H&R Block Income Tax Course
Questions And Answers With Verified
Solutions 100% Correct Rated A+
Circular 230
Defines "practice" and outlines who may practice before the IRS. It also describes
the duties and obligations of tax professionals while practicing before the IRS,
specifies sanctions for violations, and explains the procedures for administrative
discipline.
Disclosure
Taxpayers and tax preparers use Form 8275 (Disclosure Statement) to disclose
items or positions on a tax return that are not otherwise adequately disclosed, to
avoid penalties.
Due Diligence
1. Complete Form 8867, Paid Preparer's Due Diligence Checklist, and submit it
with the return.
2. Ensure any claimed benefit is based on facts.
3. Ask the taxpayer the right questions.
4. Keep records for three years.
Noncompliance
Tax noncompliance refers to activities such as tax avoidance (reducing taxes
through legal means) and tax evasion (criminal non-payment of tax liabilities).
Privilege
Refers to the protection from being forced to disclose confidential communications
between two parties, such as between an attorney and client.
,Estimated Tax
A system of paying taxes on income that is not subject to automatic withholding,
such as income from freelancing, small businesses, or independent contracting.
Payments are typically made quarterly, based on the total tax liability for the year.
Estimated Tax Voucher
A voucher used by self-employed individuals or those with significant income
spikes (e.g., from stock sales or retirement distributions) to make quarterly
estimated tax payments.
Exemption from Withholding
An employee can use Form W-4 to notify the employer not to deduct federal
income tax from their wages if they had no tax liability in the previous year and
expect to have no tax liability for the current year.
Underpayment Penalty
The IRS imposes a penalty if taxes are underpaid during the year. To avoid this
penalty, a taxpayer must pay at least 90% of their tax liability throughout the year.
Withholding Allowances
Allowances claimed on Form W-4 that reduce the amount of tax withheld from an
employee's paycheck. More allowances result in smaller withholding amounts,
while fewer allowances result in higher withholding amounts.
Two Ways to Pay as You Go
1. Withholding from wages, pensions, or government payments like Social
Security.
2. Making quarterly estimated tax payments.
,Form W-4
The Employee's Withholding Allowance Certificate, used by employees to direct
their employer on how much federal income tax to withhold from their paycheck.
Form 8815
Exclusion of Interest from Series EE and I U.S. Savings Bonds issued after 1989.
This form is used to exclude some or all of the interest earned on these bonds from
taxable income.
Form 2210
Used to determine if a penalty applies for underpayment of estimated taxes. It also
helps figure the amount of the penalty.
Form 4868
This form gives taxpayers an automatic six-month extension to file their income
tax returns, but it does not extend the deadline for paying any taxes owed.
Form 8888
Used to allocate a tax refund to one or more bank accounts or financial institutions,
and can also be used to purchase up to $5,000 in paper series I savings bonds with
a refund.
Form 9465
Installment Agreement Request, used when a taxpayer cannot pay their full tax
liability and needs to set up a monthly payment plan.
Amended Return
An amended return is used to correct mistakes on a previously filed tax return. This
requires submitting Form 1040-X.
, Closed Year
A tax year for which the statute of limitations has expired, meaning the IRS can no
longer assess additional taxes or process refund claims, with some exceptions.
Open Year
A tax year where the statute of limitations has not yet expired, and the IRS can still
make adjustments or collect taxes.
Failure-to-File Penalty
This penalty is 5% of the balance due for each month (or part of a month) the tax
return is late, with a maximum of 25% of the unpaid tax.
Failure to File
When a taxpayer fails to file their return by the due date and there is a balance due.
Failure to Pay
When a taxpayer fails to pay the tax owed by the due date.
Failure-to-Pay Penalty
The failure-to-pay penalty is 0.5% of the unpaid balance for each month (or part of
a month) the tax is overdue, up to a maximum of 25% of the unpaid taxes.
Negligence or Intentional Disregard - ANSWER✔✔Taxpayer shows negligence or
disregard of the rules or regulations causing an underpayment.
*Negligence-or-Intentional-Disregard Penalty - ANSWER✔✔*The negligence
penalty is 20% of the amount you underpaid
This is a steep penalty, and the IRS usually charges it (or, "assesses" it) when
taxpayers overstate their deductions or don't report all their income. Negligence is
Questions And Answers With Verified
Solutions 100% Correct Rated A+
Circular 230
Defines "practice" and outlines who may practice before the IRS. It also describes
the duties and obligations of tax professionals while practicing before the IRS,
specifies sanctions for violations, and explains the procedures for administrative
discipline.
Disclosure
Taxpayers and tax preparers use Form 8275 (Disclosure Statement) to disclose
items or positions on a tax return that are not otherwise adequately disclosed, to
avoid penalties.
Due Diligence
1. Complete Form 8867, Paid Preparer's Due Diligence Checklist, and submit it
with the return.
2. Ensure any claimed benefit is based on facts.
3. Ask the taxpayer the right questions.
4. Keep records for three years.
Noncompliance
Tax noncompliance refers to activities such as tax avoidance (reducing taxes
through legal means) and tax evasion (criminal non-payment of tax liabilities).
Privilege
Refers to the protection from being forced to disclose confidential communications
between two parties, such as between an attorney and client.
,Estimated Tax
A system of paying taxes on income that is not subject to automatic withholding,
such as income from freelancing, small businesses, or independent contracting.
Payments are typically made quarterly, based on the total tax liability for the year.
Estimated Tax Voucher
A voucher used by self-employed individuals or those with significant income
spikes (e.g., from stock sales or retirement distributions) to make quarterly
estimated tax payments.
Exemption from Withholding
An employee can use Form W-4 to notify the employer not to deduct federal
income tax from their wages if they had no tax liability in the previous year and
expect to have no tax liability for the current year.
Underpayment Penalty
The IRS imposes a penalty if taxes are underpaid during the year. To avoid this
penalty, a taxpayer must pay at least 90% of their tax liability throughout the year.
Withholding Allowances
Allowances claimed on Form W-4 that reduce the amount of tax withheld from an
employee's paycheck. More allowances result in smaller withholding amounts,
while fewer allowances result in higher withholding amounts.
Two Ways to Pay as You Go
1. Withholding from wages, pensions, or government payments like Social
Security.
2. Making quarterly estimated tax payments.
,Form W-4
The Employee's Withholding Allowance Certificate, used by employees to direct
their employer on how much federal income tax to withhold from their paycheck.
Form 8815
Exclusion of Interest from Series EE and I U.S. Savings Bonds issued after 1989.
This form is used to exclude some or all of the interest earned on these bonds from
taxable income.
Form 2210
Used to determine if a penalty applies for underpayment of estimated taxes. It also
helps figure the amount of the penalty.
Form 4868
This form gives taxpayers an automatic six-month extension to file their income
tax returns, but it does not extend the deadline for paying any taxes owed.
Form 8888
Used to allocate a tax refund to one or more bank accounts or financial institutions,
and can also be used to purchase up to $5,000 in paper series I savings bonds with
a refund.
Form 9465
Installment Agreement Request, used when a taxpayer cannot pay their full tax
liability and needs to set up a monthly payment plan.
Amended Return
An amended return is used to correct mistakes on a previously filed tax return. This
requires submitting Form 1040-X.
, Closed Year
A tax year for which the statute of limitations has expired, meaning the IRS can no
longer assess additional taxes or process refund claims, with some exceptions.
Open Year
A tax year where the statute of limitations has not yet expired, and the IRS can still
make adjustments or collect taxes.
Failure-to-File Penalty
This penalty is 5% of the balance due for each month (or part of a month) the tax
return is late, with a maximum of 25% of the unpaid tax.
Failure to File
When a taxpayer fails to file their return by the due date and there is a balance due.
Failure to Pay
When a taxpayer fails to pay the tax owed by the due date.
Failure-to-Pay Penalty
The failure-to-pay penalty is 0.5% of the unpaid balance for each month (or part of
a month) the tax is overdue, up to a maximum of 25% of the unpaid taxes.
Negligence or Intentional Disregard - ANSWER✔✔Taxpayer shows negligence or
disregard of the rules or regulations causing an underpayment.
*Negligence-or-Intentional-Disregard Penalty - ANSWER✔✔*The negligence
penalty is 20% of the amount you underpaid
This is a steep penalty, and the IRS usually charges it (or, "assesses" it) when
taxpayers overstate their deductions or don't report all their income. Negligence is
