Use IRS Publication 556 to answer the following questions.

1. Your return may be selected for examination on the basis of computer scoring. This is a computer program that assigns a numeric score to each individual and some corporate tax returns after they have been processed. This computer program is called the

a. Tax Return with Errors Selector (TRE).
b. Taxpayer Random Selector (TRS).
c. Discriminant Inventory Function System (DIF).
d. Discriminant Delinquent Taxpayer Finder (DDTF).

2. Your return may be selected for examination on the basis of

a. information received from third-party documentation.
b. Discriminant Inventory Function System (DIF).
c. a selection to address both the questionable treatment of an item and to study the behavior of similar taxpayers in handling a tax issue.
d. All of the above.

3. Your return may be selected for examination as a result of information received from

a. Newspapers.
b. Public records.
c. Individuals.
d. All of the above.

4. The person that represents you can be a federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or the person that prepared your return and signed as a preparer. The same confidentiality protection that you have with an attorney also applies to certain communications that you have with

a. the IRS.
b. federally authorized practitioners.
c. the attorney representing the IRS.
d. your family.

5. Advising you on tax matters within the scope of the practitioner's authority before the IRS, would be an example of a

a. confidential communication between you and the IRS.
b. confidential communication between you and the attorney representing the IRS.
c. confidential communication between you and the federally authorized practitioner.
d. confidential communication between you and your family.

6. The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. If your tax return was examined for the same items in either of the 2 previous year and no change was proposed to your tax liability, contact the IRS to

a. report the abuse of the employee whom selected you for the second time.
b. see what other paperwork they want you to send them.
c. tell them to stop and that it is against the law.
d. see if examination should be discontinued.

7. If your examination takes place in the IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. If an agreement is reached, your case will be closed. If you cannot reach an agreement with the supervisor at this meeting,

a. the examiner will close your case.
b. the examiner will write up your case explaining your position and the IRS' position.
c. the examiner will offer you an offer in compromise.
d. the examiner will try to convince you to agree.

8. File Form 1040X only after you have filed your original return. Generally, for a credit or refund, Form 1040X must be filed within

a. 3 years after the date you filed the original return.
b. 2 years after the date you paid the tax.
c. 5 years after the due date of your return.
d. Either A or B, whichever is later.

9. The IRS has selected Frances' 2007 tax return for examination. The only item of inquiry in the IRS contact letter was for verification of charitable contributions. France's tax return for 2006 was also examined to verify her charitable contributions, and no change was proposed to her tax liability. If Frances advises the IRS representative that no change resulted in her tax return for 2006, the examination of her tax return for 2007

a. might be discontinued.
b. screened more carefully for other errors.
c. will continue no matter what.
d. be delayed because of Frances' interference, but no change will result.

10. Karl had his 2003 income tax return examined resulting in adjustments. Karl has administratively appealed the adjustments. Some of them were sustained, resulting in an income tax deficiency. Karl wants to appeal his case to the U.S. Tax Court and is entitled to invoke the Small tax case procedure if the amount of tax deficiency is not over

a. $100,000.
b. $10,000.
c. $25,000.
d. $50,000.

11. The examination of Linda's tax return for 2005 resulted in adjustments creating a tax liability in the amount of $30,000. Linda does not believe she owes anything. A Notice of Proposed Income Tax Deficiency is issued to Linda, who wants to appeal the Revenue Agent's adjustments by taking the matter to the IRS Office of Appeals. Linda must file an appeal no later than which of the following periods?

a. 10 days.
b. 30 days.
c. 90 days.
d. None of the above.

12. During the course of examining Ollie's income tax return, the Revenue Agent required information from third party sources. Which of the following provisions does not apply to the Revenue Agent giving Ollie reasonable notice before contacting third parties?

a. Pending criminal investigations.
b. Providing notice might result in reprisal against the contact.
c. When providing notice would jeopardize collection of any tax liability.
d. All of the above.

13. Harry claimed gambling losses on his income tax return. The return was examined by the IRS and the losses were disallowed and disallowance increased his tax liability. Harry pursued an appeal before the IRS Appeals Office, which sustained the Revenue Agent's adjustment. Harry now wants to take his case to a judge. In which of the following courts can Harry file a tax action?

a. United States Court of Federal Claims.
b. United States District Court.
c. United State Tax Court.
d. Any of the above.

14. In certain circumstances, the IRS will allow you to pay less than the full amount you owe. There being any doubt about the amount you owe (or whether you owe it), or if there is doubt as to whether you can pay the amount you owe based on your financial situation, would be a good indication that that the IRS will accept your

a. Offer to enlist with the IRS.
b. Offer to leave the country.
c. Offer in Compromise.
d. Offer in installments.

15. Generally, you must file a claim for a credit or refund within

a. 3 years from the date you filed your original return.
b. 2 years from the date you paid the tax.
c. 3 years from the date you paid the tax.
d. whichever is the later of A or B.

16. The Internal Revenue Service (IRS) accepts most federal returns as filed. Some returns, however, are examined, or audited to determine if the following is reported accurately.

a. Income.
b. Expenses.
c. Credits.
d. All of the above.

17. Barry's individual income tax return for 2001 was examined by the IRS, which resulted in a tax assessment in the amount of $10,000. Thereafter, Barry discovered papers which he believed would show that the IRS determination was erroneous. A reason Barry would think the IRS would reconsider his case is:

a. that he could take a credit for the amount on his 2002 return.
b. that he could File Form 1045 'Application for Tentative Refund'.
c. Barry has additional information that could result in a change to the amount that the IRS determined that he owed.
d. that he could Immediately sue for refund in court.

18. Ned's individual income tax return was under IRS examination. Five months before the expiration of the statute of limitations, the Revenue Agent wanted Ned to agree to extend the statute of limitations. Generally, the Revenue Agent must advise Ned he has a right to

a. Refuse to extend the statute of limitations.
b. Limit or restrict the consent to particular issues.
c. Limit the extension to a particular period of time.
d. Any of the above.

19. Marty timely filed his Federal income tax return for 2003. It was selected for examination. During the course of the examination, the Revenue Agent first assigned to the case retired. A second Revenue Agent proposed adjustments to the tax return which Marty believed were erroneous.  The second Revenue Agent was assigned to an extended training assignment. Before going on training, Marty and the second Revenue Agent orally agreed that the statute of limitations could be extended to December 31, 2007. Which of the following statements is applicable in order for the IRS to protect its rights?

a. An assessment of income taxes must be made before December 31, 2007.
b. A statutory Notice of Deficiency must be mailed on or before December 31, 2007.
c. A statutory Notice of Deficiency must be mailed on or before April 15, 2007.
d. The assessment of tax can be made at any time.

20. The IRS will waive penalties when allowed by law if you can show that you acted reasonably and in good faith or relied on

a. the incorrect advice of your mother.
b. the incorrect advice of your attorney.
c. the incorrect advice of your accountant.
d. the incorrect advice of an IRS employee.

21. The IRS accepts most taxpayers' returns as filed. If they inquire about your return or select it for examination, it

a. suggests that you are dishonest.
b. does not suggest that you are dishonest.
c. means that your return will be changed.
d. means that you may receive a refund.

22. If your examination is conducted by mail and you don't act on you own behalf, you can have someone represent you in correspondence with the IRS. This person must be an attorney, accountant, enrolled agent, an enrolled actuary, or the person who prepared your return and signed as the preparer. You must furnish a written authorization allowing this person to act on your behalf. Make this authorization on

a. Form 1040.
b. Form 1040A.
c. Form 2106.
d. Form 2848.

23. During an examination, if you think you will owe additional tax at the end of the examination, you can stop interest from accumulating by

a. paying all or part of the amount you think you will owe.
b. closing the case right away without putting a up a fight.
c. declaring to the auditor that you will not owe any tax.
d. asking the auditor to charge interest only on the date the penalties are assessed.

24. If you filed a joint tax return, you are jointly and individually responsible for the tax and any interest or penalty due on the joint return,

a. even if you later divorce.
b. However, a spouse may be relieved of the tax, interest, and penalties on a joint return.
c. But not if you later divorce.
d. both A and B are correct.

25. If you do not agree with any or all of the IRS findings, to help resolve disputes resulting from the examination (audits), 

a. You may demand to speak to the manager immediately.
b. You may request Fast Track Mediation services.
c. You may pay the amount in full.
d. Any of the above.

26. You may appeal the IRS' decision with this office, which is separate and independent of the IRS Office that is taking the action that you disagree with. An __________ is the only level of appeal within the IRS. 

a. appeals office.
b. agreement to mediate.
c. office of Fast Track Mediation services.
d. IRS Office.

27. If you want to have a conference with an appeals officer, you may also need to file 

a. a small case request.
b. formal written protest.
c. installment agreement.
d. either a or b are correct.

28. If the IRS determines that you can't pay any of the your tax debt, they may temporarily

a. forward you information to a collection agency.
b. delay collection until your financial condition improves. 
c. harass you until you pay your bill in full.
d. review your ability to pay every day.

29. If you filed a joint tax return, you are jointly and individually responsible for the tax and any interest or penalty due on the joint return, even if you later divorce. In the following case, a spouse may be relieved of the tax, interest, and penalties on a joint return:

a. Innocent spouse relief.
b. Separation of liability. 
c. Equitable relief.
d. Any of the above.

30. Under this act, when the IRS asks you for information, they must first tell you their legal right to ask for the information, why they are asking for it, and how it will be used. They must also tell you what will happen if you do not provide it and whether or not you must respond under the law.

a. Disclosures Act of 2002.
b. The Privacy Code 6109. 
c. The Privacy Act of 1986.
d. The Privacy Act of 1974.

 Use 540X Instructions and California FTB 4058 C to answer the following questions.

31. If you cannot pay your tax liability in full and have exhausted all payment options, you can submit to us your best offer to pay. If you meet certain requirements and FTB agrees to the amount you offer,

a. They ask you to go to court and ask if you can pay less.
b. They may look into offering a counter offer.
c. They may reduce your liability to that amount.
d. None of the above.

32.  Use Form FTB 540X to correct your 1990 through 2007 California personal income tax returns. Generally, if you filed Federal Form 1040X, Amended U.S. Individual Income Tax Return, you must file Form 540X within ________ unless the changes do not affect your California tax liability.

a. One month.
b. Two months.
c. Four months.
d. Six months.

33. If you are making a claim for a refund, file an amended return within

a. Four years from the original due date of the return.
b. One year from the date of overpayment.
c. Whichever period that expires later of a and b above.
d. None of the above.

34. The statute of limitations for filing claims for refunds is suspended during periods when the taxpayer is

a. on vacation.
b. in school attending a full time program.
c. financially disabled.
d. in the military on extended leave.

35. Your filing status for California must be the same as the filing status you used on your federal income tax return, unless you are an RDP. If you changed your filing status on your federal amended return, you must also change your filing status for California by

a. filing another Form 540 or 540A.
b. filing Form 540X.
c. calling the FTB.
d. sending in a change of filing status form.

36. If you are filing an amended return in response to a billing notice you received, you

a. will continue to receive billing notices until your amended return is accepted.
b. may file an informal claim for refund even though the full amount due has not yet been paid.
c. (after full amount has been paid) have the right to appeal or to file suit in court.
d. Any of the above.

37. If you cannot pay your tax liability in full, you may be eligible to make installment payments. When you enter into a payment arrangement with FTB, you must agree to file all required tax returns and pay all subsequent taxes promptly. If you break the arrangement

a. FTB will send you a notice 30 days before they terminate it.
b. FTB will not send you anymore notices and will adamantly expect payment.
c. FTB will request that you review the offer.
d. FTB will take collection action immediately.

38. If you are no longer married or living with your spouse and you previously filed a joint return with an amount due, FTB can tell you whether they have tried to collect from your former spouse.

True False

39. When you receive a bill from FTB, you have 45 days to pay the amount due without accruing additional interest or an underpayment penalty.

True False

40. If you are filing your amended return after the normal statute of limitation period (four years after the due date of the original return),

a. attach a check to the return as a tip for the processing person to give you a break and accept your amended return.
b. you don't have to worry since you can file and amended return any time you feel like it.
c. attach a statement asking for more time to amend the return.
d. attach a statement explaining why the normal statute of limitations does not apply