IRS Tax Evasion Quiz

How many taxpayers were indicted for legal-source tax evasion by the IRS in 2015?

• 1,500

• 1,330

• 150

• 15,000

Answer explanation

The correct number of taxpayers indicted for legal-source tax evasion by the IRS in 2015 was 1,330, as per the provided information.

Which of the following is NOT a reason why the IRS targets individuals for tax evasion?

• Misreporting income, credits, and/or deductions on tax returns

• Not filing a required tax return

• Being unable to pay their taxes

• Understating what they owe

Answer explanation

The correct choice is 'Being unable to pay their taxes' because the IRS targets individuals for tax evasion based on misreporting income, credits, and/or deductions, not filing required tax returns, and understating what they owe.

What is a key indicator of tax evasion according to the IRS?

• Making errors on a tax return

• Filing taxes late

• Showing a pattern of willful evasion

• Having a high income

Answer explanation

The key indicator of tax evasion according to the IRS is showing a pattern of willful evasion, not just making errors on a tax return, filing taxes late, or having a high income.

What kind of behavior during an IRS audit could lead to criminal prosecution?

• Making a mistake on the tax return

• Failing to use a certified tax preparer

• Making false statements or hiding records

• Filing an amended tax return

Answer explanation

Making false statements or hiding records during an IRS audit could lead to criminal prosecution.

According to the example provided, how much did John clear annually from his side business after expenses, from 2011 to 2013?

• $35,000

• $50,000

• $25,000

• $40,000

Answer explanation

John cleared $35,000 annually from his side business after expenses, from 2011 to 2013 as per the example provided.

What is one of the fraud indicators mentioned in the document?

• Accurate reporting of all income sources

• Omission of an entire source of income

• Regular updates to the IRS

• Consistent bank statements

Answer explanation

The correct indicator mentioned in the document is the omission of an entire source of income, which can be a sign of fraud.

During the audit, what activity does John say he enjoys on his off days?

• Fishing

• Hiking

• Reading

• Playing sports

Answer explanation

John says he enjoys fishing on his off days, as mentioned during the audit.

What did the IRS discover about John's income that he was unaware of?

• A Form 1099-MISC for $1,100 from ABC Builders

• A Form 1099-INT for $10.61 in interest income

• Both A and B

• None of the above

Answer explanation

The correct answer is Both A and B because John was unaware of both the Form 1099-MISC for $1,100 from ABC Builders and the Form 1099-INT for $10.61 in interest income.

How much in deposited funds did the auditor discover in John's bank statements?

• $6,000

• $60,000

• $600,000

• $600

Answer explanation

The auditor discovered $60,000 in deposited funds in John's bank statements, as indicated in the correct answer choice.

What years did the auditor expand the audit to after discovering the $60,000 in deposited funds?

• 2010 and 2011

• 2011 and 2012

• 2012 and 2013

• 2013 and 2014

Answer explanation

The auditor expanded the audit to 2011 and 2012 after discovering the $60,000 in deposited funds, making the correct years for expansion.