R4

Question 1

Types of audits

Answer 1

correspondence audits, IRS office audits, or field audits

Question 2

US Tax Court

Answer 2

type of trial court ; only hears federal tax cases before assessment is made by the IRS. Cases under 50k can use the Small Case Division - no payment required before and no jury

Question 3

US District Court

Answer 3

general trial court; include both civil and criminal cases - must pay tax liability before and then sue IRS for a refund. One judge, can request a jury trial

Question 4

PLR (private letter ruling)

Answer 4

taxpayer can request a PLR from the IRS in relation to specific tax rulings from the federal tax.

Question 5

five elements of fraud

Answer 5

(i) a misrepresentation of material fact; (ii) intent to deceive; (iii) actual and justifiable reliance by the plaintiff on the misrepresentation; (iv) an intent (also known as scienter) by the defendant to induce plaintiff’s reliance on the misrepresentation; and (v) damages. must be proven to be responsible for fraud

Question 6

if the IRS asks for client information…

Answer 6

must be subpoenaed and relevant to a court case in order to give it to them without getting permission from client.

Question 7

state boards of CPAs

Answer 7

have sole power to liscense CPAs, and to monitor continuing education required for the state and can conduct a formal hearing for possible disciplinary action.

Question 8

A taxpayer contemplates entering into a complex transaction. The taxpayer wants assurance that there will be no adverse tax effects from the transaction. The taxpayer should apply for which of the following?

Answer 8

Private letter ruling because it is a response to guidance on a tax matter

Question 9

Negligence arises when

Answer 9

CPA breaches due care

Question 10

if a taxpayer commits fraud, what kind of penalities apply?

Answer 10

civil penalties (at least 75 percent of the understatement of tax due to fraud) and criminal penalties imposed by federal tax laws

Question 11

civil fraud penalty requires

Answer 11

conduct that transcends negligence or stupidity

Question 12

tax practitioner privilege

Answer 12

Internal Revenue Code provides that the same common law protections of confidentiality that apply between a taxpayer and an attorney also apply between a taxpayer and CPA