Senior Tax Specialist
1. What is the main difference between tax avoidance and tax evasion?
Answer:
Tax avoidance is the legal use of tax laws to reduce tax liability (e.g., using
deductions or credits).
Tax evasion is the illegal act of deliberately misrepresenting or concealing
information to reduce taxes (e.g., underreporting income).
2. A corporation has $1,000,000 in revenue and $600,000 in deductible expenses.
What is its taxable income before credits?
Answer:
Taxable income = $1,000,000 − $600,000 = $400,000
3. What is the difference between a tax credit and a tax deduction?
Answer:
Tax credit directly reduces the tax owed.
Tax deduction reduces taxable income before tax is calculated.
4. When must a U.S. corporation file Form 1120?
,Answer:
Form 1120 is filed annually by domestic corporations to report income, deductions,
and credits. It’s due on the 15th day of the 4th month after the end of the
corporation’s tax year.
5. What is transfer pricing, and why is it important for multinational corporations?
Answer:
Transfer pricing refers to pricing of goods, services, and intangibles between related
entities within a multinational group. It’s important to ensure that profits are
allocated fairly among jurisdictions and comply with OECD arm’s length principles to
avoid double taxation or penalties.
6. Which section of the U.S. Internal Revenue Code governs depreciation?
Answer:
Section 167 and Section 168 (MACRS) govern depreciation deductions for tangible
property.
7. Explain the purpose of a deferred tax asset (DTA).
Answer:
A DTA arises when a company pays more tax now but expects to recover that tax in
the future due to temporary differences (e.g., net operating loss carryforwards).
8. What is the current U.S. federal corporate tax rate (as of 2025)?
Answer:
The flat corporate income tax rate is 21% under the Tax Cuts and Jobs Act (TCJA),
unless future legislation changes it.
, 9. How does the IRS determine whether an expense is deductible as a business
expense?
Answer:
The expense must be ordinary, necessary, and directly related to the business, as
outlined in IRC §162.
10. What are examples of permanent differences in tax accounting?
Answer:
Examples include:
Fines and penalties (non-deductible)
Tax-exempt interest income
Life insurance proceeds on key employees
11. What is the purpose of Form W-9?
Answer:
Form W-9 is used by U.S. persons to provide their Taxpayer Identification Number
(TIN) to entities that will report payments to the IRS (e.g., independent contractor
payments).
12. What are the penalties for late filing of an income tax return?
Answer:
Typically 5% per month (up to 25%) of the unpaid tax for failure to file, plus 0.5% per
month (up to 25%) for failure to pay.
13. What is a 1031 exchange?
1. What is the main difference between tax avoidance and tax evasion?
Answer:
Tax avoidance is the legal use of tax laws to reduce tax liability (e.g., using
deductions or credits).
Tax evasion is the illegal act of deliberately misrepresenting or concealing
information to reduce taxes (e.g., underreporting income).
2. A corporation has $1,000,000 in revenue and $600,000 in deductible expenses.
What is its taxable income before credits?
Answer:
Taxable income = $1,000,000 − $600,000 = $400,000
3. What is the difference between a tax credit and a tax deduction?
Answer:
Tax credit directly reduces the tax owed.
Tax deduction reduces taxable income before tax is calculated.
4. When must a U.S. corporation file Form 1120?
,Answer:
Form 1120 is filed annually by domestic corporations to report income, deductions,
and credits. It’s due on the 15th day of the 4th month after the end of the
corporation’s tax year.
5. What is transfer pricing, and why is it important for multinational corporations?
Answer:
Transfer pricing refers to pricing of goods, services, and intangibles between related
entities within a multinational group. It’s important to ensure that profits are
allocated fairly among jurisdictions and comply with OECD arm’s length principles to
avoid double taxation or penalties.
6. Which section of the U.S. Internal Revenue Code governs depreciation?
Answer:
Section 167 and Section 168 (MACRS) govern depreciation deductions for tangible
property.
7. Explain the purpose of a deferred tax asset (DTA).
Answer:
A DTA arises when a company pays more tax now but expects to recover that tax in
the future due to temporary differences (e.g., net operating loss carryforwards).
8. What is the current U.S. federal corporate tax rate (as of 2025)?
Answer:
The flat corporate income tax rate is 21% under the Tax Cuts and Jobs Act (TCJA),
unless future legislation changes it.
, 9. How does the IRS determine whether an expense is deductible as a business
expense?
Answer:
The expense must be ordinary, necessary, and directly related to the business, as
outlined in IRC §162.
10. What are examples of permanent differences in tax accounting?
Answer:
Examples include:
Fines and penalties (non-deductible)
Tax-exempt interest income
Life insurance proceeds on key employees
11. What is the purpose of Form W-9?
Answer:
Form W-9 is used by U.S. persons to provide their Taxpayer Identification Number
(TIN) to entities that will report payments to the IRS (e.g., independent contractor
payments).
12. What are the penalties for late filing of an income tax return?
Answer:
Typically 5% per month (up to 25%) of the unpaid tax for failure to file, plus 0.5% per
month (up to 25%) for failure to pay.
13. What is a 1031 exchange?
