59. Sanjay owes federal taxes in the amount of $1,500 for the current tax year.

Question

59. Sanjay owes federal taxes in the amount of $1,500 for the current tax year. had a tax liability in the amount of $4,000; however, his tax liablity this year is $6,250. Sanjay did not realize he would owe federal taxes this year, therefore, he did not make estimated tax payments. For what reason might he owe an underpayment penaty? Last year Sanjay a) b) c) d) Sanjay's underpayment of tax was more than $1,000 Sanjay's tax balance due is more than 20% of his total current tax year liability. Sanjay owed more than 80% of the tax shown on the 2015 return. Sanjay plans to make estimated tax payments for next year 60. Oswald received $9 in interest income from the IRS. Which of the folowing is a true statement? a) Oswald is not required to report the interest income since t is from the IRS. b) He must report it only if it is more than $10. c) Interest income (regardless of the source) must be reported on Oswald's tax return. d) He is required to report it only if he has other interest income to report 61. Maureen and Nathan have been married for 35 years. They recently separated and Maureen has discovered that they need to amend their 2015 jointly filed return. Which of the following changes would the IRS disallow on the amended return? a) Changing the filing status from Married Filing Jointly to Married Filing Separately after the due date of the return b) A corrected Form W-2 was recently received c) Reporting gambling winnings that were forgotilen on the original returrn d) Correcting the number of exemptions taken on the original return 62. Jack had his tax return prepared at a new location this year which advertis ed unbelievable low prices. However, later when Jack was reviewing his return, he noticed it had not been signed by the preparer. What action should Jack take? a) Mail the return as soon as possible. b) Ask the return preparer to sign his return before submitting to the IRS. c) Sign the return himself as the preparer d) Sign the return preparers signature on the returm. 63. Cisco is a high school graduate and has just finished taking a tax preparation course. He is Which of new to tax preparation and is unsure of which preparer designation applies to him. the folowing is the correct preparer designation? a) Attorneys b) Enroled Agent c) Unenrolled preparer d) Certified Public Accountant 64. Taegan is 30 years old and has never been required to file a tax return. This year is different cause since she finished school her tax refund to be reduced by the IRS? and was employed. Which of the following reasons would a) b) c) d) She is a first-time filer Past due mortgage interest Delinquent credit card payments Delinquent student loans

Explanation / Answer

59) a) Sanjay's underpayment of tax was more than 1000.

As per IRS, generally most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.

60) c) Interest income regardless of source must be reported to tax return.

As per IRS, most interest that you receive or that is credited to an account that you can withdraw without penalty is taxable income in the year it becomes available to you. However, some interest you receive may be tax-exempt. You should receive Copy B of Form 1099-INT.pdf or Form 1099-OID.pdf, reporting payments of interest of $10 or more. You should receive Copy B of Form 1099-INT or Form 1099-OID reporting payments of tax-exempt interest of $10 or more. You may receive these forms as part of a composite statement from a broker. You must report all taxable and tax-exempt interest on your federal income tax return, even if you don't receive a Form 1099-INT or Form 1099-OID.

61) a) Changing the filing status from MFJ to MFS after the due date of return.

As per IRS, you can amend a Married Filing Joint (MFJ) return to a Married Filing Separate (MFS) return and vice versa. When amending a MFJ return to a MFS return, first delete all information associated with the spouse on that return. This includes all Form W-2s, Schedule Cs, Schedule SEs, etc. Anything that can be denoted as 'spouse' needs to be deleted. Next, change the filing status to MFS.

NOTE: Once you have filed your tax return as Married Filing Joint (MFJ), you CANNOT amend your filing status after the April 15th deadline. Any change to filing status has to be done before the deadline.

62) b) Ask the return preparer to sign his return before submitting it to the IRS.

As per IRS, is is mandatory for the return preparer to sign the return.

63) c) Unenrolled preparer

An unenrolled return preparer is an individual other than an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary who prepares and signs a taxpayer's return as the paid preparer, or who prepares a return but is not required (by the instructions to the return or regulations) to sign the return.

64) d) Delinquent student loans

As per IRS, following are the reasons for tax refund seizure:-

Past due debt

Owe child support

Bankrupcy

Defaulted on student loan

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