Regulatory Framework & Compliance Flashcards

Under the Bipartisan Budget Act (BBA) centralized partnership audit rules, the default rule imposes any audit adjustment tax liability on:

Answer: The partnership entity itself in the year the audit is concluded

Under BBA, the default rule assesses the 'imputed underpayment' against the partnership at the partnership level for the year the audit is finalized, not the reviewed year.

Which IRS program allows taxpayers to voluntarily disclose previously unreported foreign financial accounts and assets with reduced penalties?

Answer: Both OVDP and Streamlined Procedures, depending on willfulness

Non-willful violations are eligible for the Streamlined Procedures with lower penalties, while more serious cases historically used OVDP; the appropriate program depends on the facts and willfulness assessment.

A tax professional who provides 'covered opinions' on listed transactions must comply with which heightened requirements under Circular 230?

Answer: The opinion must include a more-likely-than-not conclusion on each relevant tax issue

Under Circular 230, covered opinions on listed transactions must reach a 'more likely than not' (>50%) conclusion on each significant federal tax issue.

The accuracy-related penalty under IRC §6662 is generally imposed at what rate on the portion of an underpayment attributable to negligence?

Answer: 20% of the underpayment

IRC §6662 imposes a 20% penalty on underpayments attributable to negligence, substantial valuation misstatements, or substantial authority failures.

A tax practitioner who solicits employment from a prospective client by claiming they can obtain a larger refund than other practitioners, without basis for that claim, violates which provision?

Answer: Circular 230 §10.30 regarding solicitation and fee representations

Circular 230 §10.30 prohibits false, fraudulent, or coercive solicitation and representations about results, including unsubstantiated refund claims.

Under the Worker Classification rules, which test primarily determines whether a worker is an employee or independent contractor for federal income tax withholding purposes?

Answer: The common law behavioral, financial, and type-of-relationship test

The IRS applies a common law test examining behavioral control, financial control, and type of relationship to classify workers for federal tax purposes.

Which of the following best describes the 'qualified amended return' exception to the accuracy-related penalty under IRC §6664?

Answer: An amended return filed before the IRS contacts the taxpayer regarding the examination

A qualified amended return must be filed before the IRS contacts the taxpayer about an examination of the return; filing after contact does not qualify for penalty relief.