Unit 2: Tax Rates, Estimates, and Due Dates

Question 1

Statute of Limitations:

To claim a refund

Answer 1

3 years from the time the original return was filed, or 2 years from the time the tax was paid, whichever is later

Question 2

Statute of Limitations:

Collections

Answer 2

10 years from the day after a tax return is filed

Question 3

What is the Alternative Minimum Tax (AMT)?

Answer 3

The excess of the tentative minimum tax over the regular tax

Question 4

Qualified farmers and fishermen only have one due date for estimated taxes. They have 2 choices:

1) Pay all their 2012 estimated taxes by ___
or
2) If they file 2012 return by ___ and ___, they ___.

In order to qualify, they must have at least ___ of total gross income from farming or fishing.

Answer 4

1) January 15th, 2013
2) March 1st, 2013; pay all the tax they owe; do not need to make an estimated tax payment

2/3

Question 5

Estimated Payment Quarterly due dates

Answer 5

April 15th
June 15th
September 15th
January 15th

Question 6

A taxpayer must make estimated payments if:
a) He expects to owe at least $___
b) He expects the total of withholding and tax credits to be less than the smaller of:
___ % of the tax shown on prior year return
___ % of the tax shown on current year return

Answer 6

a) $1,000

b) 100%; 90%

Question 7

Form to file an extension

Answer 7

Form 4868 - Application for Automatic Extension of Time to File

Question 8

Failure to File Penalty:
✏️___% of unpaid balance per month (max __%)
✏️If > 60 days late, the smaller of $__ or __% of tax due on return
✏️$__ if due a refund
✏️Reduced by the ___ penalty if both apply to the same tax return

Answer 8

✏️5%; 25%
✏️$135; 100%
✏️$0
✏️Failure to pay

Question 9

Failure to Pay Penalty:
✏️___% of unpaid balance per month (__% max)
✏️___% of unpaid balance while an installment agreement is in place

Answer 9

✏️0.5% (25% max)

✏️0.25%

Question 10

If a taxpayer files an _____ and pays at least __% of the tax liability by ____, he will not be faced with a ___ penalty if the remaining balance is paid by ______.

Answer 10

extension
90%
the original due date
failure to pay
the extended due date

Question 11

An extension will give a taxpayer an additional _____ to ____, but it doesn’t _____.

Answer 11

6 months
File the return
Extend the time to pay any tax due

Question 12

Safe harbor rule for estimated payments:
For taxpayers whose adjusted gross income is $___ or less, the taxpayer will not be assessed penalties in 2012 if he pays ____.

Answer 12

$150k

At least the amount of the tax liability on his previous year’s tax return

Question 13

A US citizen or US resident is not require to make estimated tax payments if:

Answer 13

He had zero tax liability the prior year.

Question 14

The IRS requires backup withholding if a taxpayer’s __ and __ on Form ___ does not match its records, or if they have a ____ or fail to report all __, __, and__.

Current backup withholding rate is __%.

Answer 14

Name and SSN
W-9, Request for TIN
Delinquent tax debt
Interest, dividends, and other income

28%

Question 15

A taxpayer is granted an automatic ___ extension to file and pay taxes if he’s a US citizen/US resident and:

• Is living __ and his main place of business is __, or
• Is on ___.

Answer 15

2 month
Outside the US; outside the US
Active military service duty outside the US

Question 16

Statute of Limitations:
IRS assessment (audit) and 3 exceptions:

Answer 16

3 years after the return is considered filed (if on time, 3 years from due date)

Fraud, failure to file, substantial understatement

Question 17

Statute of Limitations:
Substantial understatement (\_\_\_% or more income is omitted on the return):

Answer 17

25%

6 years

Question 18

Statute of limitations: Fraud

Answer 18

No limit

Question 19

Statute of limitations: unfiled returns

Answer 19

No limit