Posted: May 13th, 2018

tax problems – questin and answer ,.,. ch 26

1. LO.1, 3 Your tax client Chen asks whether it is likely that her Form 1040 will be audited this year. You suspect that Chen might modify the information she reports on her return based on your answer. Address Chen’s question, and provide her with a justification to comply fully with the tax law’s reporting requirements.2. LO.1 Recently, a politician was interviewed about fiscal policy, and she mentioned reducing the “tax gap.” Explain what this term means. What are some of the pertinent political and economic issues relative to the tax gap?3. LO.2 Your tax research has located a Tax Court case that supports the claiming of a deduction by a client, while an IRS letter ruling holds to the contrary. The pertinent facts of both the case and the ruling match those of the client. Which holding should be followed in preparing the client’s tax return? Summarize your findings in a memo for the tax research file.4. LO.2 Does the IRS or the taxpayer bear the burden of proof in establishing the amount of an underpayment of tax liability? Of interest charges? Of tax penalties?Explain.5. LO.2 Write a page paper – Describe the process the IRS uses to collect the tax that is found to be due after an audit is completed. Assume that the IRS findings are not appealed but that the taxpayer does not pay the amount due as determined by the audit. Illustrate the process with no more than four PowerPoint slides. Hint: Use the following terms in your report—assess, seize, and lien.6. LO.3 During an interview with an IRS official on Dateline, the interviewer asks, “So how do you decide which Forms 1040 get audited and which do not?” How should the IRS official respond, taking into account that only some of the audit selection process is public information?7. LO.3 On June 10, Ming states, “I filed my Form 1040 on April 5 and haven’t heard from the IRS since then, so I know I will not be audited!” Write a word essay – Evaluate Ming’s assumption.8. LO.3 You overhear Matheus say, “I am so glad to be divorced frommy cheating wife Larissa.She keeps two sets of books in her design business, and I wish the IRS would find out about it.” Is Matheus a candidate for the informant reward program that is operated by the IRS? Explain how the program works and how a reward might be paid to Matheus.9. LO.3 Write a page paper – Describe the three broad types of IRS audits. Give an example of an issue that each type of audit might address, and indicate how frequently such audits are conducted by the IRS.10. LO.4 Write a page paper – Describe the conditions under which your client Lee Anne might approach theIRS with an offer in compromise.11. LO.5 For about 15 months, Ian has been negotiating a settlement with the IRS concerning a disputed tax deduction. The IRS and Ian have agreed to the amount of prioryear taxes he must pay. Ian asks you whether he also is liable now for interest charges on his underpayment and, if so, how that interest amount is computed. As to Ian’s tax payable amount, when does interest begin to accrue?

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