Question

2- under what circumstances may an IRS agent use indirect methods?

3- which of the following is nota major indirect method? a. net worth b. cash-t c.balance sheet evaluation d. source and application of funds

5-describe the cash-T method

26- you are investigating possible hidden income in a divorce dispute involving an automobile repair shop with five bays. There are five mechanics, charging approximately $60 per hour for 7 hours per day. Assume 315 days worked with each person's wage of $30 per hour for 8 hours. Compute gross profit per year. If the owner reports $42,500 of gross income, what is your opinion?

55- what are some ideas to help prevent procurement fraud through phantom vendors?

58- which would be the best source for a forensic accountant to gather information and learn about a new industry? a. RIA Federal tax articles b. audit technique guidelines c. dauber tracker d. CCH citatory e. Shepardizing 4-can a gain or loss be recognized when dealing with digital currencies?

12- when must a business fie form 8300?

13-what is the penalty for failure to file a form 8300?

14- are wire transfers considered to be cash under the form 8300 reporting guidelines? Are nonprofit organization exempted from form 8300 reporting requirements?

Answer 1

2- Code Section 446(b) states the use of indirect methods by an agent. This code says that if the taxpayer do not follow any accounting method or the accounting method which is followed do not compute income correctly, then IRS can use these methods for computing income for taxpayers. The use of indirect methods is limited by IRS as an agent can use these methods only if he or she can prove that the taxpayer has undisclosed income in his tax return.

3- Balance sheet evaluation is not a major indirect method. Net worth is a common indirect method to compute income. An agent may prepare a cash-t account to derermine the cash and income understated. The source and application of funds is an expenditure method.
Answer is c.

5- Taxpayers filing Schedule C or F enables IRS agent to prepare a cash transaction account (cash-t) to determine understatement of income. A cash-T is an account where agent comes to know about the cash received by the taxpayer as well as cash paid by the tax payer during the financial year.