23. If a taxpayer agrees with proposed audit changes and signs an agreement
form at the conclusion of the audit, no interest will be charged on any balance
due.
24. A preparer who willfully, recklessly, and/or intentionally understates the tax
liability on a return he or she prepares is subject to a penalty of $500.
25. Joan is preparing Kimball’s 1999 tax return. Kimball complains about the
very small amount of compensation he received for serving on jury duty for all of
May in 1999. Joan does not report any income from jury duty on Kimball’s tax
return. Joan is subject to a penalty for willful understatement.
26. A position can be taken on a tax return if it has at least a one in three likelihood
of being sustained on its merits.
27. Joni is a tax return preparer. She’s not a preparer bank. Joni prepared
Judy’s income tax return and then cashed Judy’s refund check. Joni is subject to
a penalty of $500.
28. In 1999, Stephanie contributed $2,600 to her church ($50 each week).
Stephanie has a cancelled check for each week’s contribution, but does not have
a statement from her church documenting the contribution. Stephanie may not
claim a deduction for her church contributions because she does not have
adequate records.
29. Jubilee, Inc. is a small manufacturer that employed 172 workers in 1999.
Jubilee issued Forms W-2 to all of those workers. Jubilee must keep copies of
those Forms W-2, the associated Form W-3, and all other employment tax
records for at least five years from the due date for filing Form W-2.
30. Generally, a non-working spouse may make contributions to a traditional
individual retirement account (IRA) up to $2000 even if the working spouse’s
earnings are less than $4000 and the working spouse also makes a $2000
contribution.
31. An employer may establish a simplified employee pension (SEP) plan and
make contributions to IRAs for qualifying employees. To qualify, an employee
must be at least 21 years old. An employer may raise, but not lower, the age
restriction for participation.
32. The rules regarding excess accumulations in a traditional individual
retirement account (IRA) state that a 50% excise tax must be paid for that year
on the amount not distributed as required.
33. Contributions to a Roth IRA (individual retirement account) may be deducted
if they fall below certain income limits.