Tax Administration and Tax Planning

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A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer. A) True
B) False

Beginning in 2011, all paid tax return preparers must sign up with the IRS, pay a fee, and obtain a preparer tax identification number. A) True
B) False

22.
Taxpayers who are unable to pay their taxes may enter into a payment plan with the IRS if the amount they owe is within certain limits. A) True
B) False

23.
At which of the following IRS locations are tax returns processed? A) Regional offices
B) Service centers
C) Local offices
D) National office
E) None of the above

24.
Which of the following is not a type of IRS audit?
A) Office audit
B) Field audit
C) Correspondence audit
D) Operational audit
E) All of the above are types of IRS audits

25.
Which of the following is the most common type of audit for an individual taxpayer? A) Office audit
B) Telephone audit
C) Correspondence audit
D) Field audit
E) None of the above

26.
Which of the following statements best describes the process of tax planning? A) Tax planning is equivalent to tax evasion
B) Tax planning is the avoidance of “tax traps”
C) Tax planning is the process of arranging one's financial affairs to minimize one's overall tax liability D) Tax planning is the deferral of tax on income
E) Tax planning is the calculation of a taxpayer’s marginal rate of tax

27.
A tax return with a large casualty loss would be most likely selected for audit through: A) The Discriminant Function System
B) Information from an informant
C) Information from another governmental agency
D) The Taxpayer Compliance Measurement Program
E) None of the above

28.
Which of the following is not a possible result of an audit by the IRS? A) Payment of a refund to the taxpayer
B) Payment of a deficiency by the taxpayer
C) An appeal
D) No change in the liability
E) All of the above are possible results

29.
If a calendar year taxpayer's 2011 individual income tax return is mailed on June 15, 2012, the statute of limitations would normally run out on: A) June 15, 2014
B) June 15, 2015
C) April 15, 2014
D) April 15, 2015
E) None of the above

30.
Which of the following types of audits was suspended due to protests from taxpayers and lawmakers? A) Discriminant Function System selected audit
B) Taxpayer Compliance Measurement Program selected audit
C) Correspondence audit
D) Office audit
E) None of the above

31.
Which of the following will not affect the statute of limitations on a tax return? A) Omission of a significant amount of gross income
B) Mutual consent of the IRS and the taxpayer
C) Failure to pay the tax due with the tax return
D) Failure to file a tax return
E) Filing a fraudulent tax return

32.
Which of the following statements best describes the purpose of the Taxpayer Bill of Rights? A) To provide the IRS with additional enforcement powers
B) To grant to taxpayers the right to choose the time and method of payment of delinquent taxes C) To inform taxpayers of their rights in dealing with the IRS. D) To inform taxpayers of the methods for properly completing their income tax returns E) None of the above

33.
Which of the following taxpayers will benefit most in terms of dollars saved as a result of tax planning to reduce taxes? A) An individual taxpayer who has a marginal tax rate of 28 percent B) An individual taxpayer who has an average tax rate of 28 percent C) An individual taxpayer who has a marginal tax rate of 15 percent D) The taxpayers in a. and b. will benefit equally

E) None of the above

34.
Patricia has taxable income of $40,000 on which she pays income tax of $6,194. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate? A) 15.00 percent

B) 16.07 percent
C) 16.50 percent
D) 25.00 percent
E)...
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