CHAPTER 26 TAX PRACTICE AND ETHICS

1.
A(n) $ penalty
applies if the tax preparer does not sign the client’s tax return.

2.
The tax workpapers
prepared as part of an independent financial audit are not privileged
communications that can be kept confidential from an IRS subpoena.

3.
A privilege of exists
between a tax preparer and the client as to tax advice rendered.

4.
A(n) member is required to follow
the Statements of Standards for Tax Services in conducting a tax practice.

5.
Maria did not pay her Federal income tax on time. When she
eventually filed the return, she reported a balance
due. Compute Maria’s failure to
file penalty in each of the following cases. Disregard any failure to pay
penalty.
a.
Three months late, $500 additional tax due.
b.
Four months late, $2,000 additional tax due.
c.
Ten months late, $10,000 additional tax due.
d.
Four months late due to fraud by Maria, $10,000 additional
tax due.
e.
Fifteen months late due to fraud by Maria, $10,000
additional tax due.

6.
Quon filed his Federal income tax return on time, but he did
not remit the full balance due. Compute Quon’s failure
to pay penalty in each of the
following cases. The IRS has not yet issued a deficiency notice.
a.
Three months late, $5,000 additional tax due.
b.
Nine months late, $5,000 additional tax due.
c.
Five years late, $5,000 additional tax due.
7.
Compute the failure to pay and failure to file penalties for
John, who filed his 2012 income tax return on December 14, 2013, paying the
$10,000 amount due. On April 1, 2013, John submitted a six-month extension of
time in which to file his return; he paid no tax with the extension request. He
has no reasonable cause for failing to file his return by October 15, or for
failing to pay the tax that was due on April 15, 2013. John’s failure to comply
with the tax laws was not fraudulent.
8.
Silvio, a cash basis, calendar year taxpayer, filed his
income tax return 75 days after the due date. Silvio never extended his return,
and with the return he paid the full amount of taxes that were due. What
penalties will Silvio incur, and how much is the penalty if his additional tax
is $5,000? Disregard any additional interest he must pay.

9.
Clarita underpaid her taxes by $50,000. Of this amount,
$35,000 was due to negligence on her part, as her record- keeping system is
highly inadequate. Determine the amount of any negligencepenalty.

10.
Linwell underpaid his taxes by $250,000. Portions of the
underpayment were attributable to negligence ($210,000) and to civil fraud
($40,000). Compute the total penalties incurred.