Question 1

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

The Tax Court and the U.S. District Court will appeal to the 5^th Circuit.

Question 2

Which of the following is not considered a primary authority?

Accepted Answer

Tax service is not considered a primary authority as it is a secondary source that summarizes and interprets primary authorities such as cases, regulations, and rulings. Primary authorities are sources that have the force of law and include statutes, regulations, judicial decisions, revenue rulings, and revenue procedures.

Question 3

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

Accepted Answer

Correspondence audits are the most common type of audit and are typically less comprehensive, as they are conducted through mail and usually involve simple issues or requests for additional documentation.

Question 4

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

Accepted Answer

The field audit is the least common audit, as it involves an auditor going on-site to physically inspect and observe the company's operations. It is also the broadest in scope, as it covers all aspects of the company's operations, and is typically the most complex due to the amount of data and information that needs to be gathered and analyzed.

Question 5

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

Dominic is not required to file a tax return because his income is below the filing threshold, but he should file to get a refund of the withheld $200.

Question 6

Rowanda could not settle her tax dispute 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

The Tax Court is the only court where a taxpayer can litigate their tax dispute prior to paying the proposed deficiency. The other courts listed require payment before litigation can take place.

Question 7

Allen filed his 2016 tax return on May 15^th, 2017 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 2016 tax return should end:

Accepted Answer

Because 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.

Question 8

Which of the following courts is the only court that provides for a jury trial?

Accepted Answer

Only the U.S. District Court provides for a jury trial, as it is a trial court where most federal cases begin and are tried. The other courts listed do not typically have jury trials.

Question 9

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 U.S. Court of Federal Claims will appeal to the U.S. Circuit Court of Appeals for the Federal Circuit.

Question 10

Henry filed his 2016 tax return on May 15^th, 2017. The statute of limitations for IRS assessment on Henry's 2016 tax return should end:

Accepted Answer

The SOL ends three years from the later of (1) the date the tax return was filed or (2) the tax return's original due date.

Question 11

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 Discriminate Function System (DIF System) is used by the IRS to identify tax returns that have a higher likelihood of containing errors or discrepancies. The system uses a mathematical formula to generate a score for each tax return, and the returns with the highest scores are selected for audit. One factor that can increase a taxpayer's DIF score is claiming a large amount of charitable contributions relative to their income. Therefore, it is likely that Tyrone's tax return was identified for audit through the DIF System due to his high level of charitable contributions.

Question 12

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 13

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 randomly selects returns for audit to provide the necessary input into the DIF system.

Question 14

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 letter Dan received from the IRS is known as a "30-day letter" or "notice of deficiency." This letter gives the taxpayer the option to either request a conference with an Appeals Officer or agree to the proposed tax adjustment within 30 days. If the taxpayer does not respond within this timeframe, the IRS will assess the proposed tax adjustment and begin collection efforts. Therefore, Dan should choose either option 1 or option 2 within the 30-day window to avoid further consequences.

Question 15

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

Accepted Answer

The Tax Select system is not a common method used by the IRS to select returns for audit. However, the DIF system, information matching, and document perfection are all commonly used selection methods.

Question 16

Bill filed his 2016 tax return on March 15^th, 2017. The statute of limitations for IRS assessment on Bill's 2016 tax return should end:

Accepted Answer

The SOL ends three years from the later of (1) the date the tax return was filed or (2) the tax return's original due date.

Question 17

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, also known as a statutory notice of deficiency, from the IRS. This letter informs taxpayers of the proposed tax deficiency and their right to contest the deficiency in the Tax Court by filing a petition within 90 days of the mailing of the letter. Therefore, Basu's best choice is to file a petition with the U.S. Tax Court within the 90-day period instead of paying the proposed deficiency.

Question 18

Andy filed a fraudulent 2016 tax return on May 1, 2017. The statute of limitations for IRS assessment on Andy's 2016 tax return should end:

Accepted Answer

There is no statute of limitations for fraudulent tax returns.

Question 19

Martin has never filed a 2016 tax return despite earning approximately $20,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2016 tax return?

Accepted Answer

There is no statute of limitations if a taxpayer fails to file a tax return.

Question 20

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

Greg is required to file a tax return because he had federal income taxes withheld and his income exceeds the minimum filing requirement.

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

Lavonda discovered that the 5th 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?