13.2 - Tax Procedures

Question 1

Tax Prepayments:

What percentage is the Internal Revenue Code structured to obtain for final tax purposes and by what means?

Answer 1

90% through withholding and estimated tax payments

Question 2

Tax Prepayments:

How often are tax payments required to be made if not subject to withholding?

Answer 2

Quarterly

Question 3

Tax Prepayments:

By what date(s) must taxpayers make tax payments if they are not subject to withholding?

Answer 3

• April 15^th
• June 15^th
• September 15^th
• January 15^th of the following year

Question 4

Tax Prepayments:

Identify 4 examples of tax prepayments

Answer 4

• Overpayment of tax in a prior year
• Amount withheld by an employer from wages
• Direct payment by the individual
• Excess FICA withheld

Question 5

Quarterly Installment Prepayments:

When are taxpayers allowed to annualize tax?

Answer 5

when income is uneven

Question 6

Quarterly Installment Prepayments:

Quarterly tax payments must be 25% of the least of???

Answer 6

• 100% of PY tax if return was filed or 110% if AGI > $150k
• 90% of CY tax
• 90% of annualized CY tax

Question 7

Quarterly Installment Prepayments:

Identify the formula used to calculate quarterly tax

Answer 7

Regular Tax

+ Alternative Minimum Tax

+ Self Employment Tax

+ Household Employee Tax

= Quarterly Tax

Question 8

Estimated Tax Penalty

When is the estimated tax penalty imposed?

Answer 8

• Imposed if the total of estimated tax payments is less than 25% of the required minimum

Question 9

Estimated Tax Penalty

Calcualte the estimated tax penalty

Answer 9

Federal Short term rate

+ (3% * Underpayment)

= Estimated Tax Penalty

Question 10

Estimated Tax Penalty

How often is the estimated tax penalty calculated or determined?

Answer 10

• Penalty determined each quarter

Question 11

Estimated Tax Penalty

True or False >>>

The estimted tax penalty is deductible as interest expense

Answer 11

False -

• Not deductible as interest expense

Question 12

Estimated Tax Penalty

Identify the 3 exceptions to estimated tax penalty

Answer 12

• Actual tax liability is less than $1,000
• No tax liability incurred in prior year
• IRS waives it for reasonable cause

Question 13

Estimated Tax Penalty

Does the automatic extension for filing the return also extend the time to pay taxes?

Answer 13

No

Question 14

Other Penalties:

What are the amount of penalties assessed for failure to file a return?

Answer 14

• 5% per month up to 25% of unpaid liability assessed for failure to file a return

Question 15

Other Penalties:

What is the minimum penalty assessed for failure to file a return?

Answer 15

• Minimum penalty lesser of:
  
  • $135
  • 100% tax due

Question 16

Other Penalties:

How much is the penalty for failing to pay tax due?

Answer 16

• 0.5% per month (or fraction of a month) up to 25% of unpaid liability for failure to pay tax

Question 17

Other Penalties:

At what point is the failure to pay penalty calculated?

Answer 17

• Failure to pay penalty is calculated from date liability is due

Question 18

Other Penalties:

Can failure to pay penalty offset failure to file penalty?

Answer 18

Yes

Question 19

Other Penalties:

How can the failure to pay penalty be avoided?

Answer 19

• Failure to pay penalty may be avoided by timely filing an extension request and paying a portion of estimated tax due

Question 20

Filing Requirements

Identify the 3 filing requirements

Answer 20

• Gross income above a certain threshold
• Net earnings from self-employment are $400 or greater
• Dependent with gross income in excess of the STD deduction or unearned income over $1,050

Question 21

Due Dates / Extensions:

When are individual returns due?

Answer 21

• April 15^th for calendar year taxpayers

Question 22

Due Dates / Extensions:

What form must individuals file for an automatic 6 month filing extension?

Answer 22

Form 4868

Question 23

Due Dates / Extensions:

When are tax returns due for individuals who filed an extension?

Answer 23

October 15th

Question 24

Due Dates / Extensions:

When are C - Corporations with a calendar / December 31st fiscal year end tax returns due for tax years 2016 - 2025?

Answer 24

• April 15^th filing due date
• 4^th month after fiscal year end

Question 25

# Due Dates / Extensions: ## Footnote When are C - Corporations with a calendar / December 31st fiscal year end tax returns due for tax years 2016 - 2025 if the corporation file for a 5 month extension?

Answer 25

* **Extension:** September 15^th due date * Due 9 – months after fiscal year end * 5 – month extension granted

Question 26

# Due Dates / Extensions: ## Footnote When are C - Corporations with a calendar / December 31st fiscal year end tax returns due for tax years 2026 if the corporation file for a 6 month extension?

Answer 26

* **Extension:** October 15^th due date * Due 10 – months after fiscal year end * 6 – month extension granted

Question 27

# Due Dates / Extensions: When are C - Corporations with a calendar / December 31st fiscal year end tax returns due for 2026 tax year?

Answer 27

* April 15^th filing due date * 4^th month after fiscal year end

Question 28

# Due Dates / Extensions: When are C - Corporations with a June 30th fiscal year end tax returns due for tax years 2016 - 2025?

Answer 28

* September 15^th filing due date * 3^rd month after fiscal year end

Question 29

# Due Dates / Extensions: When are C - Corporations with a June 30th fiscal year end tax returns due for tax years 2016 - 2025 if a 7 - month extension is filed and granted?

Answer 29

* **Extension:** April 15^th due date * Due 10-months after fiscal year end * 7 – month extension granted

Question 30

# Due Dates / Extensions: When are C - Corporations with a June 30th fiscal year end tax returns due for 2026 tax year?

Answer 30

* October 15^th filing due date * 4^th month after fiscal year end

Question 31

# Due Dates / Extensions: When are C - Corporations with a June 30th fiscal year end tax returns due for 2026 tax year if a 6 - month extension is filed and granted?

Answer 31

* **Extension:** April 15^th due date * Due 10 – months after fiscal year end * 6 – month extension granted

Question 32

# Due Dates / Extensions: What is the return due date and extension due date for corporations with other fiscal years outside of the calendar or June 30th fiscal year end?

Answer 32

* Return due in the 4^th month after close of fiscal year * **Extension:** due 10^th month after close of fiscal year

Question 33

# Due Dates / Extensions: When are returns due for S - Corporations?

Answer 33

* Returns are due no later than the 15^th day of the 3^rd month of the year * March 15^th for calendar year taxpayers

Question 34

# Due Dates / Extensions: What form must S - Corporations file for an automatic 6 - month extension?

Answer 34

* Automatic 6-month extension available for corporate returns by filing Form 7004

Question 35

# Due Dates / Extensions: What is the extended due date for S - Corporations who file for an automatic 6 - month extension?

Answer 35

* Extends the deadline to September 15^th for calendar year taxpayers

Question 36

# Due Dates / Extensions: When are partnership and trust tax returns due?

Answer 36

* Must be filed by the 15^th day of the 3^rd month of the year * March 15^th for calendar year taxpayers

Question 37

# Due Dates / Extensions: What form must partnerships and trusts file for an extension request?

Answer 37

Form 7004

Question 38

# Due Dates / Extensions: How long are due dates extended for partnerships and trusts who file for an extension?

Answer 38

automatic 6 - month

Question 39

# Due Dates / Extensions: What is the extended due date for partnerships and trusts who file for and is granted an extension?

Answer 39

* Extends deadline to September 15^th for calendar year taxpayers

Question 40

# Due Dates / Extensions: What is the filing due date for the filing of information returns by exempt organizations?

Answer 40

* File information returns by 15^th day of the 5^th month following close of taxable year * May 15^th for calendar year entities

Question 41

# Due Dates / Extensions: What form must exempt organizations file to request an automatic 6 - month extension for filing their informational return?

Answer 41

Form 8868

Question 42

# Due Dates / Extensions: What is the filing due date for estate and trust tax returns?

Answer 42

* Filed by 15^th day of the 4^th month following close of tax year * April 15^th for trusts and calendar-year estates

Question 43

# Due Dates / Extensions: What form must estates and trusts file to request an extension to file ?

Answer 43

Form 7004

Question 44

# Due Dates / Extensions: How long is the automatic extension for etates and trusts who request an extension to file?

Answer 44

5 1/2 months

Question 45

# Disclosure of Tax Positions: When might accuracy related penalties be avoided?

Answer 45

* if return position adequately disclosed and has a reasonable basis * understatement is due to substantial authority * Substantial authority depends on the facts & circumstances

Question 46

# Disclosure of Tax Positions: How much is the accuracy related penalty?

Answer 46

* Penalty = 20% of the underpayment

Question 47

# Disclosure of Tax Positions: Is the accuracy related penalty figured on any part of an underpayment on which the fraud penalty is charged?

Answer 47

No

Question 48

# Disclosure of Tax Positions: What is a substantial understatement?

Answer 48

larger of 10% of correct tax or $5,000

Question 49

# Disclosure of Tax Positions: Give 6 examples of items that represent substantial authority? HINT: CRTRII

Answer 49

* Court opinions * Revenue rulings * Treasury regulations * Revenue procedures * IRS notices & announcements * IRB publishings

Question 50

# Claim for Refunds How long are taxpayers required to retain records?

Answer 50

* Must maintain records as long as the contents may be material in administration of any internal revenue law * Retain 3-7 years

Question 51

# Claim for Refunds What form is used to claim a refund if it not for a current year refund (Form 1040) or prior year refund (Form 1040X)?

Answer 51

Form 843

Question 52

When must a taxpayer file for a claim for refund?

Answer 52

* Must be filed by the later of 3 years from the filing of the return or 2 years after the tax was paid

Question 53

# Claim for Refunds What is the statute of limitations for filing a claim for refunds when having worthless securities or bad debts?

Answer 53

statutue of limitations extended to 7 years

Question 54

# IRS Statute of Limitations: What is the IRS statute of limitations for tax return assessments?

Answer 54

* Assessment limited to 3 years from later of return due date or filing date

Question 55

# IRS Statute of Limitations: When is the IRS statute of limitations for assessments extended and for how long is the extension?

Answer 55

* Assessment period extended to 6 years in the case of gross omission * gross omission = in excess of 25% of gross income

Question 56

# IRS Statute of Limitations: True or False \>\>\> Gross omission = 50% of GI stated in the return

Answer 56

False - 25% of GI stated in the return

Question 57

# IRS Statute of Limitations: What items are counted in the assessment of gross omission on a tax return?

Answer 57

* Only items completely omitted from the return are counted

Question 58

What is the IRS statute of limitations for the assessment period in the case of a nonexistent or fraudulent return?

Answer 58

* Assessment period unlimited in the case of a nonexistent or fraudulent return

Question 59

When will the IRS issue a release of the notice of federal tax lien once it has been filed?

Answer 59

within 30 days after the tax due has been satisfied

Question 60

What does gross income mean for a trade or business?

Answer 60

Total of the amounts received from the sale of goods before deductions and cost of goods sold