- A taxpayer who receives an IRS audit notice and disagrees with the results after the audit may appeal to:
Answer: The IRS Independent Office of Appeals within 30 days (for most audits), and subsequently to Tax Court, U.S. District Court, or Court of Federal Claims if unresolved.
After an audit, taxpayers may appeal to IRS Appeals within 30 days, and if unresolved, proceed to Tax Court, District Court, or Court of Federal Claims. Answer C is correct. Direct Supreme Court access (A) is not available at this stage. Commissioner appeals (B) are not standard procedure. State authorities (D) handle state, not federal, tax matters.
- Which of the following correctly describes the filing requirements for Form W-2?
Answer: Employers must furnish W-2s to employees by January 31 and file copies with the SSA by January 31.
W-2s must be furnished to employees by January 31 and filed with the SSA by January 31 (both electronic and paper). Answer B is correct. The old February 28/March 31 deadlines (A, C) were updated to January 31 for employer W-2 filing. April 15 (D) is not the SSA filing deadline.
- A taxpayer who owes self-employment tax must file Schedule SE when:
Answer: Net self-employment income is $400 or more.
Schedule SE is required when net self-employment income is $400 or more - this is the filing threshold for the SE tax. Answer B is correct. $25,000 (A) is not a standard threshold. $600 (C) is a 1099 reporting threshold, not an SE filing threshold. Filing is required below the SS wage base (D).
- Form 709 (United States Gift Tax Return) is required when:
Answer: A taxable gift is made (gifts exceeding the annual exclusion to any one person), gifts of a present interest to a spouse who is not a U.S. citizen, or certain transfers that must be disclosed regardless of tax.
Form 709 is required for taxable gifts (above annual exclusion), gifts to non-citizen spouses, and certain required disclosures. Answer D is correct. Not all gifts require Form 709 (A). The threshold is per-person annual exclusion, but Form 709 may be required even with no tax due (B). Lifetime exemption (C) relates to whether tax is owed, not whether Form 709 is required.
- A married couple may choose to file Married Filing Separately (MFS). Which of the following is a disadvantage of MFS status?
Answer: MFS taxpayers lose access to several deductions and credits, including the earned income credit, education credits, and child and dependent care credit, and may be subject to higher tax rates.
MFS status results in loss of many beneficial credits and deductions, and tax brackets are less favorable than MFJ. Answer C is correct. MFS standard deduction is half of MFJ (A). Many credits are unavailable for MFS filers (B). Accounting methods are separate (D).
- Which of the following correctly describes the late filing penalty for a partnership or S corporation that fails to file on time?
Answer: $220 per month (indexed for inflation) per partner or shareholder, up to 12 months - calculated even if there is no tax owed since partnerships and S corps are pass-through entities.
The late filing penalty for partnerships and S corporations under Sections 6698 and 6699 is a per-owner monthly dollar penalty (currently $220 per month, indexed for inflation) for each month the return is late, up to a maximum of 12 months. The penalty applies regardless of whether any tax is owed because partnerships and S corps are pass-through entities with no entity-level tax. Answer D is correct. The 5%/month penalty (A) applies to individual income tax returns with unpaid balances. $200/month (B) was the older, pre-inflation-adjustment amount. A flat $1,000 penalty (C) is not the statutory rule.
- A trust or estate (Form 1041) must file its income tax return by:
Answer: The 15th day of the fourth month after the trust's tax year-end (April 15 for calendar-year trusts), with a 5-month extension available.
Form 1041 is due the 15th day of the fourth month after year-end (April 15 for calendar-year trusts), with a 5-month (not 6-month) automatic extension available. Answer D is correct. While the due date in C is correct, Answer D is more complete because it specifies the 5-month extension period. March 15 (B) applies to partnerships and S corps.
- An S corporation (Form 1120-S) must file its return by:
Answer: The 15th day of the third month after the tax year-end (March 15 for calendar-year S corporations), with a 6-month automatic extension available.
S corporations file on the same schedule as partnerships - 15th day of the third month (March 15 for calendar year), with a 6-month extension. Answer A is correct. April 15 (B) is for individuals. Fourth month (C) is for C corporations. S corps have an earlier due date than C corps (D).
- An employer must file Form W-3 (Transmittal of Wage and Tax Statements) when:
Answer: Submitting paper W-2s to the Social Security Administration, as a cover transmittal - electronic filers do not file Form W-3.
Form W-3 is the paper transmittal that accompanies paper W-2 submissions to the SSA - electronic filers transmit the W-2 data directly and do not file a separate W-3. Answer A is correct. Earnings thresholds (B) and employee counts (C) don't trigger Form W-3 independently. Withholding (D) determines W-2 requirements, not W-3 specifically.
- A taxpayer living abroad on April 15 is entitled to an automatic extension to:
Answer: June 15, with an additional discretionary extension to December 15 available upon request.
U.S. citizens and residents abroad receive an automatic 2-month extension to June 15 (no form required), with an additional extension to December 15 available by request. Answer C is correct. The October 15 extension (A) requires Form 4868. April 30 (B) is not a standard date. Taxpayers abroad do get extensions (D).
- Form 8300 must be filed by businesses that receive:
Answer: Cash payments exceeding $10,000 in a single transaction or a series of related transactions, within a specific time period.
Businesses must file Form 8300 when they receive cash (including cashier's checks, money orders) of more than $10,000 in a transaction or related transactions. Answer A is correct. Wire transfers (B) are not covered by Form 8300. Credit cards (C) are not covered. Foreign currency (D) without exceeding $10,000 threshold doesn't require Form 8300.
- A calendar-year individual taxpayer's Form 1040 is originally due on:
Answer: April 15 of the following year, or the next business day if April 15 falls on a weekend or holiday.
Individual Form 1040 is due April 15 of the year following the tax year (or the next business day if April 15 is a weekend or holiday). Answer D is correct. March 15 (A) is the due date for S corporations and partnerships. June 15 (B) is the extended due date for certain overseas filers. March 1 (C) is not a standard due date.
- A taxpayer who cannot pay their full tax liability by the filing deadline should:
Answer: File the return on time to avoid the larger failure-to-file penalty, pay as much as possible, and consider requesting an installment agreement or currently-not-collectible status.
Filing on time minimizes the larger failure-to-file penalty (5%/month vs. 0.5%/month for failure to pay). The taxpayer should pay what they can and explore installment agreements. Answer C is correct. Not filing increases penalties (A). Extensions don't extend payment deadlines (B). Late filing to request abatement is a poor strategy (D).
- A nonresident alien individual was engaged in a U.S. trade or business during the year and received U.S.-source income. Which return must this individual file?
Answer: Form 1040-NR (U.S. Nonresident Alien Income Tax Return) to report U.S. source income.
A nonresident alien who is engaged in a U.S. trade or business during the year must file Form 1040-NR to report U.S.-source income effectively connected with that trade or business. Answer B is correct. Form 1040 (A) is for U.S. citizens and resident aliens, not nonresident aliens. Answer C is incorrect because when a nonresident alien is engaged in a U.S. trade or business, a return is required even if withholding fully covered the tax liability on any fixed or determinable income. Form 1040-X (D) is an amended return for a previously filed return, not an original filing.
- A taxpayer files their tax return but owes additional tax. The IRS assesses a penalty for substantial understatement of income tax when the understatement exceeds:
Answer: The greater of $5,000 or 10% of the correct tax shown on the return.
The substantial understatement penalty applies when the understatement exceeds the greater of $5,000 or 10% of the correct tax. Answer A is correct. $1,000/5% (B) and $10,000/25% (D) are not the standard. Not all understatements trigger this specific penalty (C).
- An individual taxpayer with significant self-employment income is required to make estimated tax payments. These payments are due:
Answer: Quarterly, on April 15, June 15, September 15, and January 15 of the following year.
Individual estimated tax payments are due April 15, June 15, September 15, and January 15 - note the second installment is June 15 (not July 15), making the periods uneven. Answer D is correct. Monthly payments (A) are not required. July 15 (B) is incorrect - the second payment is June 15. Annual payment (C) results in underpayment penalties.
- An employer must report wages and withholding on Form 941 (Employer's Quarterly Federal Tax Return). Form 941 is filed:
Answer: Quarterly, by the last day of the month following the end of each calendar quarter (April 30, July 31, October 31, January 31).
Form 941 is filed quarterly with due dates of April 30, July 31, October 31, and January 31. Answer C is correct. Annual filing (A) describes Form 944 for small employers. Monthly filing (B) is for deposits, not returns. Semiannual filing (D) is not the Form 941 schedule.
- Form 1099-NEC must be filed with the IRS and furnished to the recipient by:
Answer: January 31 for both IRS filing and recipient copies, regardless of whether filing is paper or electronic.
Form 1099-NEC (for nonemployee compensation) must be filed with the IRS and furnished to recipients by January 31, both paper and electronic. Answer B is correct. The old February 28/March 31 split (A) applied to Form 1099-MISC before 1099-NEC was reinstated. April 15 (C) is not the 1099-NEC deadline. Recipient copies and IRS copies have the same January 31 deadline (D).
- A corporation must deposit its payroll taxes. Which of the following correctly describes the deposit schedule for a 'semiweekly depositor'?
Answer: Payroll taxes on wages paid on Wednesday, Thursday, or Friday must be deposited by the following Wednesday; taxes on wages paid Saturday through Tuesday must be deposited by the following Friday.
Semiweekly depositors follow the Wednesday/Friday deposit schedule: payroll on Wed-Fri deposits by next Wednesday; payroll on Sat-Tue deposits by following Friday. Answer A is correct. Bi-weekly deposits (B) describe a different schedule. 15th/last day (C) is the monthly depositor schedule. Next-day deposit (D) is for very large depositors.
- An individual taxpayer who is due a refund has how long to file a claim for the refund?
Answer: The later of 3 years from the original due date of the return or 2 years from the date the tax was paid.
The refund statute of limitations is the later of 3 years from the return's original due date or 2 years from when the tax was paid. Answer D is correct. 1 year (A) is too short. 2 years from payment (B) is only one prong of the test. 4 years (C) exceeds the standard limitation.
