49. Troy\'s tax preparer, Walt, filed Form 8275, Disclosure Statement, to provid

Question

49. Troy's tax preparer, Walt, filed Form 8275, Disclosure Statement, to provide information about Troy's tax treatment of an item that resulted in his understatement of tax by $1,050. Which of the statements below best describes a reason for filing Form 8275? a) The taxpayer wants to disclose tems or positions which are contrary to regulations. b) The taxpayer wants to disclose relevant facts which will show that his tax treatment of an item had a reasonable basis. c) The taxpayer wants to disclose relevant facts, in accordance with Rev. Proc. 2012-51 which justify tax treatment of an item which resulted in substantial understatement d) The taxpayer wishes to appeal a penalty to IRS which resulted from an inadvertent omission on time, he did not pay the $2,000 until June 30th. a) 50. Fritz had his taxes filed electronically on April 15 and owed $2,000. Although he filed his taxes His penalty for paying tax late will be The smaller of $205 or 100% of the unpaid tax 25% of the unpaid tax c) d) b) of 1% of the unpaid tax for each month or part of a month. 20% of the underpayment 51. Jim has been divorced from Ann for six months and they have not lived together for two years. Prior to the final decree, they filed joint returns. During the separation, Ann won $25,000 in the lottery, which she failed to report. Jim was unaware of Ann's lottery winnings. They have received an IRS notice that their joint return has been changed to reflect increased income and tax liability due to the winnings. They have also been assessed with interest and penalties. Since both Jim and Ann are liable for any tax, interest, and penalty due, what shoukd Jim do? a) Fle Form 8379, Injured Spouse Allocation b) Fie Form 8379, Injured Spouse Allocation, along with an amended return. c) Fie a request for innocent spouse relief since he had no knowledge of the lottery winnings d) Fie Form 8857, Request for Innocent Spouse Relef, along with an amended return. 52. Jilian owns a tax preparation business and has hired a few new preparers for the upcoming tax season. She is reviewing the taxpayer's legal rights with her new preparers. Which of the folowing is not a legal right of a taxpayer? a) Tax evasion b) Deduct all expenses that he feels are reasonable c) Tax avoidance d) Payment of the lowest legitimate tax 53. Tony is a new paid tax preparer and needs to prepare an amended return for a client. He's Which of the following is the correct unsure how the return should be filed with the IRS. method to be used when filing an amended return? a) A paper return must be filed with the appropriate Internal Revenue Service Center b) An amended return can be faxed to the appropriate Internal Revenue Service Center c) An amended return can be filed electronically d) Tony can scan the amended return and email a copy to the appropriate Internal Revenue Service Center

Explanation / Answer

49) c) The taxpayer wants to disclose relevant facts, which justify tax treatment of an item which resulted in substantial understatement.

As per IRS, form 8275 is used by taxpayers and tax return preparers to disclose items or positions, except those taken contrary to a regulation, that are not otherwise adequately disclosed on a tax return to avoid certain penalties. The form is filed to avoid the portions of the accuracy-related penalty due to disregard of rules or to a substantial understatement of income tax for non-tax shelter items if the return position has a reasonable basis. It can also be used for disclosures relating to the economic substance penalty and the preparer penalties for tax understatements due to unreasonable positions or disregard of rules.

50) c) 1/2 of 1% of unpaid tax for each month or part of month.

As per IRS,  The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

51) c) File a request for innocent spouse relief since he had no knowledge of lottery winnings.

As per IRS, Taxpayers file Form 8857 to request relief from tax liability, plus related penalties and interest, when they believe only their spouse or former spouse should be held responsible for all or part of the tax.

ou must meet all of the following conditions to qualify for innocent spouse relief:

52) a) Tax Evasion

As per IRS, Tax evasion is the criminal act of using illegal means to avoid paying taxes. Tax evasion schemes are plentiful, but all involve the misrepresentation of an individual's or business' income and/or assets when reporting to the Internal Revenue Service, in order to reduce the amount of taxes they owe. A taxpayer does not have a legal right of tax evasion.

53) a) A paper return must be filed with the appropriate IRS Center.

As per IRS, the Form 1040X, Amended U.S. Individual Income Tax Return, isn't accepted electronically; only an original tax return may be electronically filed. You must file Form 1040X on paper and mail it to the IRS.

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