Topic 11: Additional Federal Tax Topics / Additional Federal Tax Topics, Quiz Part I of II

The IRS is always on the lookout for abusive tax schemes. Which of the following are listed by the IRS as some of the most common tax schemes?

Select one:
a. A business organized as a domestic sole proprietorship incorporating as a sub-chapter S corporation in the State the business is headquartered in
b. A partnership consisting of two individuals who allow a third individual to buy into the partnership.
c. An international business corporation (IBC) set-up in the same name as a domestic corporation. Payments received domestically are processed through the foreign bank account of the IBC.
d. A domestic corporation that petitions the IRS to change its fiscal year from December 31 to September 30.
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The IRS is always on the lookout for abusive tax schemes. Which of the following are listed by the IRS as some of the most common tax schemes?

Select one:
a. A business organized as a domestic sole proprietorship incorporating as a sub-chapter S corporation in the State the business is headquartered in
b. A partnership consisting of two individuals who allow a third individual to buy into the partnership.
c. An international business corporation (IBC) set-up in the same name as a domestic corporation. Payments received domestically are processed through the foreign bank account of the IBC.
d. A domestic corporation that petitions the IRS to change its fiscal year from December 31 to September 30.
c. An international business corporation (IBC) set-up in the same name as a domestic corporation. Payments received domestically are processed through the foreign bank account of the IBC.
The best way to report any suspected tax fraud activity is to:

Select one:
a. File a crime report with the local police or sheriff department
b. Sue the suspected perpetrator of the suspected tax fraud in superior court
c. Notify the IRS by completing and mailing Form 3949-A
d. Do nothing. The IRS will investigate any suspected cases of tax fraud directly. The IRS does not expect individual citizens to involve themselves in the reporting of any suspected tax fraud activity.
c. Notify the IRS by completing and mailing Form 3949-A
An individual can report Certified Public Accountants, Attorneys, Enrolled Agents or Registered Tax Return Preparers that are suspected of tax abuse by:

Select one:
a. Completing form 3949-A and mailing to the IRS' Fresno office
b. Sending an e-mail to the IRS Office of Professional Responsibility
c. Reporting the CPA, Attorney or Enrolled Agent to local law enforcement
d. None of the above as the IRS does not have a procedure in place for this type of reporting
b. Sending an e-mail to the IRS Office of Professional Responsibility
Which of the following is a typical penalty that individuals who invest in abusive tax schemes or shelters can expect from the Internal Revenue Service (IRS).
Select one:
a. The individual will owe back taxes with accrued interest
b. The individual can expect a minimum of 100 hours of community service to be performed.
c. The individual can expect to be sentenced to a minimum of 20 years in a federal prison.
d. All of the above are typical penalties
a. The individual will owe back taxes with accrued interest
There are many legitimate tax shelters available to taxpayers. Which of the following are examples of a legitimate tax shelter.
Select one:
a. Investing in a 401K retirement account
b. Hiring your minor children to work in your business that is unincorporated so that they can pay taxes on the income you pay to them, at a lower tax rate
c. Investing in a traditional Individual Retirement Account (IRA)
d. All of the above are legitimate income tax shelters
d. All of the above are legitimate income tax shelters
Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony for which the penalty is up to _______ and imprisonment for up to 3 years for assisting with or advising about the preparation or presentation of a false return or other document under the Internal Revenue laws.
Select one:
a. $5,000
b. $100,000
c. $25,000
d. $200,000
b. $100,000
Some taxpayers assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Other arguments along this same idea includes:

Select one:
a. The IRS must prepare a federal tax return for an individual who fails to file
b. Compliance with an administrative summons from the IRS is voluntary
c. Taxpayers can reduce their federal income tax liability by filing a "zero return"
d. All of the above are arguments that have been, and continue to be made, by groups and individuals
d. All of the above are arguments that have been, and continue to be made, by groups and individuals
Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the non-complying individual to:
Select one:
a. Civil penalties, but never any criminal penalties that could lead to actual jail time
b. Is always treated by local, state and federal authorities as a criminal act
c. Criminal penalties, including fines and imprisonment, as well as civil penalties
d. None of the above are accurate
c. Criminal penalties, including fines and imprisonment, as well as civil penalties
There is no authority that permits a taxpayer that has taxable income to avoid income tax by filing a "zero return". Section 61 provides that gross income includes all income from whatever source derived, including compensation for services. Courts have repeatedly penalized taxpayers for making the frivolous argument that the filing of a zero return can allow a taxpayer to avoid income tax liability or permit a refund of tax withheld by an employer. In addition, an individual (EA, CPA and/or tax preparers) that helps a taxpayer file a zero return:

Select one:
a. Can not be held responsible for the filing of the return. Sole liability for the return always rests solely with the taxpayer
b. Can be held responsible for interfering with the administration and enforcement of the internal revenue laws
c. Should prepare the tax return per the taxpayer's instruction as the return is the sole responsibility of the taxpayer
d. Should not prepare the tax return per the taxpayer's instructions as all of the responsibility and liability for the return will fall on the individual who actually prepares the return
b. Can be held responsible for interfering with the administration and enforcement of the internal revenue laws
Those who act on frivolous positions risk a variety of civil and criminal penalties.

Select one:
a. Those who promote these positions may face harsher consequences than those who adopt them
b. Those who adopt these positions will face similar consequences to those who promote them
c. Those who adopt these positions will not face the same consequences as those who merely promote them
d. Those who adopt these positions may face harsher consequences than those who merely promote them
d. Those who adopt these positions may face harsher consequences than those who merely promote them
Taxpayers who rely on frivolous arguments may face criminal prosecution. These taxpayers may be ________ for attempting to evade or defeat a tax. Select one: a. Convicted of a felony b. Barred from filing their own tax returns c. Fined not more than $1,000 d. All of the above are truea. Convicted of a felonyRegarding frivolous tax positions, which of the following statements is a false statement? Select one: a. Taxpayers filing returns with frivolous positions may be subject to an accuracy-related penalty of twenty percent of the underpayment attributable to negligence or disregard of rules or regulations b. Late filed returns setting forth frivolous positions may be subject to an additional tax c. The U.S. Congress has stayed out of frivolous tax issues, allowing the Department of the Treasury to proceed as it sees fit d. The IRS is serious about fighting frivolous arguments and penalties are stiffc. The U.S. Congress has stayed out of frivolous tax issues, allowing the Department of the Treasury to proceed as it sees fitAn individual is ready to request an Appeals Hearing or Conference if: Select one: a. They are claiming citizenship under an individual State and are claiming that they are not a U.S. citizen and therefore not subject to the tax laws of the United States of America. b. They believe the facts used by the IRS are incorrect, and they have records or other support available to back up their position c. The claimed right of the federal government to impose and collect taxes is unconstitutional d. All of the above can be addressed through the Appeals processb. They believe the facts used by the IRS are incorrect, and they have records or other support available to back up their positionAppeals will consider any reason the taxpayer may have for disagreeing with an IRS decision including but not limited to: Select one: a. Moral issues the taxpayer may have with tax revenues being used in time of war to support the U.S. military b. A religious belief, that is well recognized, that does not allow an individual to remit funds to a government c. A politically based disagreement that the taxpayer may have with the federal government over the use of certain taxpayer funds d. None of the above can be used as the basis for Appeald. None of the above can be used as the basis for AppealWhen preparing a request for Appeals, a small case request is prepared when the total amount for any one tax period is __________ Select one: a. $25,000 or less b. More than $10,000 c. At least $5.000 d. $10,000 or lessa. $25,000 or lessWhich of the following is an accurate statement regarding IRS Appeals Officers? Select one: a. The IRS Appeals Officer's primary goal is to "win" as many cases possible for the government b. The IRS Appeals Officer is compensated for maximizing the amount of revenue he or she can collect for the government c. IRS Appeals Officers are hired to settle cases—not necessarily to win them d. IRS Appeals Officers are trained to "follow the letter of the law" when reviewing an appealc. IRS Appeals Officers are hired to settle cases—not necessarily to win themIf the taxpayer wants to be represented by someone in the appeals process, the person must be an attorney, a certified public accountant, or an enrolled agent authorized to practice before the IRS. If the representative is to talk directly to the IRS, a copy of a completed Power of Attorney ______ must be filed with the IRS. Select one: a. IRS Form 2848 b. IRS Form 12203 c. IRS Form 3949-A d. IRS Form 8888a. IRS Form 2848Which of the following is an accurate statement with regards to the IRS Appeals' mission statement? Select one: a. IRS Appeals wants to insure that every taxpayer with a tax issue is brought to court and receives the maximum penalties legally possible b. IRS Appeals wants to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer c. IRS Appeals wants to enforce tax compliance on every taxpayer and strives to accomplish this by enforcing the maximum penalties possible for taxpayer noncompliance d. IRS Appeals has no interest in enhancing the integrity and efficiency of the IRSb. IRS Appeals wants to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayerAccording to the IRS's own statistics, Appeals result in a tax bill that's _____ lower on average. Select one: a. 40% b. $150 c. 25% d. $1,500a. 40%Which of the following items must be included in a formal written request for Appeals that is sent to the IRS? Select one: a. The taxpayer's name, address, social security number, and daytime telephone number b. An Indication of the tax periods or years involved c. A list of all the changes the taxpayer does not agree with and why there is a disagreement d. All of the above are items that must be included in the letterd. All of the above are items that must be included in the letterIn cases where a current year tax return has already been filed that excluded a spouse or dependent who needs an ITIN, the taxpayer should: Select one: a. Complete Form 1040X, Amended U.S. Individual Income Tax Return, showing the ITIN applicant's information, and attach it to Form W-7 b. Complete Form 1040 again and write "ITIN Update" across the top first page of the return c. Send in a new ITIN application for the individual. It is not necessary to attach any other documentation d. There is nothing that needs to be done for the current year, since the return has already been fileda. Complete Form 1040X, Amended U.S. Individual Income Tax Return, showing the ITIN applicant's information, and attach it to Form W-7An ITIN Acceptance Agent is an individual, business or organization (college, financial institution, accounting firm, etc.) authorized by IRS to assist individuals in obtaining ITINs. Which of the following statements is true about an ITIN Acceptance Agent? Select one: a. The Acceptance Agent must first determine whether or not an individual is eligible for a Social Security number b. An individual must apply with the Department of Homeland Security in order to become an Acceptance Agent c. The Acceptance Agent is not required to verify the identity of the taxpayer d. The Acceptance Agent may not charge a fee for the preparation and filing of the actual Form W-7a. The Acceptance Agent must first determine whether or not an individual is eligible for a Social Security numberWhich of the following situations will require that an ITIN be applied for? Select one: a. The individual is a nonresident alien and will file a joint return with his or her spouse who is either a US Citizen or a resident alien for tax purposes b. The individual is claimed as a dependent on a tax return by a resident alien for tax purposes c. The individual is a spouse claimed by a resident alien for tax purposes as an exemption d. All of the above will require that an ITIN be applied ford. All of the above will require that an ITIN be applied forWhich of the following IRS tax forms cannot be filed without an ITIN? Select one: a. Form 1040 b. Form 1040-ES c. Form 4868 d. All of the above must include an ITIN if a Social Security number cannot be obtaineda. Form 1040If a taxpayer's tax records are not currently affected by identity theft, but the taxpayer is at risk due to a lost/stolen purse or wallet, questionable credit card activity, credit report or other activity, then the IRS should be provided with proof of the taxpayer's identity. Which of the following items should be sent to the IRS? Select one: a. A copy, not the original documents, of valid Federal or State issued identification, such as a Social Security card, driver's license, or passport b. A copy of a police report, if one exists c. A completed IRS Identity Theft Affidavit - Form 14039 d. All of the above should be sent to the IRSd. All of the above should be sent to the IRSIn general, the deadlines for performing certain actions applicable to a member of the military's taxes are extended for the period of his or her service in a combat zone, plus ____ after the last day in the combat zone. Select one: a. Three months b. 180 days c. 365 days d. Nine monthsb. 180 daysConcerning an extension of time to file when serving in a combat zone, which of the following individuals will not qualify for the extension? Select one: a. A Merchant Marines serving aboard a vessel under the operational control of the Department of Defense and in support of a combat zone b. Red Cross personnel serving in a combat zone c. Civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces in a combat zone d. All of the above qualify for the combat zone extensiond. All of the above qualify for the combat zone extensionWhich of the following individuals is not considered a member of the U.S. military (armed forces of the United States of America)? Select one: a. A member of the Coast Guard b. A private in the Army c. A merchant marine d. All of the above are considered members of the U.S. militaryc. A merchant marineMilitary pay earned during a month while serving in a combat zone as an enlisted person or as a warrant officer (including commissioned warrant officers) for any part of a month, is not assessed which of the following payroll taxes? Select one: a. Social Security Taxes b. Medicare Tax c. Payroll Income Tax d. None of the above taxes are assessed.c. Payroll Income TaxWhat would be the total number of days added to the due date for a personal income tax return when a member of the military enters a combat zone on March 1st and leaves the combat zone in the same year, on June 1st? Assume that the original due date for the personal income tax return was April 15th (45 days after the March 1st date). Select one: a. 180 days b. 225 days c. 45 days d. 200 daysb. 225 days