TBS 1

Question 1

IRS Publication 1 - Page 1
The Taxpayer Bill of Rights

Answer 1

Question 2

IRS Publication 1 - Page 2
Your Rights as a Taxpayer

Answer 2

Question 3

We’re your voice at the IRS
Taxpayer Advocate Service (TAS)

Answer 3

Question 4

IRS Publication 947
Practice Before the IRS and Power of Attorney

Answer 4

Question 5

IRS Publication 5
Your Appeal Rights and How to Prepare a Protest if You Disagree

Answer 5

Circular No. 230
Regulations Governing Practice before the Internal Revenue Service

Question 6

Circular No. 230
Regulations Governing Practice before the Internal Revenue Service

Answer 6

Question 7

The IRS selects tax returns for examination through all of the following, except:

computer programs
financial statement disclosures
informants
a random process
newspapers

Pub 1 - Page 2 Examinations

Part 1:
For each question or statement in the table below related to taxpayers’ rights when interacting with the Internal Revenue Service (IRS), select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 7

a random process

The IRS uses computer programs, newspapers, financial statement disclosures, informants, and other public and private sources to identify tax returns that may have an understated tax liability. The IRS does not randomly select tax returns to examine (Document #2: IRS Publication 1).

The process of selecting a return for examination usually begins in one of two ways. First, we use computer programs to identify returns that may have incorrect amounts. These programs may be based on information returns, such as Forms 1099 and W-2, on studies of past examinations, or on certain issues identified by compliance projects. Second, we use information from outside sources that indicates that a return may have incorrect amounts. These sources may include newspapers, public records, and individuals. If we determine that the information is accurate and reliable, we may use it to select a return for examination.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 8

Which of the following is not one of the rights listed in the Taxpayer Bill of Rights for challenges to an IRS position?

• A Taxpayer Bill of Rights does not exist
• The right to raise objections in response to an IRS action
• The right to provide additional documentation in response to an IRS action
• The right to receive a response if the IRS does not agree with the taxpayer’s positions
• Free representation if the taxpayer cannot afford an attorney

Part 1:
For each question or statement in the table below related to taxpayers’ rights when interacting with the Internal Revenue Service (IRS), select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 8

Free representation if the taxpayer cannot afford an attorney

Watch out - there was a trick answer there: A Taxpayer Bill of Rights does not exist.

Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position (Document #1). Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulties, but they do not have the right to free representation if they cannot afford an attorney.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 9

What does the Taxpayer Advocate Service provide?

• Completion of tax returns exclusively for the elderly
• Help for taxpayers in resolving tax issues with the IRS
• Publications and forms
• Assistance in suing the IRS for harassment
• Pre-approval for controversial tax positions

Part 1:
For each question or statement in the table below related to taxpayers’ rights when interacting with the Internal Revenue Service (IRS), select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 9

Help for taxpayers in resolving tax issues with the IRS

The Taxpayer Advocate Service (Document #3) was created to help taxpayers resolve tax issues when notified by the IRS. This service can help with continuing issues that cannot be resolved independently or with issues that are causing financial difficulty.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 10

Who cannot represent a taxpayer in an examination by the IRS?

• An enrolled agent who fails to complete CPE
• An officer of the entity
• A family member
• An employee
• A fiduciary

Part 1:
For each question or statement in the table below related to taxpayers’ rights when interacting with the Internal Revenue Service (IRS), select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 10

An enrolled agent who fails to complete CPE

Publication 947 Practice Before the IRS and Power of Attorney

Other individuals who may serve as representatives:
* an individual
* a family member
* a bona fide officer of a corporation
* a partner
* an employee representing his employer
* a fiduciary (trustee, executor, personal representative, administrator, receiver, or guardian)

Enrolled agents lose their eligibility to practice before the IRS if they fail to meet the requirements for renewal of enrollment (such as continuing professional education). The individual being examined by the IRS, a family member, an officer of a corporation, a partner, an employee, or a fiduciary may represent a taxpayer before the IRS (Document #4: IRS Publication 947).

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 11

Which of the following is not considered practice before the IRS?

Estate planning with a client
Preparing an individual’s tax return
Representing a client at hearings and meetings with the IRS
Communicating with the IRS on behalf of a client

Part 1:
For each question or statement in the table below related to taxpayers’ rights when interacting with the Internal Revenue Service (IRS), select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 11

Estate planning with a client

Practice before the Internal Revenue Service encompasses all matters connected with a presentation to the IRS or its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include preparing and filing documents; communicating with the IRS; rendering written advice with respect to potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings (Document #6).

Circular 230: Subpart A - Rules Governing Authority to Practice
Section10.2 Definitions
(a)(4) Practice before the IRS comprehends all matters connected with a presentation to the IRS or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the IRS. Such presentations include, but are not limited to:

• **preparing documents
• filing documents
• corresponding and communicating with the IRS
• rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion
• representing a client at conferences, hearings, and meetings**

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 12

Failure to file a tax return within 60 days of the due date (including extensions) (minimum penalty)

• The smaller of $435 or 100% of the unpaid tax
• $100 a day until the tax is paid
• The smaller of $500 or 50% of the unpaid tax
• 5% of the unpaid tax for each month

IRS Publication 556, “Examination of Returns” chapter

Part 2:
The IRS can impose both criminal and civil penalties to encourage tax compliance by both tax professionals and taxpayers. For each tax violation listed in the table below, select the appropriate penalty by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 12

The smaller of $435 or 100% of the unpaid tax

The minimum penalty for returns filed more than 60 days after the due date, or extended due date, is the smaller of $435 or 100% of the unpaid tax. The penalty for filing late, but within 60 days, is normally 5% of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25% of the unpaid taxes.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 13

Failure by the tax practitioner to sign a tax return

• $55 per violation
• $500 per violation
• 10-day suspension of the practitioner’s license
• There is no penalty, only a warning letter.

IRS Publication 556, “Examination of Returns” chapter

Part 2:
The IRS can impose both criminal and civil penalties to encourage tax compliance by both tax professionals and taxpayers. For each tax violation listed in the table below, select the appropriate penalty by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 13

$55 per violation

Failure by the tax practitioner to sign a tax return will result in a $55 fine per violation in calendar year 2023.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 14

Willful understatement of the tax by the tax practitioner

• 2-month suspension of the practitioner’s license
• The greater of $5,000 or 75% of income derived from preparing the taxpayer’s tax return
• $5,000 per violation
• The lesser of $5,000 or 100% of the willful understatement

IRS Publication 556, “Examination of Returns” chapter

Part 2:
The IRS can impose both criminal and civil penalties to encourage tax compliance by both tax professionals and taxpayers. For each tax violation listed in the table below, select the appropriate penalty by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 14

The greater of $5,000 or 75% of income derived from preparing the taxpayer’s tax return

Willful understatement of the tax by the tax practitioner is the greater of $5,000 or 75% of income derived from preparing the taxpayer’s tax return.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 15

Fraud committed by the taxpayer

• 10% of the liability attributable to the fraud
• 25% of the liability attributable to the fraud
• 50% of the liability attributable to the fraud
• 75% of the liability attributable to the fraud

IRS Publication 556, “Examination of Returns” chapter

Part 2:
The IRS can impose both criminal and civil penalties to encourage tax compliance by both tax professionals and taxpayers. For each tax violation listed in the table below, select the appropriate penalty by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 15

75% of the liability attributable to the fraud

The penalty for fraud committed by the taxpayer is 75% of the liability attributable to the fraud.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 16

Which of the following is not a valid exception to the general deadline for filing a return and paying tax?

• You had insufficient funds to pay the tax due.
• You are a member of the Armed Forces and serving in a combat zone.
• You are a citizen working abroad.
• You have been in a qualifying disaster situation (e.g. severe storms, tornadoes, severe flooding).

IRS Publication 556, “Examination of Returns” chapter

Part 2:
The IRS can impose both criminal and civil penalties to encourage tax compliance by both tax professionals and taxpayers. For each tax violation listed in the table below, select the appropriate penalty by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 16

You had insufficient funds to pay the tax due.

You may be exempt from meeting the general deadline for filing a tax return and paying tax if you are a member of the Armed Forces and serving in a combat zone; a citizen working abroad; or you have been in a qualifying disaster situation (e.g., severe storms, tornadoes, severe flooding). Having insufficient funds is not a valid reason for missing the deadline.

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 17

Taxpayers may appeal most IRS decisions with their local Appeals Office. Which of the following is not a common format for conferences with Appeals Office personnel?

• By correspondence
• With the supervisor of the IRS office taking action against the taxpayer
• In person
• By telephone

Part 3:
For each question in the table below related to the appeals process, select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 17

With the supervisor of the IRS office taking action against the taxpayer

The Appeals Office is an independent function of the IRS, separate from the IRS Office taking the action that the taxpayer disagrees with. Appeals employees fairly and impartially settle disputes between taxpayers and other divisions of the IRS by considering the arguments made by both sides. Most disputes can be settled informally at the Appeals level without litigation (Document #5).

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 18

Under what circumstances can a small case request appeal be submitted?

• If the total tax due is $25,000 or less
• If the total tax due is $30,000 or less
• If the total tax due is $50,000 or less

Part 3:
For each question in the table below related to the appeals process, select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 18

**If the total tax due is $25,000 or less
**
A small case request appeal may be submitted if the total tax due for each tax period is $25,000 or less (Document #5).

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 19

If the taxpayer does not agree with the Appeal Office, which of the following courts is not an option?

• United States Tax Court
• United States Court of Federal Claims
• United States District Court
• The taxpayer’s District Court in his or her state of residency

Part 3:
For each question in the table below related to the appeals process, select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 19

The taxpayer’s District Court in his or her state of residency

If the taxpayer and the Appeals Office do not agree on some or all of the issues after the Appeals conference, the taxpayer can take their case to the United States Tax Court, the U.S. Court of Federal Claims, or the U.S. District Court in the judicial district where the taxpayer resides or has their principal place of business, after satisfying certain procedural and jurisdictional requirements. The District Court in the taxpayer’s state of residency is not a valid choice (Document #5).

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 20

If the Tax Court determines that the taxpayer’s case is intended primarily to cause a delay, or that the taxpayer’s position is frivolous or groundless, the Tax Court may award a penalty of up to:

• $500
• $5,000
• $15,000
• $25,000

Part 3:
For each question in the table below related to the appeals process, select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 20

$25,000.

If the Tax Court determines that the taxpayer’s case is intended primarily to cause a delay, or that the taxpayer’s position is frivolous or groundless, the Tax Court can impose a penalty against the taxpayer of up to $25,000 in its decision (Document #5).

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)

Question 21

Taxpayers may be able to recover reasonable litigation and administrative costs if they are the prevailing party in the appeals process. Which of the following would generally not be a recoverable cost?

• Travel and lodging costs for appeals appearances
• Court costs charged by the IRS
• Expert witness expense
• Costs of studies, analyses, tests, or engineering repors necessary to prepare the case

Part 3:
For each question in the table below related to the appeals process, select the appropriate answer by clicking in the indicated cell. (Refer to the documents under the Exhibits tab.)

Answer 21

Travel and lodging costs for appeals appearances

Reasonable litigation and administrative costs may be recoverable if the taxpayer is the prevailing party, and include attorney fees that do not exceed a maximum hourly rate; reasonable amounts for court costs or any administrative fees or similar charges by the IRS; reasonable expenses of expert witnesses; and reasonable costs of studies, analyses, tests, or engineering reports that are necessary to prepare the taxpayer’s case.

Reasonable expenses do not include travel, meals, or lodging costs incurred during the appeals process. (Document #5)

IRS Publication 556, “Appeal Rights” chapter

(The references for this simulation are sections 4131.01–.06 (Part 1); 4112, 4133, and 4411.04 (Part 2); and 4130 (Part 3) in the Taxation and Regulation Reference Volume.)