Tax Administration and Tax Planning

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