Multiple Choice Questions

1. Which of the following does not include tax fraud?

a. A tax return in which the taxpayer deliberately underreports one income item but makes a mistake and over reports a second income item. The second income item more than offsets the first income item so that overall the taxpayer overpays taxes.

b. A tax return that underreports income to correct for an error in over reported income in the previous year.

c. Neither a nor b involves tax fraud.

d. Both a and b involve tax fraud.

2. In identifying tax fraud, what do affirmative indications represent?

a. Signs or symptoms indicating possible fraud intent.

b. Evidence of intent to defraud.

c. Signs or symptoms of evidence of intent to defraud.

d. None of the above.

3. Which of the following is sufficient for a taxpayer to commit tax fraud?

a. The commission of an illegal act leading to underpayment of taxes.

b. Underpayment of taxes.

c. The commission of a negligent act that leads to underpayment of taxes.

d. None of these.

4. Which of the following is a CPA not permitted to do in relation to federal taxation?

a. Argue a client’s case before an IRS office representative.

b. Prepare complicated tax forms that involve complex legal issues.

c. Act as a client’s legal representative in a tax court.

d. CPAs are permitted to perform all of the preceding functions.

5. Which of the following is not a division of the IRS?

a. Wage and Investment Division.

b. Small Business/Self-Employed Division.

c. Large and Mid-Size Business Division.

d. Estates and Trusts Division.