What choices do the Carpenters have in the face of the IRS’s decision about their tax liability? Nancy and Jeff Carpenter received their package of tax forms from the IRS. Because theCarpenters had recently moved, Jeff went to the library to pick up the appropriate form toclaim moving expenses. They carefully completed the forms and mailed them to the IRSon April 5.Jeff Carpenter was running for a seat in his state's legislature. His political rival hoped toprove that Nancy had illegal sources of income. He called the IRS and asked to have a copyof the Carpenters' return sent to him. His request was refused.Because of unrelated circumstances and not because of Jeff's rival's request, IRS officialschecked the arithmetic on the Carpenters' forms. Their return was one of the less than onepercent that was selected for further examination.An IRS representative contacted Nancy and Jeff, asking them to meet with him and to bringverification of their moving expenses. At the meeting, the IRS representative ruled thatmany of their expenses, including the temporary storage of their furniture, were not taxdeductible. He asked the Carpenters to sign an agreement to pay the additional tax.

Filing correct tax return is essential. Any errors and mistakes can invites fines and penalties. So,…

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Business

Accounting

tax

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

What choices do the Carpenters have in the face of the IRS’s decision about their tax liability?

Nancy and Jeff Carpenter received their package of tax forms from the IRS. Because the
Carpenters had recently moved, Jeff went to the library to pick up the appropriate form to
claim moving expenses. They carefully completed the forms and mailed them to the IRS
on April 5.
Jeff Carpenter was running for a seat in his state's legislature. His political rival hoped to
prove that Nancy had illegal sources of income. He called the IRS and asked to have a copy
of the Carpenters' return sent to him. His request was refused.
Because of unrelated circumstances and not because of Jeff's rival's request, IRS officials
checked the arithmetic on the Carpenters' forms. Their return was one of the less than one
percent that was selected for further examination.
An IRS representative contacted Nancy and Jeff, asking them to meet with him and to bring
verification of their moving expenses. At the meeting, the IRS representative ruled that
many of their expenses, including the temporary storage of their furniture, were not tax
deductible. He asked the Carpenters to sign an agreement to pay the additional tax.

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