Reg Deck 1

Question 1

What are the 3 types of IRS Audits?

Answer 1

Correspondence Examination (through mail), Office Examination (at IRS District office), Field Examination (at business or residence)

Question 2

IRS Form 2848 “Power of Attorney and Declaration of Representative”

Answer 2

IRS Form allowing an Attorney, CPA, EA, or preparer that signed the tax return to speak with the IRS.

Question 3

IRS Form 980 “Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment”

Answer 3

Taxpayer acceptance of tax deficiency.

Question 4

When can the Disciplinary Hearing be appealed?

Answer 4

Within 30 days to of the decision by the Administrative Law Judge to the Secretary of the Treasury.

Question 5

Give an example of an ethical violation by a CPA performing a consulatation service for a stated fee

Answer 5

When the CPA knows that the fee will be a lot more.

Question 6

What type of fee is not allowed under Treasury Dept 230?

Answer 6

Contingent fee for preparing a client’s income tax return.

Question 7

Civil penalty for claiming allowances on false information.

Answer 7

$500

Question 8

Maximum fine (criminal) attempting to evade tax?

Answer 8

$100,000 and/or 5 years in prison. $500,000 for Corporations; no jail time

Question 9

Income less than $150,000 may avoid a penalty by paying what % of current year taxes and prior year taxes?

Answer 9

100% & 90%

Question 10

Income >$150,000 may avoid a penalty by paying what % of current year taxes and prior year taxes

Answer 10

90% & 110%

Question 11

Failure to file by due date penalty

Answer 11

5%/month up to 25% max.

Question 12

Failure to file due to fraud

Answer 12

15%/month up to 75% max.

Question 13

Failure to pay amount due on return

Answer 13

0.5%/month up to 25% on tax due

Question 14

CPA liability to clients under common law

Answer 14

Fraud, Gross Negligence or Constructive Fraud, Negligence, Breach of Contract

Question 15

Basis for suing CPA without showing cause

Answer 15

Breach of Contract or negligence

Question 16

A client suing a CPA for negligence must prove each of the following factors except:

Answer 16

Reliance

Question 17

Which of the following pairs of elements must a client prove to hold an accountant liable for common law fraud?

Answer 17

Scienter and justifiable reliance

Question 18

Define Fraud

Answer 18

Intentional misrepresentation of a material fact WITH resultant harm.

Question 19

What is gross negligence or constructive fraud?

Answer 19

Extreme, flagrant, or reckless departure from the standards of due care.

Question 20

Define Ordinary or Simple Negligence

Answer 20

Failure to do what an ordianry, reasonable, prudent CPA would do.

Question 21

What is Breach of Contract?

Answer 21

Failure by a CPA to fulfill requirements of a contract

Question 22

What is the difference between Simple Negligence and Gross Negligence?

Answer 22

Simple Negligence is failing or not doing what a regular CPA would do. Gross Negligence is intent to not follow due care.

Question 23

Defenses that a CPA has: (5)

Answer 23

1.) CPA was not negligent.
2.) Client contributed to the loss.
3.) CPA followed professional standards.
4.) Mistake was immaterial.
5.) CPA’s error did not cause the loss.

Question 24

Ultramares rule

Answer 24

CPA may be liable for fraud or gross negligence

Question 25

Who are CPA’s not liable to who do not have privity (contractual or near contractual relationship) on ordinary negligence?

Answer 25

3rd parties such as investors and creditors.

Question 26

What is a 3rd party beneficiary rule?

Answer 26

A CPA may be liable for ORDINARY negligence when the services benefit the 3rd party primarily. 3rd party is party to contract when they are the beneficiary. Plaintiff can be a 3rd party when they are the AIM and END transaction benficiary.

Question 27

When is a CPA liable under Foreseeability rules?

Answer 27

CPA is negligent in issuing the report to parties who can be forseen as being injured.

Question 28

A Taxpayer received a 90-day letter proposing a deficiency. The taxpayer challenged th proposed deficiency in the Small Cases Division of the U.S. Tax Court. If the taxpayer loses the case, then the decision is:

Answer 28

Not appealable.

Question 29

List of courts that are referred to as courts of original jurisdiction, trial courts, for tax matters?

Answer 29

The Tax Court, the U.S. District Court, and the U.S. Court of Federal Claims.

Question 30

What is Schedule UTP used for?

Answer 30

To disclose specific information regarding Uncertain Tax Positions

Question 31

If a noncash donation is made, what is the minimum amount that a qualified appraisal is required?

Answer 31

$5,000.

Question 32

What are the requirements if a donation exceeds $500?

Answer 32

A description of how the property was acquired and the taxpayer’s basis in the property must be included with the taxpayer’s return.

Question 33

What is a reportable transaction?

Answer 33

The potential for tax avoidance or evasion.

Question 34

A Civil fraud penalty can be impsoed on a corporation that underpays taxes by

Answer 34

Maintaining false records and reporting ficticious transactions to minimize corporate tax liability

Question 35

What is the deduction allowed for underpayment of federal estimated taxes?

Answer 35

Not deduction is allowed per IRC Section 162

Question 36

What committee report is not used as a source of tax law?

Answer 36

Accounting and Review Services Committee Report