tax problems - questin and answer ,.,. ch 26

12. LO.6 Which of the valuation penalties is likely to arise when an aggressive taxpayer reports:
a. A charitable contribution?
b. A business deduction?
c. A decedent’s taxable estate?

13. LO.6 The IRS assesses special penalties when a taxpayer misreports the value of property that was the subject of a deduction or that was subject to a gift/estate tax. How are these penalties computed? Hint: Include the term gross misstatement in your answer.

14. LO.6 Milton Corporation recomputes its energy credit for the prior tax year and, as a result, claims a $100,000 refund. The IRS reviews the claim and allows only $60,000 of the requested refund. If Milton does not appeal, is this matter finished? Is Milton certain to receive the full $60,000 refund allowed? Explain.

15. LO.6 On October 30, Wilton determines that his tax for the calender tax year will total $10,000. If his employer is scheduled to withhold only $7,500 in Federal income taxes, what can Wilton do to avoid any underpayment penalty?

16. LO.4, 5 Indicate whether each of the following statements is true or false.
a. The government never pays a taxpayer interest on an overpayment of tax.
b. The IRS can compromise on the amount of tax liability if there is doubt as to the taxpayer’s ability to pay.
c. The IRS is required to accept Colin’s application for an installment plan that delays the payment of her $6,000 outstanding tax liability.
d. The offer in compromise program attempts to allow upper-income taxpayers additional time in which to pay delinquent tax amounts.

17. LO.4, 6 In each of the following cases, distinguish between the terms.
a. Offer in compromise and closing agreement.
b. Failure to file and failure to pay.
c. 90-day letter and 30-day letter.
d. Negligence and fraud.
e. Criminal and civil tax fraud.

18. LO.6 While working on the Federal income tax return for your client Best Wishes LLC, you discover that the payroll office was lax in its procedures. You found that the office allowed some employees to reduce their withholding taxes by overstating the number of exemptions to which they were entitled and that the withholding amounts for the last two months of the tax year were not remitted to the Treasury. In no more than three Power-
Point slides, summarize the various tax penalties to which Best Wishes now is exposed.

19. LO.7 Discuss the concept of statutes of limitations in the context of the Federal income tax law.
a. Who benefits when the statute applies—the government, the taxpayer, both?
b. What happens when the statute is scheduled to expire within two weeks but the IRS audit will not be completed by then?

20. LO.8 In no more than five PowerPoint slides, prepare a presentation to your school’s
Accounting Alumni Club titled “How the IRS Keeps Track of Tax Preparers.” Include the application of the PTIN and of Circular 230 in your remarks.

21. LO.8 Give the Circular 230 position concerning each of the following situations sometimes encountered in the tax profession.
a. Taking an aggressive pro-taxpayer position on a tax return.
b. Not having a quality review process for a return completed by a partner of the tax firm.
c. Purposely delaying compliance with a document request received from the IRS.
d. Not keeping up with changes in the tax law.
e. Charging $1,500 to complete a Form 1040–EZ.
f. When representing a taxpayer in a Federal income tax audit, charging a fee equal to one-third of the reduction of the tax proposed by the IRS agent.
g. Representing both the husband and wife as to tax matters when negotiating their divorce.
h. Advertising on the Web for new tax clients and including Se habla espa?l in the text of the ads.

22. LO.8 Indicate whether each of the following parties could be subject to the tax preparer penalties.
a. Tom prepared Sally’s return for $250.
b. Theresa prepared her grandmother’s return for no charge.
c. Georgia prepared her church’s return for $500 (she would have charged an unrelated party $3,000 for the same work).
d. Geoff prepared returns for low-income taxpayers under his college’s VITA program.
e. Hildy prepared the return of her corporate employer.
f. Heejeo, an administrative assistant for an accounting firm, processed a client’s return through TurboTax.

23. LO.8 Using PowerPoint slides, list at least three of the Statements on Standards for Tax
Services that apply to CPAs. For each standard you choose, provide a short explanation of its content.