"▪ Civil penalties for clients
▪ Paid preparer penalties
▪ Criminal penalties
▪ Penalty abatement and appeals
▪ Collections
▪ Installment payment agreements
▪ Offers in Compromise
▪ Enforced collection action and appeals"
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Final Course Exam
SCORE: 87%
PASSED
1,
Which of the following is NOT an exception to the penalty for failure to pay estimated tax?
The total balance due after withholding is less than $1,000.
XX The total balance due after withholding is less than $5,000.
The taxpayer paid (through withholding and/or timely estimated tax payments) at least 90% of the current year's tax liability.
The taxpayer paid (through withholding and/or estimated tax payments) at least 100% of the previous year's tax liability.
2,
The accuracy penalty is:
XX 20% of the underpayment in cases of substantial understatement of income tax.
40% of the underpayment in cases of both disregard of the rules and regulations and substantial understatement of income tax.
75% of the underpayment for gross valuation misstatements.
A criminal penalty.
3,
How much is the penalty for fraudulent failure to file if the tax due on the return is $4,000 and the return was filed nine months late?
$750
$2,250
XX $3,000
$4,000
4,
Which of the following is NOT a taxpayer requirement for any of the estimated tax penalty exceptions?
XX Age 18 or over by the end of the tax year.
No tax liability for the previous year.
A U.S. citizen or resident for the entire tax year.
Tax year was for a full 12 months
5,
Which of the following is NOT true about the accuracy penalty? The accuracy penalty is:
Imposed for negligence.
XX A criminal penalty.
A monetary penalty.
A civil penalty.
6,
How much can a paid tax return preparer be penalized for unauthorized release of tax return information?
$50 per occurrence up to $10,000.
$100 per occurrence up to $10,000.
XX $250 per occurrence up to $10,000.
$1,000 per occurrence up to $10,000.
7,
Which of the following is not an IRS procedural rule for paid tax return preparers?
Sign client copy of the return.
Include preparer's SSN or PTIN on the return.
Give taxpayer a completed copy of the return no later than when the original return is given to the taxpayer to sign.
XX Keep a copy of the return for at least three years.
8,
How much can a paid tax return preparer be penalized for failure to sign several tax returns they prepared?
XX Nothing, as long as all taxpayers signed the returns.
$50 per violation.
$250 per violation.
0.5% of the tax due on each return prepared.
9,
How much can a paid tax return preparer be penalized for failure to include their identifying number on the tax returns they prepared?
XX Nothing, as long as the taxpayers' identifying numbers appear on all the returns.
$50 per violation.
$250 per violation.
0.5% of the tax due on each return they prepared.
10,
Which of the following is a true statement regarding the trust fund recovery penalty?
If the IRS assesses a trust fund recovery penalty of $1,000 each against two responsible persons, the IRS may only collect a total of $1,000.
The more responsible persons the IRS can find, the more money it can collect because it can collect the full trust fund recovery penalty from every responsible person.
XX If the IRS assesses a trust fund recovery penalty of $1,000 each against two responsible persons, the IRS may collect $1,000 from each responsible person.
If more than one individual meets the definition of a responsible person, the IRS must select one as the most responsible because it may only assess the trust fund recovery penalty against one of them.
11,
Which of the following is NOT true regarding the trust fund recovery penalty?
The penalty may only be assessed against what the IRS defines as "responsible persons."
The penalty may only be assessed against individuals who willfully failed to collect, truthfully account for, and pay over the trust fund taxes.
XX The trust fund recovery penalty may not be assessed against a member of a board of trustees of a nonprofit organization.
The IRS can collect the full amount from any one of the individuals against whom the trust fund penalty is assessed.
12,
The trust fund recovery penalty may be assessed against:
Sole proprietor who has no employees and who has not paid his own self-employment tax.
An employee who accidentally failed to collect employment taxes.
XX A responsible person even after the business that owed the employment taxes is closed.
An investor who was not an active participant in the business.
13,
An attorney should represent a taxpayer involved in a criminal tax case due to:
Attorney-client privilege
XX Circular 230 instructions
Due diligence
Burden of proof requirements
14,
Which of the following is likely to be considered reasonable cause for penalty abatement purposes? Assume no filing extensions.
Wes waited until September to file his tax return because he needed time to save money to pay $580 tax due.
Gracie thought she was below the income threshold for filing a return because her $5,000 cash tips were not taxable.
Hank was hospitalized with meningitis on March 30. He was fully recovered when he was discharged on May 7. He filed his return in November of the same year.
XX Zoey was in a serious car accident on April 4 and was hospitalized for the next 25 days. She filed her return on May 1 of the same year.
15,
The Claim for Refund and Request for Abatement form is:
Form W-6.
XX Form 843.
Form 911.
Form 1045.
16,
Penalty abatement is:
The determination of an inability to pay a tax assessment.
XX The removal or elimination of an assessed penalty.
A plan to reduce a penalty for effective tax administration.
An appeal under the Collection Appeals Program (CAP).
17,
Which of the following taxpayers would likely be eligible for a collection hold? A taxpayer who:
Lacks the present ability to make payments toward their tax liability.
XX Is incapacitated because of a serious accident.
Has the ability to make the required payments, but finds it inconvenient to do so.
Wants to skip one monthly payment in their installment agreement.
18,
The IRS has the right to revoke an installment agreement for any of the following occurrences EXCEPT:
XX The taxpayer accepted a temporary assignment abroad.
The taxpayer fails to pay any other tax liability.
The agreement was based on incorrect or inaccurate information provided by the taxpayer.
The IRS believes tax collection under the installment agreement is in jeopardy.
19,
An installment agreement is:
A plan to pay the full balance due within 120 days of the due date of the return.
An option for any taxpayer who has a balance due on a return that was filed in a timely manner.
XX An agreement for a taxpayer to pay a balance due, generally within 72 months or less.
A method of forced collection.
20,
Which of the following actions may the IRS take when a taxpayer on an installment payment agreement fails to file an income tax return in a timely manner?
Double the payment amount required under the installment agreement.
XX Revoke the installment payment agreement.
Levy their wages or funds on deposit.
Seize their property.
21,
Which of the following statements regarding offers in compromise is correct?
The collection statute of limitation continues while an offer in compromise is pending.
Taxpayers are never required to make a payment at the time an offer in compromise is submitted.
A taxpayer submitting an offer in compromise based on efficient tax administration is not required to submit a financial statement.
XX Form 656, Offer in Compromise, is used by taxpayers to convey the amount, terms, and basis of an offer in compromise to the IRS
22,
How should a taxpayer determine an appropriate offer amount for an offer in compromise? The offer amount should be equal to:
The maximum amount the taxpayer can borrow from all sources.
XX The taxpayer's reasonable collection potential, which is the net equity of the taxpayer's assets plus the amount the IRS could collect from the taxpayer's future earnings.
The total value of all of the taxpayer's assets at the time the offer is submitted.
The amount of cash the taxpayer has on hand at the time the offer is submitted.
23,
Which of the following taxpayers is NOT eligible for an offer in compromise? A taxpayer who:
Consistently files late returns.
XX Is in an open audit.
Cannot pay the full liability before the statute of limitation for collection expires.
Has a balance due attributable to additional tax assessed as a result of an audit three years ago.
24,
Why would a taxpayer seek the discharge of a lien?
The lien does not apply to that particular taxpayer.
XX The property released through discharge can be sold to pay the tax debt.
The tax debt had already been paid in full, including penalties and interest.
The taxpayer wants to obtain a loan on property to pay off a tax debt
25,
A tax lien:
XX Appears on a taxpayer's credit report and remains there even after it is released or withdrawn.
Is filed with the county sheriff in the county in which the taxpayer lives.
Lasts for one calendar year.
Does not include property purchased acquired after the lien was filed.
26,
A tax lien is:
A process that lasts for as long as the tax debt remains unpaid.
Seldom withdrawn even after the taxpayer enters into a DDIA.
Taking the taxpayer's property to satisfy a tax debt.
XX A legal claim to a taxpayer's property filed by the IRS to secure payment of the taxpayer's tax debt.
27,
When does the IRS send a taxpayer a CP 504 notice?
XX The taxpayer has an unpaid tax liability, and the IRS is preparing to commence enforced collection activity.
The IRS rejects a taxpayer's offer in compromise.
The IRS selects a taxpayer's return for audit.
An auditor completes an audit and proposes adjustments to the taxpayer's return.
28,
Which of the following is the appropriate remedy after the IRS mistakenly files a Notice of Federal Tax Lien against an individual who has no tax liability?
Subordination.
Discharge.
XX Certificate of non-attachment.
Release.
29,
Generally, how long does an IRS wage levy last?
XX One pay period.
One month.
One year.
Until the tax liability is paid or the levy source no longer pays money to the taxpayer
30,
Which of the following assets is exempt from levy by the IRS?
Up to $20,000 in furniture and personal effects.
Commercial annuity payments.
XX Worker's compensation.
Life insurance proceeds.
Additional questions:
What is the approximate late filing penalty for filing a return seven months late if the balance due on the return is $7,000?
$0
$490
$1,750
XX $2,450
The penalty for failure to file an income tax return on time is:
10% of the balance due.
Waived for balances less than $135.
Only applied when caused by willful neglect.
XX Only applied when there is a balance due.
The maximum penalty per tax preparer per year for failure to comply with EITC due diligence is:
$5,000
$10,000
$25,000
XX $500 per violation with no limit per preparer
Circular 230 addresses issues of:
EITC due diligence.
Taxpayer civil penalties.
Collection.
XX Regulations governing practice before the IRS.
When representing a taxpayer in a trust fund recovery penalty case, it can be extremely helpful to make a Freedom of Information Act (FOIA) request for the trust fund recovery penalty file to gain information on:
XX IRS attempts to collect from other responsible persons.
The length of time until the statute of limitations expires.
The amount of the penalty.
The grounds for the penalty.
"Willful neglect" is:
XX A defense for the trust fund recovery penalty.
A voluntary and intentional violation of a known legal duty.
A criminal offense.
A penalty of 5% of the underpayment due.
Why is it good practice to recommend that clients use the Direct Deposit Installment Agreement (DDIA)?
The IRS no longer accepts payments by check on installment payment agreements.
The IRS will agree to stop the accrual of interest on the balance due if this payment option is selected.
The IRS will waive the $43 set-up fee for the installment payment agreement.
XX The IRS will not assess a penalty the first time there are insufficient funds in their account on the payment date.
Which of the following is NOT a basis for an offer in compromise?
Doubt as to collectability
Doubt as to liability
XX Reasonable cause
Effective tax administration
What is a Notice of Federal Tax Lien?
A deficiency notice, which gives the taxpayer 90 days to file a Tax Court petition.
The notice sent to the taxpayer advising of imminent property seizure by the IRS.
A CP 504 notice indicating the IRS intends to levy to collect the balance due.
XX A legal claim to a taxpayer's property, which is filed by the IRS to secure payment of the taxpayer's tax debt.
Questions with wrong answers:
Question 8 How much can a paid tax return preparer be penalized for failure to sign several tax returns they prepared?
Your answer: Nothing, as long as all taxpayers signed the returns.
Question 7 Which of the following is not an IRS procedural rule for paid tax return preparers?
Your answer: Keep a copy of the return for at least three years.
Question 9 How much can a paid tax return preparer be penalized for failure to include their identifying number on the tax returns they prepared?
Your answer: Nothing, as long as the taxpayers' identifying numbers appear on all the returns.
Question 10 Which of the following is a true statement regarding the trust fund recovery penalty?
Your answer: If the IRS assesses a trust fund recovery penalty of $1,000 each against two responsible persons, the IRS may collect $1,000 from each responsible person.
Question 13 An attorney should represent a taxpayer involved in a criminal tax case due to:
Your answer: Circular 230 instructions
Question 17 Which of the following taxpayers would likely be eligible for a collection hold? A taxpayer who:
Your answer: Is incapacitated because of a serious accident.
Question 29 Generally, how long does an IRS wage levy last?
Your answer: One pay period.
Question 3 What is the approximate late filing penalty for filing a return seven months late if the balance due on the return is $7,000?
Your answer: $2,450
Question 9 Which of the following is not an IRS procedural rule for paid tax return preparers?
Your answer: Give taxpayer a completed copy of the return no later than when the original return is given to the taxpayer to sign.
Question 13 An attorney should represent a taxpayer involved in a criminal tax case due to:
Your answer: Burden of proof requirements
Question 15 "Willful neglect" is:
Your answer: A defense for the trust fund recovery penalty.