R4 M3 - Federal Tax Procedures & Taxpayer Penalties Flashcards
What is failure-to-pay Penalty?
This is when you pay for your income tax _ after the original date of the return (April 15, 20ZZ)
What are the general requirements for a taxpayer to avoid tax penalty?
- Act in good faith
- Did not have willful neglect
- Reasonable cause to support tax return position.
Which represents the correct order of deductions in the individual income formula?
- Adjustments
- Standard Deduction or itemized deduction
- QBI deduction
John Q. Dillinger is the outgoing Commissioner of the Internal Revenue Service. In his final public meeting with IRS employees, he addressed changes that he would like to see made in the IRS audit and appeals process. Which of the following statements that he made at this meeting is correct?
A. Office audits are normally performed at the national office of the IRS in Washington, DC. B. A revenue agent and the Appeals Division can both settle an unresolved tax issue based on the probability of winning the case in court. C. Following an audit, if agreement is reached with the taxpayer, the taxpayer signs Form 870. D. Tax returns are checked for mathematical accuracy, but only if the returns indicate a refund.
Choice “C” is correct. Following an audit, if agreement is reached with the taxpayer, the taxpayer signs Form 870 (Waiver of Restrictions on Assessment and Collection of Deficiency in Tax).
When an agreement is made if there was a disagreement in the tax return the taxpayer will sign Form 870 any interest accumulated on the deficiency 30 days after the form is filed will stop.
John Harper’s individual income tax return was audited by the IRS. The IRS revenue agent determined John owed additional taxes on his previously filed return. John disagrees with the agent’s additional assessment and the matter was not agreed upon at the IRS administrative appeals conference. John has decided to initiate resolution of the disputed tax in the Federal Court System.
Which of the following is a correct statement regarding the Federal Court System?
A. The U.S. Tax Court is the only forum in which the taxpayer may have a claim heard without first paying the disputed tax liability in full. B. If the disputed tax matter was heard at an IRS administrative appeals conference, the matter may not be heard in the Federal Court System. C. Only the IRS may initiate the resolution of a tax dispute to the Federal Court System. D. Tax matters may be heard initially at the appellate court level, bypassing the need to go through the trial court system.
Choice “A” is correct. The U.S. Tax Court is the only federal trial court where taxpayers may have disputes litigated without first paying the disputed tax liability. In other federal trial courts (U.S. District Court and the U.S. Court of Federal Claims), the taxpayer is required to pay the disputed tax and sue the IRS for a refund.
Choice “B” is incorrect. The taxpayer may, but is not required to, request an IRS administrative appeal. If there is not agreement after the appeals conference, the taxpayer is entitled to take the case to the U.S. Tax Court, U.S. Federal Court of Claims, or a U.S. District Court.
Choice “C” is incorrect. Either the IRS or the taxpayer may initiate resolving a tax dispute in the Federal Court System when the taxpayer and the IRS cannot reach an agreement using the administrative appeals process.
Choice “D” is incorrect. The taxpayer or the IRS must first exhaust remedies at the Federal Trial Court System level (U.S. Tax Court, a U.S. District Court, or U.S. Court of Federal Claims) prior to the dispute being heard at the federal appellate court level. Appellate courts only resolve matters involving questions of law, and not questions of fact.
US Tax Court :
US Tax Court: hears only federal tax cases (income tax, estate tax, gift tax, or certain excise taxes).
US District Court: Hear both civil and criminal cases (not just tax cases).
Courts of Appeals and the U.S Court of Appeals for the Federal Circuit: The U.S courts of appeals (or circuit courts) are the first level of federal appellate courts. A court of appeals hears appeal from U.S District court and the U.S Tax courts
The courts of appeals hear appeals from the US Court of Federal Claims
