CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
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Chapter 1, Problem 59P
To determine
Write a letter to Person M explaining the reason behind for not getting good tax advice from the Company R&P.
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Richere is a new client. She tells you that during the past year for fun she made quilts and sometimes sold them at local craft fairs. She said she earned about $1,750 doing this. Her tax preparer should:
(a) Report this income on Schedule C and assist Richere to reconstruct her expenses for any items related to the production of the quilts, booth costs, and travel to the craft fairs.
(b) Tell Richere that because she has no profit motive, the income is not taxable and the expenses are not deductible.
(c) Explain the hobby loss rules to Richere and explain that the income should be reported on Schedule 1, line 8 but as this is a hobby, any expenses she has are not deductible.
(d) Advise Richere that the income is reportable and that you will assist her to reconstruct her expenses which may be deducted on Schedule A, line 16.
You are a CPA and do tax returns for individuals. A woman enters your office and asks you to complete her tax return. During your meeting, she mentions that she is expecting about $5000 in refund, and needs that to pay off a debt, that will result in a $1000 fine if she does not pay in the next month. You complete her tax return, but the refund is much lower than she expected, only $1000. She is very mad, and consults with another CPA. The other CPA determines that you made a significant mistake, but the period to file returns has passed. It will cost $500 to file an amendment. What damages is the woman likely entitled to?
Group of answer choices
A. None, because accountants can't be perfect
B. $500, because that is all that is needed to make it right
C. $500, and potentially $1000, because of the consequential damages of not being able to pay off her loan on time
D. $4000, because that is the difference between the proper refund and your mistake.
Sarah is a local CPA who performs part-time bookkeeping services for local businesses and does tax returns during tax season. Sarah does not know about the AICPA Code of Conduct or the IRS Circular 230. Draft a memo for your files and an email to Sarah to answer the questions below.
1. Explain what parts of the AICPA Code of Conduct apply to Sarah.
2. Explain what parts of the IRS Circular 230 apply to Sarah.
Chapter 1 Solutions
CONCEPTS IN FED.TAX.,2020-W/ACCESS
Ch. 1 - Briefly state Adam Smiths four requirements for a...Ch. 1 - Based on the discussion in the chapter, evaluate...Ch. 1 - Prob. 3DQCh. 1 - Based solely on the definitions in the chapter, is...Ch. 1 - As stated in the text, the federal income tax is...Ch. 1 - How are federal, state, and local income taxes...Ch. 1 - How is a sales tax different from an excise tax?Ch. 1 - Who is responsible for collecting sales and excise...Ch. 1 - Prob. 9DQCh. 1 - Prob. 10DQ
Ch. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - Prob. 13DQCh. 1 - LO3 Identify three primary sources of tax law.Ch. 1 - Explain why the following statement is not...Ch. 1 - What is the federal income tax base?Ch. 1 - Prob. 17DQCh. 1 - Prob. 18DQCh. 1 - How is gross income different from income?Ch. 1 - LO4 What are the three basic tests that an expense...Ch. 1 - Prob. 21DQCh. 1 - LO4 How is a transaction loss different from an...Ch. 1 - How does the legislative grace concept help...Ch. 1 - Prob. 24DQCh. 1 - Explain the pay-as-you-go system.Ch. 1 - Prob. 26DQCh. 1 - Prob. 27DQCh. 1 - Prob. 28DQCh. 1 - Prob. 29DQCh. 1 - Prob. 30DQCh. 1 - What are the three types of IRS examinations?Ch. 1 - Prob. 32DQCh. 1 - Prob. 33DQCh. 1 - Prob. 34DQCh. 1 - Prob. 35DQCh. 1 - Prob. 36DQCh. 1 - Prob. 37DQCh. 1 - LO7 Evaluate the following statement: The goal of...Ch. 1 - It has often been said that only the rich can...Ch. 1 - Prob. 40PCh. 1 - Prob. 41PCh. 1 - Prob. 42PCh. 1 - Prob. 43PCh. 1 - Prob. 44PCh. 1 - Prob. 45PCh. 1 - Prob. 46PCh. 1 - LO2 Joe Bob is an employee of Rollo Corporation...Ch. 1 - Prob. 48PCh. 1 - LO2 Gosney Corporation has two employees. During...Ch. 1 - Prob. 50PCh. 1 - Darrell is an employee of Whitneys. During the...Ch. 1 - Prob. 52PCh. 1 - Prob. 53PCh. 1 - LO4 Explain why each of the following expenditures...Ch. 1 - Prob. 55PCh. 1 - Prob. 56PCh. 1 - Prob. 57PCh. 1 - Prob. 58PCh. 1 - Prob. 59PCh. 1 - Michiko and Saul are planning to attend the same...Ch. 1 - Inga, an attorney, completed a job for a client in...Ch. 1 - Prob. 62PCh. 1 - Prob. 63PCh. 1 - Leroy and Amanda are married and have three...Ch. 1 - Prob. 65PCh. 1 - Prob. 66PCh. 1 - Prob. 67IIPCh. 1 - Prob. 68IIPCh. 1 - Prob. 69IIPCh. 1 - Prob. 70IIPCh. 1 - Prob. 73TACh. 1 - Prob. 74TACh. 1 - Prob. 75TACh. 1 - Prob. 76DCCh. 1 - Prob. 77DCCh. 1 - Bonnie is married and has one child. She owns...Ch. 1 - Prob. 79EDC
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Similar questions
- A retired 67-year-old, low-income client makes an appointment with you, a tax professional, to have a tax return prepared. Once you review their documents, you realize this is a simple return. The firm charges a minimum of $500 per tax return prepared, which is a significant amount of money for the taxpayer. Create one initial post and respond to at least two of your classmates. For your initial post, address the following: What might you do to help a retired 67-year-old, low-income client with a simple return? What options are available to low-income taxpayers? Why would a retired 67-year-old, low-income client be eligible for one of these options— VITA or TCE—over another? What specific income and tax papers would this client need for eligibility in either program?arrow_forwardYou are the tax supervisor at a local tax return preparation firm. Suzanne and her husband Steve have been working with the local fire department for 8 years. They have a total income after adjustments (reported on line 11 of the form 1040) of $160,000. After reviewing the preparation of the return, you notice there are a few things not taken into consideration for her tax return preparation. For each of the following questions, provide where the change on the tax return would occur and how much would it effect their taxable income, if they had an effective tax rate of 21% and a marginal tax rate of 24%, prior to the change. The ROTH IRA contribution of $7000 for each of Suzanne and Steve. (5PTS) Fertility treatment for Suzanne, so she should conceive a child. The process is still going on, but in 2020, they spent $15,000 on treatments and racked up 300 miles going back and forth to hospitals. (5PTS) They made a charitable contribution for the Fireman’s Fund,…arrow_forwardAllison works full time as a dental hygienist. She devotes her spare time to designing and creating stained glass pieces. During the past year, she has sold 10 of her pieces at local craft fairs and was recently commissioned to create 3 stained glass windows for the home of a new customer. She has incurred a number of expenses for taking stained glass classes, purchasing materials and tools, and participating in craft fairs. Identify the tax issue or issues suggested by the following situations and state each issue in the form of a question.arrow_forward
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