Tax Consulting Tax Compliance and Reporting

Question 1

What is the penalty for failing to file a tax return on time, absent reasonable cause?

Accepted Answer

5% per month on unpaid tax, up to 25%

Answer

The failure-to-file penalty is 5% of the unpaid tax for each month or part of a month the return is late, capped at 25% of the unpaid tax.

Question 2

Which IRS form is used to report miscellaneous income paid to non-employees, such as independent contractor payments of $600 or more?

Accepted Answer

Form 1099-NEC

Answer

Form 1099-NEC (Nonemployee Compensation) is used to report payments of $600 or more made to non-employees for services rendered.

Question 3

What is the statute of limitations for the IRS to assess additional tax on a timely filed return in most cases?

Accepted Answer

3 years

Answer

The standard statute of limitations for IRS assessment is 3 years from the later of the return due date or the date the return was filed.

Question 4

An amended tax return must be filed using which IRS form?

Accepted Answer

Form 1040-X

Answer

Form 1040-X is the Amended U.S. Individual Income Tax Return used to correct a previously filed federal income tax return.

Question 5

Which penalty applies when a tax preparer fails to meet due diligence requirements for the Earned Income Tax Credit?

Accepted Answer

$600 per credit claimed per return

Answer

Tax preparers who fail to meet EITC due diligence requirements face a penalty of $600 per credit (EITC, Child Tax Credit, AOTC, or Head of Household) claimed on the return.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting Tax Compliance and Reporting