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Questions and Answers

What is the due date for filing an individual tax return?

  • May 15
  • April 15 (correct)
  • June 15
  • March 15

    • Which of the following entities must file a tax return if gross income exceeds $600?

  • Estates and Trusts (correct)
  • Corporations
  • Partnerships
  • Non-profits

    • What happens if a taxpayer does not file a tax return or pay a tax due by the due date?

  • They may receive a refund
  • Interest and penalties will be assessed (correct)
  • They can file an extension without penalty
  • Their income will be automatically adjusted

    • How long does a taxpayer have to file an amended tax return if they misreport income that does not exceed 25% of gross income?

    <p>Three years</p> Signup and view all the answers

    What is the penalty for failing to file a tax return that has a balance due?

    <p>5% of the tax due for each month or partial month late</p> Signup and view all the answers

    Which tax status results in no statute of limitations for the taxpayer?

    <p>Failing to file a return</p> Signup and view all the answers

    What allows a taxpayer to file a tax return six months later than the original due date?

    <p>Six-month extension request</p> Signup and view all the answers

    Which program checks all tax returns for mathematical and tax calculation errors?

    <p>Document Perfection Program</p> Signup and view all the answers

    What is the highest authoritative weight when interpreting the Internal Revenue Code (IRC)?

    <p>Internal Revenue Code</p> Signup and view all the answers

    Which of the following is NOT a step in the tax research process?

    <p>Prepare financial statements</p> Signup and view all the answers

    Which type of Treasury Regulation has the lowest authority?

    <p>Proposed regulations</p> Signup and view all the answers

    Which court has the highest judicial authority when interpreting tax law?

    <p>U.S. Supreme Court</p> Signup and view all the answers

    What type of facts relates to events that have not yet occurred?

    <p>Open facts</p> Signup and view all the answers

    Which of the following documents would hold higher authoritative weight than revenue rulings?

    <p>Treasury Regulations</p> Signup and view all the answers

    What consequence does the IRC impose on tax practitioners for unsupported positions?

    <p>Penalty for Substantial Authority violations</p> Signup and view all the answers

    Which organization’s Code of Professional Conduct must tax practitioners adhere to?

    <p>American Institute of CPAs (AICPA)</p> Signup and view all the answers

    What role does the House of Representatives play in the legislative process of enacting a tax law?

    <p>It originates the tax bill in the legislative process.</p> Signup and view all the answers

    Which of the following is NOT considered a primary authority in tax law?

    <p>IRS forms and publications.</p> Signup and view all the answers

    What is the function of a Citator in tax research?

    <p>To check the status of various authorities and case history.</p> Signup and view all the answers

    Which court has the ultimate authority to interpret the Internal Revenue Code?

    <p>Supreme Court</p> Signup and view all the answers

    Which of the following statements is accurate regarding the two types of tax services used in tax research?

    <p>Annotated tax services are arranged by code selection while topical services are organized by topic.</p> Signup and view all the answers

    What is the purpose of the Joint Conference Committee in the legislative process?

    <p>To reconcile differences between House and Senate versions of a tax bill.</p> Signup and view all the answers

    What is meant by the judicial doctrine of stare decisis?

    <p>Courts should avoid changing previous rulings.</p> Signup and view all the answers

    What type of source does the IRC Code of 1986 represent?

    <p>Primary legislative source.</p> Signup and view all the answers

    What is the purpose of the Information Matching Program?

    <p>To match tax return information with third-party reports</p> Signup and view all the answers

    Which type of audit is considered the most common?

    <p>Correspondence examination</p> Signup and view all the answers

    What does the 30-day letter allow a taxpayer to do?

    <p>Appeal the audit assessment</p> Signup and view all the answers

    What is the function of the Discriminant Function System?

    <p>To assign a score for underreported tax liabilities</p> Signup and view all the answers

    In which court does a losing party appeal a tax case?

    <p>U.S. Circuit Court with jurisdiction over the case</p> Signup and view all the answers

    What should a taxpayer do after receiving a 90-day letter if they disagree with the audit assessment?

    <p>Petition the U.S. Tax Court to hear the case</p> Signup and view all the answers

    What types of cases does the U.S. Supreme Court typically agree to hear?

    <p>Cases of great significance to a broad cross-section of taxpayers</p> Signup and view all the answers

    Which court has a small claims division for tax liabilities of $50,000 or less?

    <p>U.S. Tax Court</p> Signup and view all the answers

    Study Notes

    Corporate and Individual Tax Filing

    • All corporations are required to file an annual tax return, regardless of income level.
    • Individual taxpayer filing requirements depend on age, gross income, and filing status.
    • Gross income filing thresholds are determined by summing standard and additional deductions.
    • Self-employed individuals face lower gross income thresholds for filing compared to the general requirements.

    Important Filing Dates and Extensions

    • Calendar-year partnership income returns are due by March 15.
    • Estates and trusts must file a return if their gross income exceeds $600.
    • Taxpayers can receive a six-month extension to file a return, but tax payments are still due on the original date.

    Penalties for Non-Compliance

    • Failure to file a tax return by the due date incurs interest and penalties on owed taxes.
    • The penalty for not filing a return with a balance due is 5% of the owed tax per month, capped at 25%.

    Statute of Limitations

    • Taxpayers have three years to amend returns if income misreported is less than or equal to 25% of gross income.
    • Six years are allowed if gross income omissions exceed 25%.
    • No statute of limitations applies in cases of fraud or if a return is not filed.

    Audit Processes

    • The Document Perfection Program checks all tax returns for errors.
    • Information matching programs reconcile tax return data with third-party reports.
    • Types of audits:
      • Correspondence examinations are common.
      • Office examinations occur at IRS offices.
      • Field examinations are extensive, conducted at the taxpayer's location.

    Appeals and Court Processes

    • Taxpayers can request an appeals conference after receiving a 30-day letter regarding IRS audit disagreements.
    • A 90-day letter allows for petitioning the U.S. Tax Court if a taxpayer disagrees with an IRS assessment.
    • The U.S. Supreme Court selectively hears significant tax cases with broad implications.
    • Primary authorities include official sources like statutes, regulations, and judicial decisions from government branches.
    • Secondary authorities explain tax laws but do not include court rulings.
    • The U.S. House of Representatives typically initiates tax bills, which are then reviewed and voted on by both houses.
    • Treasury regulations are authoritative but not legislative sources.

    Tax Research Tools

    • A citator assists in checking the status of various authorities, including case history and IRS rulings.
    • Tax professionals utilize annotated tax services and topical services for research.
    • Five steps in the tax research process: Understanding facts, identifying issues, locating authorities, analyzing authorities, and documenting findings.

    Professional Conduct and Ethical Standards

    • Tax practitioners must adhere to multiple codes of conduct, including AICPA's Code and IRS Circular 230.
    • The IRC mandates penalties for tax practitioners representing unsupported positions.

    Special Rules and Jurisdiction

    • The Golsen Rule states that the U.S. Tax Court follows circuit rulings relevant to a case.
    • Jurisdiction for appeals depends on the taxpayer’s residence based on circuit court governance.

    Final Notes on Regulations and Authoritative Weight

    • Regulations from the Treasury Department carry high authoritative weight, with the Internal Revenue Code at the top.
    • Internal Revenue Code incorporates new tax laws into designated sections as appropriate.
    • Judicial doctrine of stare decisis favors consistency with past court rulings.

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