116. Taxpayer X, anxious to increase his net take-home pay, filed a W-4 with his employer claiming eight dependents. In truth, X was only entitled to claim two dependents and X knew that. X however, believed (based on an article he read in TV Guide) that, by the end of the year, he would be able to claim a very large deduction on his return that would completely offset any tax liability and even entitle him to a large tax refund.. Unfortunately for X, his tax preparer correctly told him that the anticipated deduction was not allowable under applicable tax law and X ended up with a pretty big tax liability for the year. The IRS is entitled to assess X a $10,000 penalty for giving false information with respect to withholding. a. True b. False 117. Taxpayer X legitimately owed zero tax for 2018. Nevertheless, Taxpayer X, who believes that the filing of a tax return violates his Fifth Amendment constitutional protect against self- incrimination, filed a 2018 tax return that took a position ultimately determined to be frivolous. Since X owed no tax for 2018, he cannot be assessed a penalty for filing a frivolous return. a. True b. False 118. Al Capone, III willfully attempted to evade or defeat his income tax liability for the year 2018. The IRS has the right to seek criminal penalties against him for this tax offense but, if it so elects, it cannot also assess and collect any applicable civil tax penalties. a. True b. False 119. Betty Capone (the wife of Al Capone, III) joined with Al in filing a 2018 return, claiming the status of married, filing jointly and which vastly understated Al's revenues from his life of crime. Al fled the country to a country with no extradition to the US, leaving Betty holding the bag for the subsequent tax assessments. Betty then divorced Al. Betty only had a fifth grade education, has ADD and is severely dyslexic (to the point that she cannot add or subtract numbers) and she truly had no idea that Al was a criminal believing him to be a law-abiding social worker in the community. Betty is able to establish that she did not know and had no reason to know that the return contained an understatement of income. Nevertheless, Betty has no potential for any relief from the assessment under the Internal Revenue Code under the joint and several liability theory. a. True b. False 120. Bob is a tax preparer within the Code's definition. To help out his poorer clients, he routinely makes loans to his clients against their pending tax refunds (at no interest) and has them agree to have the tax refund checks mailed directly to him. He then endorses the check (pursuant to a written agreement with the taxpayer), deposits the check into his trust" account, pays off the loan and remits the balance to his client. Bob is quite scrupulous about the manner in which he handles all this and all of his clients are eternally grateful to him for providing this service. He has never had a client complaint about this practice. Because of the manner in which Bob handles these loans, he is not subject to any preparer conduct penalty