100,000 \
c.&80,000 & 150,000 \
d.&50,000 & 300,000
\end{array}$

Accepted Answer

The answer of Compute the undervaluation penalty for each of...

Question 15

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
-Failure to deposit withholding tax.

Accepted Answer

Reasonable cause is the appropriate taxpayer defense for failure to deposit withholding tax. This defense is used when the taxpayer can demonstrate that they exercised ordinary business care and prudence but were nevertheless unable to comply with the tax law.

Question 16

A tax professional needs to know how the IRS is structured and how it works to carry out its mission. Evaluate this statement.

Accepted Answer

The answer of A tax professional needs to know how...

Question 17

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
-Filing an improper refund claim.

Accepted Answer

The answer of For each of the indicated tax penalties,...

Question 18

Yin-Li is the preparer of the Form 1120 for Cloves Corporation. On the return, Cloves claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.

Accepted Answer

The answer of Yin-Li is the preparer of the Form...

Question 19

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
-Preparer penalty for taking an unreasonable tax return position.

Accepted Answer

The answer of For each of the indicated tax penalties,...

Question 20

What are the chief responsibilities of the IRS Commissioner and of the Chief Counsel of the IRS?

Accepted Answer

The answer of What are the chief responsibilities of the...

Quiz 26: Tax Practice and Ethics

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used. -Preparer penalty for reckless conduct.

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, because her record-keeping system is highly inadequate. Determine the amount of any negligence penalty.

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000) and to civil fraud ($40,000). Compute the total penalties incurred.

The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are the responsibility of each division. List the four IRS operating divisions.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used. -Failure to deposit withholding tax.

A tax professional needs to know how the IRS is structured and how it works to carry out its mission. Evaluate this statement.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used. -Filing an improper refund claim.

Yin-Li is the preparer of the Form 1120 for Cloves Corporation. On the return, Cloves claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used. -Preparer penalty for taking an unreasonable tax return position.

What are the chief responsibilities of the IRS Commissioner and of the Chief Counsel of the IRS?