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Exam 17: Tax Practice and Ethics

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Question 71

Multiple Choice

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The Chief Counsel of the IRS is appointed by the:

A) Secretary of the Treasury Department.
B) U. S. Senate.
C) U. S. House of Representatives.
D) U. S. President.
E) American Bar Association President.

F) C) and E)
G) C) and D)

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Question 72

Multiple Choice

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Which of the following statements is incorrect as to the conduct of IRS income tax audits?

A) Only the Appeals Division of the IRS has the authority to settle tax disputes based on the hazards of litigation.
B) The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report.
C) For a Form 1040 that is filed on April 11, 2012, if the taxpayer has not received an audit notification from the IRS by the end of 2012, the return may still be audited.
D) Most IRS examinations of Forms 1040 are conducted solely through the mail.

E) A) and B)
F) A) and C)

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Question 73

Essay

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Circular 230 requires that the tax practitioner use the "best practices" of the tax profession in carrying out a tax engagement. Specify what some of these best practices entail.

Recently, the overall Federal income tax audit rate for individual returns has been about 3%.

An IRS letter ruling might determine that an employee's compensation is unreasonable in amount.

Describe the following written determinations that are issued by the IRS.

A taxpayer can take a dispute to the Small Cases Division of the Tax Court when the disputed amounts do not exceed $____________________. or

The ____________________, a presidential appointee, is the "IRS attorney."

Vera is audited by the IRS for several tax years. Her returns were prepared by the following parties. Which of the following statements is correct?

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

Jake, an individual calendar year taxpayer, incurred the following transactions. Assuming that any error in timely reporting these amounts was inadvertent, how much omission from gross income would be required before the six-year statute of limitations would apply?

A VITA volunteer is exempted from the Code's tax preparer penalties.

To file for a tax refund, an individual generally uses Form ____________________.

A taxpayer can be subject to both ____________________ and ____________________ penalties for tax misconduct. or

A(n) ____________________ should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a proposed transaction.

Which statement appearing below does not correctly describe the IRS letter ruling process?

If the taxpayer refuses to pay an assessed tax, the IRS can seize taxpayer property under the ____________________ process.

The Code's scope of privileged communications for a CPA extends only to ____________________ advice given.

Keepert uses "two sets of books." She only reports one-half of her cash sales on the records that she uses to complete her Federal income tax return. The statute of limitations for Keepert's return is six years.

A(n) ___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.