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1. Last year Dave and Marie paid more taxes than they owed. After they filed their tax return, they received a refund for overpayment of taxes. This year, Dave and Marie claimed a deduction for interest paid on their home mortgage and claimed a credit for childcare expenses in order to avoid overpayment of taxes. Is this an instance of tax evasion or tax avoidance? Explain why.


2. Suppose that you and your best friend both work in a restaurant. Tips make up a large part of your earnings. You report all the tips you receive and are surprised to learn that your friend does not. Write a persuasive letter to your friend, explaining why he or she should report all tips and how the taxes from these tips fund public services.



Taxpayer Rights–Answers in complete sentences.



3. Why did the IRS deny the political rival’s request to see the Carpenters’ tax return?


4. According to the statistics in the case study above, what percentage of tax returns are selected for examination each year?


5. In 2013, taxpayers filed 145,819,388 tax returns. How many of these tax returns would you expect were selected for examination?


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