Question

1.Which of the following is not an option available to a taxpayer who disagrees with an auditor's proposed changes?

A.. Wait until the IRS issues a Notice of Deficiency, and then file a tax court petition.

B.. Request an appeals conference.

C.. Request a meeting with the auditor's group manager.

D.. Immediately file a tax court petition upon conclusion of the audit.

2. In which of the following cases would a representative have the best chance of getting the IRS to cancel or discontinue an audit?

A.. When the issues raised in the current audit were raised in an audit of either of the two prior

tax years, and the prior audit resulted in little or no change.

B.. When the taxpayer is a member of a partnership.

C.. When the auditor for the current return is not the same one who audited the taxpayer's return

in a prior year.

D.. When the taxpayer is an S corporation.

3.Which of the following situations would most likely be resolved in a correspondence audit?

A.. Verification of a taxpayer's qualifications for the EITC.

B.. The determination whether 23 of a construction company's workers are employees or

independent contractors.

C.. Whether a particular transaction resulted in capital gain or ordinary income.

D.. Review of all tax records of an S corporation (sales of $20 million and 40 employees) for the

past three years.

Answer 1

Answer 1:

Correct answer is:

D. Immediately file a tax court petition upon conclusion of the audit.

Explanation:

Taxpayer can only file a petition in Tax Court if he/she has received

1. a notice of deficiency, or
2. a notice of determination.

from the IRS. As such until Notice of Deficiency or Notice of determination is received, tax court petition cannot be filed.

As such option D is not available and is correct answer.

All other options A,B and C are incorrect.

Answer 2:

Correct answer is:

A.. When the issues raised in the current audit were raised in an audit of either of the two prior tax years, and the prior audit resulted in little or no change.

Explanation:

The Internal Revenue Manual states that if a taxpayer had a similar issue examined by IRS in either of the two prior years, and there was no change or a small change in the tax from the audit, the new examination will be discontinued.

As such option A is correct.

IRS may not cancel or discontinue an audit:

B. When the taxpayer is a member of a partnership or

C. When the auditor for the current return is not the same one who audited the taxpayer's return in a prior year or

D. When the taxpayer is an S corporation.

As such options B,C and D are incorrect.

Answer 3:

Correct answer is:

A. Verification of a taxpayer's qualifications for the EITC.

Explanation:

Internal Revenue Manual (IRM) 4.19.11.1.3 provides a list of issues that are candidates for correspondence audit which includes dependency exemptions and related credits [Earned Income Tax Credit (EITC), Child Care Credit, Adoption Credit, etc.

As such Option A is most appropriate.

Other options are incorrect.