1. The Commissioner of the Internal Revenue Service (IRS) is appointed by the:
a. President of the United States
b. Secretary of the Treasury
c. Senate
d. Congress
2. The IRS is now organized to:
a. facilitate the processing of tax returns.
b. Remedy requests.
c. carrying out its broader goals.
d. (a.) and (c.) only.
3. The highest ranking legal adviser of the IRS is the:
a. Attorney General
b. Chief Attorney
c. District Attorney
d. Chief Counsel
4. To whom does the Chief Counsel of the Internal Revenue Service report to:
a. The Commissioner of the Internal Revenue Service
b. Secretary of the Treasury
c. The Regional Council in National Office
d. The Attorney General
5. The National Taxpayer Advocate:
a. Represents the IRS in Tax Court cases.
b. Administers a taxpayer-intervention system.
c. Assists the IRS in preparing proposed legislation, treaties, regulations, and executive orders.
d. Prepares IRS rulings and other written determinations.
6. The Taxpayer Assistance Order (TAO) is issued by the:
a. Secretary of Treasury
b. Chief Counsel
c. National Taxpayer Advocate
d. Commissioner of IRS
7. The IRS Oversight Board:
a. Has the authority to affect tax policy.
b. Has the authority to affect the processing of individual tax cases.
c. Can intervene in IRS personnel or procurement matters.
d. Can review and approve the IRS annual budget request.
8. A form 911 is filed by the Taxpayer for which of the following:
a. National Research Program
b. Appeals Conference
c. Tax Court Hearing
d. Taxpayer Advocate Service Assistance
9. Signed into law in 1996, guarantees taxpayers various rights to representation before the IRS. What is it called?
a. The Constitution.
b. The 16th Amendment.
c. The Taxpayer Bill of Rights
d. The Taxpayer Advocate.
10. In selecting returns for examination, the primary goal of the IRS is to review only those returns that:
a. belong to the taxpayers who were found guilty before.
b. will generate additional revenues for the Treasury
c. have been filed for the first time.
d. contain mathematical/clerical errors.
11. The procedure used to match the information recorded on a return with corresponding data received from third
parties is referred to as:
a. Information Document Reconciliation Program
b. Information Document Review Program
c. Information Document Check Program
d. Information Document Matching Program
12. In case of underpayment of taxes, if the deficiency is not paid in a timely fashion, interest is imposed on the unpaid
amount for a period that begins on the date of:
a. Filing return and ends on the date of payment or the last working day of the respective year, whichever is
later.
b. Filing return and ends on the date of payment.
c. The notice and demand and ends on the date of payment.
d. The notice and demand and ends on the date when the taxpayer receives the notice.
13. If a return is identified as including an unallowable item, the IRS:
a. Computes the seemingly necessary adjustment in taxes, and the taxpayer is notified by mail.
b. Sends a formal notice of deficiency to the taxpayer.
c. Considers the contact that it makes with a taxpayer under this circumstance to be an examination.
d. Cancels the return and asks the taxpayer to file his return again.
14. What is the formula which assigns numeric weights to certain (undisclosed by the IRS) return items, generating a
composite score for the return
a. Selection of Returns formula.
b. Unallowable Items formula.
c. Discriminant function formula (DIF).
d. Mathematical Errors formula.
15. The program that is designed to furnish the IRS with statistics concerning the type and number of errors that are
made on a representative sample of individual income tax returns is the:
a. Unallowable Items Program
b. Mathematical/clerical Error Program
c. National Research Program
d. Discriminant Function Program
16. An office examination is scheduled when a selected return for examination:
a. belongs to a taxpayer who was previously found guilty of manipulating return
b. belongs to a taxpayer who resides near to the IRS local office
c. requires a mere verification of record-keeping
d. involves one or more issues that will require some analysis and the exercise of the IRS personnel’s judgment
17. Which of the following examinations involves complex issues that require more advanced knowledge of the internal
revenue laws and accounting skills?
a. Correspondence Examination
b. Field Examination
c. Office Examination
d. Arithmetical Error Examination
18. A written revenue agent’s report (RAR) is prepared by the IRS agent and is given to the taxpayer:
a. before the commencement of the examination
b. at the beginning of the examination
c. during the examination
d. upon the conclusion of the examination
19. When a taxpayer does not agree with the IRS agent’s proposed adjustments a:
a. 30–day letter is issued
b. RAR is issued
c. 10–day notice is issued
d. 21–day notice is issued
20. A statutory notice of deficiency is also known as a:
a. 30–day letter
b. 10–day letter
c. 90–day letter
d. 21–day letter
21. How much time from the date of issue of 30–day letter does a taxpayer get to request for a conference with an
appeals officer?
a. 30 days
b. 90 days
c. 10 days
d. 21 days
22. Your client has just received an IRS summons to appear for an interview. Which of the following statements is false
concerning this interview:
a. Provided your client gives prior notice to the IRS, the taxpayer may tape-record the interview.
b. The IRS may tape record the interview but must provide a transcript of the recording to the taxpayer if he
requests a copy and pays for the copying charges.
c. Notes may not be taken by either the IRS agent or the taxpayer during the interview.
d. The IRS investigator must explain various taxpayer rights to your client before commencing the interview.
23. If a taxpayer and the IRS cannot agree on the proposed adjustments after an appeals conference, the regional
director of appeals will issue a:
a. 30–day letter
b. 90–day letter
c. 21–day letter
d. 10–day letter
24. The Tax Court will review a taxpayer’s case, provided that he or she files a petition with the court within:
a. 10 days of the date of his or her statutory notice of deficiency
b. 60 days of the date of his or her statutory notice of deficiency
c. 30 days of the date of his or her statutory notice of deficiency
d. 90 days of the date of his or her statutory notice of deficiency
25. Some of the factors believed to be perused in an economic–reality audit include the following:
a. Significant increases in interest, dividend, and other investment income.
b. Significant decreases in mortgage and other reportable interest paid.
c. Significant variance in self-employment or farming income during the period relative to industry norms.
d. All of the above.
26. A “DIF” score is a type of:
a. Fraud definition used by the Service.
b. Composite score which rates returns for potentially higher tax liability.
c. Negligent penalty score.
d. Score used for an information purpose in collateral agreements.
27. A taxpayer’s return is classified for audit after receiving a high DIF score and being manually screened by an IRS
classifier. Which of the following statements best describes whether the taxpayer will be contacted by an auditor or
revenue agent:
a. Yes, the taxpayer will be contacted since a high DIF score always will mean some type of audit.
b. Yes, the taxpayer will be contacted because only the National Office has the power to decide that after
screening the return need not be audited.
c. No, the taxpayer will not necessarily be contacted since after the Service Center review, it may be decided
that an audit is unwarranted.
d. No, the taxpayer will not necessarily be contacted by an auditor or revenue a agent since after the return is
screened by the Service Center, it then is randomly selected for audit.
28. Which of the following issues would most typically not be handled as a correspondence examination:
a. Mathematical errors.
b. Clearly defined unallowable deductions.
c. Errors detected through matching of forms 1099 and W-2.
d. Questions concerning gambling income.
29. The following is NOT a factor in favor of the Protest/Appeals Process:
a. An appeals officer can consider the hazards of litigation.
b. The litigation path remains a possibility even if an appeal is pursued.
c. The conclusion of the dispute, whether for or against the taxpayer, is expedited.
d. The appeals process allows a further delay in the payment of the disputed tax.
30. The IRS is responsible for administering and enforcing the internal revenue laws of the United States.
a. True
b. False
31. The IRS was established by Congress on July 1, 1682, to meet the fiscal needs of the Civil War.
a. True
b. False
32. The IRS Oversight Board is made up of only IRS officials.
a. True
b. False
33. The Chief Counsel is appointed by the President and reports to the Commissioner of the IRS.
a. True
b. False
34. The Tax Exempt and Government Entities (TEGE) Division of the IRS comprises three business divisions: employee
plans; exempt organizations, and governmental entities.
a. True
b. False
35. The IRS has increased the number of tax return processing centers with the increase in electronic filing of returns.
a. True
b. False
36. A taxpayer may be represented before the IRS only by attorneys.
a. True
b. False
37. In absence of an administrative summons, a taxpayer cannot be required to accompany the representative to an
interview.
a. True
b. False
38. The IRS examines each and every return critically in order to generate additional revenue for the Treasury.
a. True
b. False
39. The number of routine math errors has increased sharply due to increase in electronic filing.
a. True
b. False
40. The IRS treats an adjustment in tax resulting from an unallowable item identified in return as a correction of a
mathematical or clerical error.
a. True
b. False
41. Generally, the IRS selects returns for examination through the use of mathematical models, including correlations and
discriminant functions.
a. True
b. False
42. ‘Economic reality’ factors are considered by the IRS in selection of returns for audit only where it has some other
evidence that the taxpayer has over reported taxable income for the year.
a. True
b. False
43. In cases where IRS examiner questions only one or two items on a selected return, an examination is typically
conducted by mail called a correspondence examination.
a. True
b. False
44. A field examination is usually limited to an examination of corporations and individual business returns.
a. True
b. False
45. A field audit by the IRS is always conducted at the taxpayer’s premises.
a. True
b. False
46. An RAR contains a brief explanation of the proposed adjustments and lists the balance due or the overpayment.
a. True
b. False
47. A taxpayer’s appeal must be in written form if the total proposed additional tax and penalties exceed $2,500.
a. True
b. False
48. The objective of the Appeals Office is to resolve tax controversies without litigation on a basis that is fair and
impartial to both the government and the taxpayer.
a. True
b. False
49. The Appeals Office has the exclusive and final authority to settle cases that originate in any district irrespective of its
jurisdiction.
a. True
b. False
50. Individual Taxpayers have around a 20% chance of being audited.
a. True
b. False
51. Form 911 is a Request for Taxpayer Advocate Assistance.
a. True
b. False
52. A Power of Attorney is necessary when a qualified representative goes to the IRS to represent a Taxpayer.
a. True
b. False
53. There is a general common law privilege of confidentiality for non-criminal tax matters that exists between a
Taxpayer and his or her Tax Practitioner.
a. True
b. False
54. The National Research Program (NRP) provides statistics that are used in the development and update of the DIF
formulas.
a. True
b. False
55. What are the major duties of the IRS Oversight Board?
56. These and other items were included as guaranteed to taxpayers in the various incarnations of the Taxpayers Bill of
Rights:
57. What are the functions performed by the Mathematical/Clerical Error Program?
58. “If a taxpayer cannot resolve his or her dispute with the IRS administratively, he or she may seek judicial relief.”
Explain how a taxpayer can seek relief through the judicial system.
59. What are the “Pros” and “Cons” of filing a protest to an IRS Audit?
60. Explain how the Discriminant Function System works.
61. Enumerate how the IRS conducts Field Examination.
62. What are the ‘dos and don’ts’ in negotiating with a government auditor?
63. Why would a Taxpayer choose to go to District Court or the Court of Federal Claims and not to U.S. Tax Court?