(1) Federal Taxes - Preparing Returns

What is the fee to receive an EFIN from the IRS? a) $0 b) $35 c) $75 d) $108

a) $0

William has finished filing a client's tax return, but does not provide the client with a copy of the return. What is the amount of the penalty William will be issued? a) $50 b) $100 c) $200 d) $530

a) $50

If Mary is a paid preparer, or works as a preparer in a firm, she has to file all returns electronically if she is filing: a) 11 or more returns b) 35 or more returns c) 80 or more returns d) 100 or more returns

a) 11 or more returns

Orson prepares a return for a client, rendering him primarily responsible for the accuracy of the return. He fails to sign this return before submitting it to the IRS. What penalty can Orson expect? a) A $50 penalty b) A $100 penalty c) Suspension of the ability to practice before the IRS d) None of the above

a) A $50 penalty

Which of the following people is a tax preparer? a) A British citizen who is compensated for preparing U.S. tax returns in England for Americans who live in England. b) A volunteer for VITA who only prepares tax returns for VITA clients. c) An IRS employee who assists taxpayers complete returns during an IRS open house. d) All of the above.

a) A British citizen who is compensated for preparing U.S. tax returns in England for Americans who live in England.

The standard of authority required to avoid penalties with respect to a disclosed position relative to an undisclosed position is: a) Lower. b) Higher. c) The same. d) Dependent upon the circumstances.

a) Lower.

If a client requests a return of their records, the practitioner: a) Must promptly return all records which are necessary to comply with federal tax obligations b) Can retain all records if the client has an unpaid balance due to the practitioner c) Must turn over all records, including all copies immediately upon taxpayer request d) Once filed, the practitioner may not keep any records of the taxpayer so such a request is unlikely

a) Must promptly return all records which are necessary to comply with federal tax obligations

When does a tax preparer have to furnish a complete copy of the return or claim to the taxpayer? a) No later than the time it is presented for the taxpayer's signature. b) No later than the time when the taxpayer receives his or her refund check. c) Within 3 years, starting from the time it is presented for the taxpayer's signature. d) None of the above. A tax preparer does not need to furnish a taxpayer with a copy of the return.

a) No later than the time it is presented for the taxpayer's signature.

Donna is a secretary who prepares income tax returns to earn extra money during the tax filing season. Donna does not keep a copy of the returns she prepares but she does keep a record of her clients' names, identification numbers, tax year and type of return prepared. Is she subject to a penalty for failing to retain a copy of each return? a) No. b) Yes, $25 per return. c) Yes, $50 per return. d) Yes, $100 per return.

a) No.

In general, for what period of time is a written consent to disclose taxpayer information effective? a) One year from the date the taxpayer signs the consent. b) One year from the filing date of the return. c) Three years from the close of the return period to which it applies. d) A consent to disclosure does not expire.

a) One year from the date the taxpayer signs the consent.

A taxpayer signs an electronically filed return by use of a _________? a) PIN b) Finger print c) Scanned signature d) Checking a box on the return

a) PIN

A tax return preparer who is paid to prepare a Form 1040 series return must use which of the following identifying numbers to avoid penalty under §6695(c)? a) PTIN b) SSN c) ITIN d) EFIN

a) PTIN

Waiting more than three calendar days to submit a return to the IRS once the ERO has all necessary information for origination is considered: a) Stockpiling b) Transmitting c) Submission d) Forgetfulness

a) Stockpiling

What is an Electronic Filing Identification Number (EFIN)? a) The IRS assigns an EFIN to identify IRS Authorized IRS e-file Providers. b) It is a number you must use if you are not an IRS Authorized E-file Provider. c) It is a number the IRS issues to every tax return preparer. d) It is a preparer tax identification number.

a) The IRS assigns an EFIN to identify IRS Authorized IRS e-file Providers.

After Form 8879 is completed, what should be done with it? a) The preparer keeps the form for records. b) It is submitted to the IRS along with the return. c) The taxpayer keeps it for personal record. d) It can be disposed of by either the taxpayer or preparer after 60 days.

a) The preparer keeps the form for records.

Henry Pierce did not file a tax return for 2015. When is the last date the IRS can assess tax. a) The tax may be assessed at any time b) On April 15, 2019 c) On December 31, 2018 d) On December 31, 2025

a) The tax may be assessed at any time

Which of the following acts constitute negligence with regard to a preparer's obligation to properly complete a tax return? a) Transposing the numbers in an entry on a Schedule C. b) Making up income amounts for a Schedule C filer. c) Making up expenses for a Schedule C filer. d) Accepting round numbers for a Schedule C filer's mileage, income, and expenses.

a) Transposing the numbers in an entry on a Schedule C.

Which of the following reasons for an understatement might NOT constitute reckless conduct on the part of the tax preparer? a) Transposing. b) Estimating. c) Guessing. d) Fudging.

a) Transposing.

A tax preparer must include in records involving a taxpayer's claim for Earned Income Tax Credit a record of how, when, and from whom the information used in completing the claim was obtained. a) True b) False

a) True

An electronically filed return is not considered filed until the IRS acknowledges acceptance of the electronic portion of the tax return for processing. a) True b) False

a) True

Herb has filed a tax return for a client which understates the client's tax liability. Because he acted in good faith and with a reasonable cause provided by the nature of the return, he will not be assigned a penalty. a) True b) False

a) True

It is permissible for a taxpayer to authorize an Electronic Return Originator (ERO) to enter the taxpayer's PIN on an electronic return. a) True b) False

a) True

Paul prepared and filed a tax return with Earned Income Tax Credit (EITC) for a client on March 21, 2019. If he keeps it until June 30th, 2022, he will meet the recordkeeping requirement for the EITC. a) True b) False

a) True

Regina is soliciting her tax preparation services by both direct mailings and electronic mail. One prospective client has responded to an electronic message with a statement that he does not wish to be solicited. In an attempt to regain the prospect's interest, Regina uses a direct mail communication to supply more information. This action is subject to disciplinary proceedings. a) True b) False

a) True

The definition of a "use" of taxpayer information is an occasion in which a tax return preparer refers to or relies on taxpayer information as a basis to take or permit actions. a) True b) False

a) True

If an authorized IRS electronic filing provider uses radio, television, Internet, signage, or other methods of communication to advertise IRS electronic filing, the Provider must keep a copy and provide the text to the Internal Revenue Service upon request, or if prerecorded, the recorded advertisement. The copies must be maintained for what period of time? a) Until the end of the calendar year following the last transmission or use. b) For one year following the last transmission or use. c) For three years following the last transmission or use. d) For five years following the last transmission or use.

a) Until the end of the calendar year following the last transmission or use.

How long must an ERO retain his copy of Form 8453? a) Until the end of the calendar year in which the associated return was filed. b) For one year from the date the return was filed. c) For three years from the date the return was filed. d) For three years from the date the return was due.

a) Until the end of the calendar year in which the associated return was filed.

Internal Revenue Code §7216 is a criminal provision enacted by the U.S. Congress in 1971 that prohibits preparers of tax returns from knowingly or recklessly disclosing or using tax return information. Under what conditions may a tax preparer use or disclose tax return information? a) When the preparer obtains consent to use tax return information before tax return information is used and before returns are provided to the taxpayer for signature. b) A preparer may use tax return information within three years of filing the return. c) A preparer may disclose tax information to a spouse who is not listed on the return. d) A preparer may disclose tax return information only if requested by an attorney.

a) When the preparer obtains consent to use tax return information before tax return information is used and before returns are provided to the taxpayer for signature.

Jane has not provided all the information necessary for her tax preparer, Bob, to complete Jane's tax return. Bob is in a hurry, so he asks Jane to sign the partial return as it is today. Bob assures Jane that he will complete and file the return when the rest of the information is faxed to him. Jane faxes the information a few days later. Bob then completes the return, files it with the IRS and faxes a copy of the completed return to Jane. Has Bob violated his requirement to provide a copy of the return to Jane? a) Yes, because a copy must be given to the taxpayer when it is presented to the taxpayer for signature. b) Yes, because a faxed copy is not acceptable. c) Yes, because a fax is not secure. d) No.

a) Yes, because a copy must be given to the taxpayer when it is presented to the taxpayer for signature.

Susan keeps copies of all her financial records electronically. Susan requests that her tax preparer, Ellen, provide her with an electronic copy of her tax return. Ellen agrees to this request and provides Susan with an electronic copy of her tax return at the same time that she presents it to Susan for signing. Has Ellen fulfilled her obligation to furnish a completed copy of the return to Susan? a) Yes, because the electronic format was acceptable to both b) Yes, because she has no such obligation unless the request is in writing c) No, because the copy must be provided on paper d) No, because the copy must be provided after the return is filed

a) Yes, because the electronic format was acceptable to both

Bob Black, a widower, died in March 2019. His daughter Mary hired Colette, a tax preparer, to complete her father's 2019 Form 1040 income tax return. Can Colette e-file the return? a) Yes, if all qualifications are met. b) Only if Colette is e-filing at least 10 other tax returns during the filing season c) No, because Bob is deceased. d) No, because Bob cannot sign the e-file authorization.

a) Yes, if all qualifications are met.

Must a paid preparer sign and fill in the other blanks in the paid preparer's area of the return? a) Yes. b) No. c) No, but only if the taxpayer requests that the preparer not do so. d) No, but only if he gets the taxpayer to sign as self-prepared

a) Yes.

What are an ERO's obligations with regard to an e-filed return that has been rejected by the IRS? a) The ERO can correct if the change is minor, as defined; otherwise the ERO must contact the taxpayer within 24 hours. b) The ERO can correct if the change is minor, as defined; otherwise the ERO must take reasonable steps to contact the taxpayer within 24 hours. c) The ERO must amend the return to satisfy the IRS requirements. d) The ERO must mail the taxpayer a copy of the IRS rejection notice via certified mail.

b) The ERO can correct if the change is minor, as defined; otherwise the ERO must take reasonable steps to contact the taxpayer within 24 hours.

When an Electronic Return Originator (ERO) receives a reject of an e-filed return, how soon must the ERO take reasonable steps to notify the taxpayer? a) 8 hours b) 12 hours c) 24 hours d) 48 hours

c) 24 hours

For how many years must IRS e-file Signature Authorization Forms (8879 and 8878) be available to the IRS following the due date or receipt of the return? a) 6 months b) 1 year c) 3 years d) 5 years

c) 3 years

In general, how long are practitioners required to keep most records? a) 60 days b) 1 year c) 3 years d) 10 years

c) 3 years

Valerie has completed her client's tax return and saved a copy for her records. For how long must these files be kept following the close of the return period? a) 6 months b) 1 year c) 3 years d) 10 years

c) 3 years

Gregory has been found to have knowingly misused privileged tax information from one of his clients. Which of the following are possible penalties for the misuse of taxpayer information? a) A $1,000 fine b) Up to one year's imprisonment c) A $1,000 fine, up to one year's imprisonment, or both. d) None of the above

c) A $1,000 fine, up to one year's imprisonment, or both.

Victor has completed a tax return for a client which claims Child Tax Credit. The client is ineligible for this credit, but Victor did not attempt to determine eligibility before including the claim on the return. What is the penalty that Victor can expect for this violation? a) A public reprimand b) Disbarment from practice before the IRS c) A $530 penalty d) All of the above

c) A $530 penalty

Which of the following people is a tax preparer? a) A person who is compensated for using a computer to copy handwritten information into a fillable IRS tax form. b) A person who is compensated for using a computer to complete Schedules A, B, and D for a 1040 filer. c) A person who is compensated for using a computer to complete a tax return for his regular employer. d) A person who is compensated for using a computer to electronically file a tax return that someone else prepared.

b) A person who is compensated for using a computer to complete Schedules A, B, and D for a 1040 filer.

Which of the following satisfies the copy/list retention requirement for tax preparers? a) A card file with the AGI and tax due or refund for each return prepared b) A spreadsheet with the name and taxpayer identification number, tax year of each taxpayer for whom a return was prepared, and the type of return c) An electronic copy of each Form 1040 prepared, without additional schedules d) A paper copy of each EIC checklist, EIC worksheet and record of how EIC information was received and from whom

b) A spreadsheet with the name and taxpayer identification number, tax year of each taxpayer for whom a return was prepared, and the type of return

IRS e-file procedures do not require that the ERO submit Form 8879, IRS e-file Signature Authorization. At what point in the e-file procedure should the ERO transmit the tax return? a) Before the ERO and taxpayer complete and sign Form 8879 b) After the ERO and taxpayer complete and sign Form 8879 c) Either before or after the ERO and taxpayer complete and sign Form 8879 d) After the ERO and taxpayer complete Form 8879 but before they sign it

b) After the ERO and taxpayer complete and sign Form 8879

Of the following, who is always considered an income tax return preparer? a) An enrolled agent. b) Any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax or any claim for refund of federal income tax. c) A tax accountant. d) All of the above.

b) Any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax or any claim for refund of federal income tax.

Which of the following is evidence of income? a) Invoices. b) Bank statements. c) Telephone bills. d) Receipts for purchases.

b) Bank statements.

Andrew gives his PIN to his tax return preparer and verbally authorizes the preparer to enter his PIN in order to e-file his income tax return. Who needs to sign Form 8879? a) Andrew only b) Both Andrew and the tax preparer c) Neither, the verbal authorization and the PIN is sufficient d) The tax preparer only

b) Both Andrew and the tax preparer

What is the main requirement of the FTC safeguards rule for a tax return preparer? a) Give their customers privacy notices b) Develop, implement and maintain an Information Security Program c) Encrypting electronically stored taxpayer data d) Run weekly external network vulnerability scans

b) Develop, implement and maintain an Information Security Program

What is a popular target for fraud and abuse that an Electronic Return Originator (ERO) should look out for? a) Amended tax returns b) Earned Income Tax Credit (EITC) c) Form W2 d) None of the above

b) Earned Income Tax Credit (EITC)

All of the following constitutes a failure under Section 6695, EXCEPT: a) Failure to sign return b) Failure to enclose written notification of errors or omissions known to preparer c) Failure to furnish identifying number d) Failure to file correct information returns

b) Failure to enclose written notification of errors or omissions known to preparer

A tax return preparer claimed an Earned Income Tax Credit (EITC) with a tax return. Since they will keep a copy of the income tax return, they will not need a copy of Form 8867. a) True b) False

b) False

A tax return preparer must keep a full copy of a completed tax return for each client for whom a return was prepared. a) True b) False

b) False

A tax return preparer's Preparer Tax Identification Number (PTIN) and Social Security Number (SSN) essentially act as the same number. One can be used in place of the other. a) True b) False

b) False

A taxpayer may only provide consent to use information to a tax return preparer by means of a written document with a physical signature. a) True b) False

b) False

All paid tax return preparers (excluding attorneys, CPAs, and enrolled agents) must have a Preparer Tax Identification Number (PTIN) before preparing any federal tax returns. a) True b) False

b) False

Barry has prepared Susan's tax return. Throughout the process, Barry has proved to be very trustworthy. Susan has signed the tax return and is ready for her copy, but unfortunately Barry's copier is being serviced but will be fixed in a few days. Susan agrees to pick up her copy whenever it is ready. This arrangement is in compliance with tax preparer regulations. a) True b) False

b) False

Bob is paid to prepare Mary's tax return. He uses her computer and files the return electronically. Because the tax return was prepared on Mary's computer, only Mary, the taxpayer, has to electronically sign the return. a) True b) False

b) False

Disclosure of any taxpayer information without prior consent from the taxpayer is prohibited in all cases. a) True b) False

b) False

Disclosure of tax return information to another tax return preparer who is assisting in the preparation of the return does not require consent from the taxpayer, even if the other preparer is outside of the United States. a) True b) False

b) False

Due to the convenience of electronically filing tax returns, there is information a tax preparer can leave off on a return compared to a return on paper. a) True b) False

b) False

Even if a tax preparer can show reasonable cause in understating tax liability and acted in good faith, they will still incur the penalty for understating tax liability. a) True b) False

b) False

Even though a tax preparer is required to obtain and exclusively use a PTIN, in the event of losing it, he can use his Social Security Number (SSN) as the identifying number to be included with the tax return preparer's signature. a) True b) False

b) False

Harriet has filed a return for a client. Though she is prohibited from negotiating the refund check, she hires an intermediary agent to negotiate on her behalf. This is an acceptable means of bypassing the restrictions on tax preparers negotiating checks. a) True b) False

b) False

Information about a firm's practices for the collection and sharing of information are restricted to only associates and employees, not clients. a) True b) False

b) False

Janet has presented her client with a return for signature. Because she does not have a copy of the return for the client's records on hand, she promises to mail them their copy that afternoon. Because the copy should arrive within 48 hours of the signing, this complies with regulations. a) True b) False

b) False

Mary's electronic income tax return is almost complete; she just has to submit it to the IRS. Even though it was done by a paid preparer, Mary is the only person who needs to provide an electronic signature. a) True b) False

b) False

Modernized e-file (MeF) will not allow returns after October 15. a) True b) False

b) False

Once the client has provided records to a tax practitioner, the records become the property of the practitioner. a) True b) False

b) False

Only tax preparers employed by a tax firm must furnish a taxpayer with a copy of a return. a) True b) False

b) False

Philip prepared his client's taxes 2 years ago. He is now going to throw away his copy of the tax return and the list with the name and taxpayer identification number for whom the return was prepared. Since it has been 2 years, Philip is complying with regulations. a) True b) False

b) False

Pierre and Leo are very close friends, but Pierre is still paying Leo to prepare his tax return. Because they're so close, Leo doesn't have to sign the tax return to claim primary responsibility for the preparation. a) True b) False

b) False

Regulations for safeguarding taxpayer information apply only to written and electronic documents. a) True b) False

b) False

Shirley provided a copy of a tax return she prepared for her client but didn't have the resources for her own copy. If she just has the name and taxpayer identification number of the taxpayer, this is good enough to have on file for the 3-year period following the close of the return. a) True b) False

b) False

Tax returns using ANY foreign or overseas address cannot be filed electronically. a) True b) False

b) False

The IRS sets the maximum fee a tax preparer can charge for tax preparation services. a) True b) False

b) False

The official income tax return due date is April 15. Claudia started preparing an electronic tax return for a client on April 13, two days before the due date. She officially submitted the return on April 17, two days late, but since she started preparing it on April 13, it is still considered by the IRS to be on time. a) True b) False

b) False

When completing a claim for Earned Income Tax Credit (EITC), a tax practitioner must only elicit information required by the appropriate form. Investigating what appears to be erroneous information falls outside of the scope of the tax practitioner. a) True b) False

b) False

When completing an electronic tax return for a taxpayer, only the signature of the taxpayer is required. a) True b) False

b) False

Which of the following acts is not negligence? a) Failure to keep adequate books and records. b) Filing a false return. c) Filing an incorrect return. d) Failure to include on an income tax return an amount shown on Form 1099-MISC

b) Filing a false return.

Jackie has received a notice from the Internal Revenue Service stating that her Social Security Number has been compromised. Which form should she file? a) Form 1405 b) Form 14039 c) Form 114 d) Form 9839

b) Form 14039

A tax return preparer can avoid the understatement penalty that resulted from having taken an unreasonable position if the preparer: a) Did not know the position was unreasonable. b) Did not know the position had been taken. c) Can show that he acted in good faith and can show that there was reasonable cause for the understatement. d) Can show that the understatement was made due to error.

c) Can show that he acted in good faith and can show that there was reasonable cause for the understatement.

Which of the following is a proof of payment? a) An invoice from a doctor reflecting the cost of a medical procedure. b) Bank statement showing withdrawals. c) Cash receipt. d) All of the above.

c) Cash receipt.

What number does a Authorized IRS e-file Provider need to electronicly file a tax return? a) SSN b) EIN c) EFIN d) ITIN

c) EFIN

Which of the following is NOT a requirement for record retention of a paid tax preparer? a) Retain copies of client returns or a list of returns prepared b) Retain a record of the name of the preparer required to sign each return c) Make records available to the IRS for inspection for three years following the end of the return period d) Maintain a copy of the software used, if any, in preparing each year's returns

d) Maintain a copy of the software used, if any, in preparing each year's returns

A taxpayer instructs his tax preparer to exclude from his income tax return the wages he earned at his job because he claims that there is no taxable gain when a person exchanges labor for money. The tax preparer: a) Can prepare the tax return as instructed. b) Must prepare the tax return as instructed. c) Should prepare the tax return as instructed but must advise his client of the penalties that are likely to apply as a consequence of his omitting his wage income. d) May not prepare the return as instructed because the clients position constitutes a frivolous argument.

d) May not prepare the return as instructed because the clients position constitutes a frivolous argument.

Who must sign Form 8453? a) The taxpayer. b) The ERO. c) Both. d) Neither.

d) Neither.

Kevin, a paid tax preparer, has not received his PTIN. Can Kevin use his Social Security number instead? a) Yes b) Yes, but must amend the return with his PTIN when he receives it c) Yes, if the return is for a family member d) No

d) No

What is the maximum preparer penalty that can be imposed for preparing and submitting numerous returns claiming EITC without completing the Paid Preparer's Due Diligence Checklist, Form 8867? a) $50 b) $530 c) $26,500 d) No limit

d) No limit

Stephen Jones intends to file his 2018 amended income tax return on March 31, 2020. Can he use e-file? a) Yes, because e-file closes on April 15, 2020. b) Yes, if he is expecting a refund. c) No, because the return is not a current year return. d) No, because efile is not available for amended form 1040 returns.

d) No, because efile is not available for amended form 1040 returns.

On March 23, 2019, Geri prepared a 2015 form 1040 individual tax return for Candy. The return shows a refund of $2,600. Can Geri file Candy's return electronically? a) Yes, because the IRS prefers that taxpayers use e-file. b) Yes, but only if Candy is paying for Geri's services by obtaining a refund anticipation loan. c) No, because Candy is getting a refund. d) No, because the return period is before the two prior tax years.

d) No, because the return period is before the two prior tax years.

What must a paid preparer do with Form 8867, Paid Preparer's Due Diligence Checklist? a) File it electronically or attached to a paper return b) Maintain a copy for 3 years following the later of the due date of the return or the date the return was filed c) File it electronically or attached to a paper return, and maintain a copy for 3 years following the later of the due date of the return or the date the return was filed d) None of these are requirements

c) File it electronically or attached to a paper return, and maintain a copy for 3 years following the later of the due date of the return or the date the return was filed

Which of the following statements is correct regarding electronically filed returns? a) Individual return for a deceased taxpayer may not be electronically filed. b) 2018 U. S. Individual Income Tax Returns may not be electronically filed after April 15, 2019. c) Fiscal year individual tax returns may not be electronically filed. d) All electronically filed returns require a separate signature document to be submitted to the appropriate Internal Revenue Service Center.

c) Fiscal year individual tax returns may not be electronically filed.

For which clients must an ERO file Form 8453? a) For each client whose return the ERO prepared. b) For each client whose return the ERO e-filed. c) For each client who elects not to include his transactions on the electronic short-term capital gain (loss) or long-term capital gain (loss) records. d) All of the above.

c) For each client who elects not to include his transactions on the electronic short-term capital gain (loss) or long-term capital gain (loss) records.

For how long must an ERO retain Form 8879? a) Until the end of the calendar year in which the associated return was filed. b) For one year from the later of the date the associated return was filed or the date the IRS received it. c) For three years from the later of the return due date or the date the IRS received it. d) For five years from the later of the date the associated return was filed or the date the IRS received it.

c) For three years from the later of the return due date or the date the IRS received it.

When must a taxpayer sign Form 8453? a) Before his return is e-filed. b) After his return is e-filed. c) Form 8453 does not require anyone's signature. d) The ERO and not the taxpayer is required to sign Form 8453.

c) Form 8453 does not require anyone's signature.

How long should a taxpayer keep his copy of his W-2? a) He can discard it as soon as he files the relevant return. b) He can discard it as soon as he receives his refund. c) He should keep it for as long as it may be needed for the administration of any provision of the tax code. d) He can discard it three years from the close of the tax year.

c) He should keep it for as long as it may be needed for the administration of any provision of the tax code.

Which of the following sections of the Internal Revenue Code offers provisions for the protection of taxpayer information for tax return preparers? a) IRC § 1167 b) IRC § 4467 c) IRC § 7216 d) IRC § 8867

c) IRC § 7216

A tax preparer can be subject to penalty if a return he prepared understates a taxpayer's tax liability due to an unreasonable position that the preparer knew or should have known about. The penalty is: a) The greater of the understated liability or the tax payers fee for preparing the return. b) The greater of the understated liability or one-half of the tax payers fee for preparing the return. c) The greater of $1000 or one-half of the tax payers fee for preparing the return d) The greater of $5000 or one-half of the tax payers fee for preparing the return.

c) The greater of $1000 or one-half of the tax payers fee for preparing the return

Which of the following individuals must submit fingerprint cards when registering for IRS e-services? a) Certified Public Accountant b) Enrolled Agent c) Principal of a small tax practice d) All the above

c) Principal of a small tax practice

Debbie wants to file her tax return electronically. There are two methods to sign individual income tax returns electronically. What are the two methods? a) Personal PIN and SSN b) SSN and Practitioner PIN c) Self-select PIN and Practitioner PIN d) Self-select PIN and SSN

c) Self-select PIN and Practitioner PIN

A taxpayer who timely filed a return wants to claim a loss for worthless securities. Until when can he do so? a) Three years from the due date of the return. b) Six years from the due date of the return. c) Seven years from the due date of the return. d) Ten years from the due date of the return.

c) Seven years from the due date of the return.

Which of the following is NOT a reason the IRS may deny a request to participate in IRS E-File? a) Failure to timely pay any federal, state, or local tax liability b) Suspension/disbarment from practice before the IRS c) Tax practice is not big enough d) Assessment against the applicant of the earned income credit due diligence penalty under §6695(g)

c) Tax practice is not big enough

Who is authorized to enter a taxpayer's PIN for an E-File signature if the taxpayer is unable to enter his or her PIN? a) Nobody. The taxpayer is the only person authorized. b) The taxpayer's legal guardian or emergency contact. c) The Electronic Return Originator (ERO). d) All of the above.

c) The Electronic Return Originator (ERO).

Under which of the following circumstances has an e-filed return been timely filed? a) The ERO transmits it before the due date. b) The IRS receives it before the due date. c) The IRS acknowledges that, before the due date, it accepted the transmitted return. d) The ERO completes the return before the due date.

c) The IRS acknowledges that, before the due date, it accepted the transmitted return.

The Internal Revenue Service monitors and performs annual suitability checks on authorized Internal Revenue Service electronic filing providers for compliance with the revenue procedure and program requirements. Violations may result in a variety of sanctions. Which statement is correct with respect to sanctions the Internal Revenue Service may impose on an electronic filing provider? a) The Internal Revenue Service may issue a letter of reprimand or a 1-year suspension as a sanction for a level one infraction in the electronic filing program. b) The Internal Revenue Service may impose a period of suspension that includes the remainder of the calendar year in which the suspension occurs, plus the next 2 calendar years, for a level two infraction in the electronic filing program. c) The Internal Revenue Service may suspend or expel an authorized Internal Revenue Service electronic filing provider prior to administrative review for a level three infraction in the electronic filing program. d) The Internal Revenue Service may not impose a sanction that is greater than a 1-year suspension from the electronic filing program.

c) The Internal Revenue Service may suspend or expel an authorized Internal Revenue Service electronic filing provider prior to administrative review for a level three infraction in the electronic filing program.

Who is the owner of an EFIN? a) All tax preparer's own their EFIN. b) The signing preparer owns the EFIN used on the return. c) The firm owns the EFIN. d) The IRS owns the EFIN.

c) The firm owns the EFIN.

What is the preparer penalty for understatement of tax liability due to an unreasonable position taken on a tax return? a) $1,000 b) 50% of the preparer's fee c) The greater of $1,000 or 50% of the preparer's fee d) The lesser of $5,000 or 50% of the preparer's fee

c) The greater of $1,000 or 50% of the preparer's fee

Who is responsible for the penalty under §6695(b) if more than one income tax return preparer is involved in the preparation of the return or claim for refund? a) The taxpayer b) Every tax preparer who assists with the return c) The individual preparer who has the primary responsibility for the overall substantive accuracy of the preparation of the return d) The individual preparer who did most of the work

c) The individual preparer who has the primary responsibility for the overall substantive accuracy of the preparation of the return

A tax return preparer must complete the paid preparer's area of the return if: a) The taxpayer prepares his own return b) The individual volunteers to complete the return for no cost c) The individual was paid to prepare, assist in preparing, or review the tax return and has the primary responsibility for the overall accuracy of the preparation of the return. d) He prepares a tax return for his employer by whom he is regularly and continuously employed

c) The individual was paid to prepare, assist in preparing, or review the tax return and has the primary responsibility for the overall accuracy of the preparation of the return.

IRS Form 8275, Disclosure Statement, and IRS Form 8275-R, Regulation Disclosure Statement, are used by taxpayers to disclose items or positions that are not otherwise adequately disclosed on a tax return in order to avoid certain penalties. All of the following penalties may be avoided by use of one of these forms EXCEPT: a) The preparer penalty for understatement due to position contrary to regulations. b) The substantial understatement penalty. c) The negligence penalty. d) The accuracy-related penalty.

c) The negligence penalty.

By signing and dating the Declaration of Taxpayer, Doug, a taxpayer, is stating that: a) He is a self-employed person b) He is filing a single status c) The return is true, correct, and complete d) He does not give Consent to Disclosure

c) The return is true, correct, and complete

Which of the following is NOT an information security incident which may require reporting to the IRS or other authorities? a) Theft of information b) Natural disaster that destroys unrecoverable information c) Theft of IRS forms and publications d) Computer network attack such as denial of service

c) Theft of IRS forms and publications

Tom Mahoney works for ABC Corporation and each year receives a W-2 from them. Each year he timely files his tax return and complies with all the reporting requirements. How long should he keep each year's W-2. a) He can discard it once he files his return. b) Three years from the calendar year for which the W-2 was issued. c) Three years from the due date of the return. d) Three years from the date he files each return.

c) Three years from the due date of the return.

Generally, for how long should a taxpayer retain records? a) Five years. b) Indefinitely. c) Until the statute of limitations expires. d) Ten years.

c) Until the statute of limitations expires.

What is the criminal penalty imposed on a tax preparer for knowingly or recklessly making unauthorized disclosures of a taxpayer's information? a) $250 for each disclosure, up to an annual maximum of $10,000 b) $500 for each disclosure, no maximum c) Up to $1,000 or imprisonment for not more than one year or both, for each violation d) Up to $2,000 or imprisonment for not more than two years or both, for each violation

c) Up to $1,000 or imprisonment for not more than one year or both, for each violation

Which of the following uses of taxpayer information can be conducted without prior acquisition of taxpayer consent? a) Use as an example of the return process for other taxpayers. b) Use in advertisement to demonstrate services offered. c) Use to compile lists for soliciting tax return business. d) It is never permissible to use information without taxpayer consent.

c) Use to compile lists for soliciting tax return business.

Steven, a paid tax preparer, knew that a position taken on a tax return he prepared was arguable, but that it did not meet the standard of having a reasonable basis. He disclosed the position on the return. The position resulted in an understatement of tax. Has Steven violated his responsibilities to prepare an accurate return? a) No, because the position is arguable b) No, because the position is disclosed c) Yes, because a disclosed position must have a reasonable basis d) Yes, because any position which decreases a taxpayer's liability is unreasonable

c) Yes, because a disclosed position must have a reasonable basis

Can an ERO ever correct and resubmit tax return data without obtaining new signatures or authorizations from the taxpayer? a) No. b) Yes, if the ERO has proof of the taxpayer's waiver of this requirement. c) Yes, if the changes do not differ from the amount on the original electronic return by more than $14 to Total Tax. d) Yes, if the changes do not differ from the amount on the original electronic return by more than $100 to Total Income.

c) Yes, if the changes do not differ from the amount on the original electronic return by more than $14 to Total Tax.

Is an ERO representative permitted to sign an 8879 by using a rubber stamp? a) Yes, because an ERO is not required to sign an 8879 so if the ERO representative uses a rubber stamp, it's allowed. b) Yes, because a taxpayer is not required to sign an 8879 so if the ERO representative uses a rubber stamp, it's allowed. c) Yes. d) No.

c) Yes.

In preparing Form 8867, Paid Preparer's Due Diligence Checklist, how long should a return preparer retain copies? a) one year from the filing of the return b) two years from the filing of the return c) three years from the filing of the return d) six years from the filing of the return

c) three years from the filing of the return

Jessica has completed a substantial number of tax returns for her clients without using her PTIN. What is the maximum penalty she can expect in one year for this violation of tax regulations? a) $10,000 b) $15,000 c) $20,000 d) $26,500

d) $26,500

What is the maximum preparer penalty for failure to sign multiple tax returns in a single year when required to do so? a) $50 b) $530 c) $5,000 d) $26,500

d) $26,500

What is the preparer penalty for a preparer who willfully, recklessly, and/or intentionally understates the tax liability on a return he or she prepares? a) $250 or one-half the income derived (or to be derived) by the tax return preparer with respect to the return or claim, whichever is greater. b) $500 or one-half the income derived (or to be derived) by the tax return preparer with respect to the return or claim, whichever is greater. c) $1,000 or 75% of the income derived (or to be derived) by the tax return preparer with respect to the return or claim, whichever is greater. d) $5,000 or 75% of the income derived (or to be derived) by the tax return preparer with respect to the return or claim, whichever is greater.

d) $5,000 or 75% of the income derived (or to be derived) by the tax return preparer with respect to the return or claim, whichever is greater.

What is the preparer penalty for claiming Head of Household filing status without completing the Paid Preparer's Due Diligence Checklist, Form 8867? a) $25 b) $50 c) $130 d) $530

d) $530

Any tax return preparer who endorses or otherwise negotiates, whether directly or through an agent, any check issued to a taxpayer other than himself shall face a penalty of: a) $130 for each check not to exceed $26,500 per calendar year. b) $130 for each check. c) $530 for each check not to exceed $26,500 per calendar year. d) $530 for each check.

d) $530 for each check.

Which of the following applies to radio or television broadcasting regarding advertisement of electronic filing? a) The broadcast must be pre-approved by the IRS. b) The IRS does not require retention of pre-recorded broadcast advertisements. c) A pre-recorded broadcast advertisement must be kept for three years. d) A pre-recorded broadcast advertisement must be kept until the end of the calendar year following the last transmission or use.

d) A pre-recorded broadcast advertisement must be kept until the end of the calendar year following the last transmission or use.

Which of the following is NOT an Electronic Return Originator (ERO)? a) VITA b) A company that prepares returns and e-files them for its clients c) A company that does not prepare but rather collects completed returns from customers and e-files them d) A software developer that develops software for the purposes of transmitting electronic return information directly to the IRS

d) A software developer that develops software for the purposes of transmitting electronic return information directly to the IRS

An unenrolled tax return preparer requires a valid preparer tax identification number for which of the following? a) Preparing a tax return b) Signing a tax return c) Preparing or signing a claim for refund d) All of the above

d) All of the above

Authorized IRS e-file Providers that participate in the role as an Online Provider must follow the IRS six security, privacy, and business standards to better serve taxpayers and protect their individual income tax information collected, processed, and stored. Compliance with these standards is mandatory. Which of the following is required? a) Extended Validation SSL Certificate b) Weekly external network vulnerability scans c) Reporting of Security Incidents d) All of the above

d) All of the above

Cassandra is acting as an Electronic Return Originator (ERO) for her client. She has prepared her client's return and will be submitting it electronically. Which of the following are examples of Cassandra's responsibilities as an ERO? a) Verifying Taxpayer Identity Numbers (TINs) b) Verifying the taxpayer's address c) Checking for suspicious or altered documents d) All of the above

d) All of the above

Jenny set up a tax practice and must comply with the standards of security and privacy. Which of the following standards must she implement in her practice? a) Jenny should use a protocol like CAPTCHA to protect her website against malicious bots b) Jenny must run weekly vulnerability scans in accordance with PCIDSS. c) Jenny's website must be registered with a domain registrar in the US accredited by ICANN. d) All of the above

d) All of the above

Peter supervises an office of tax preparers. He does not meet with clients or enter any of the return information; however, he has primary responsibility for reviewing and signing each return. Which of the following penalties may be assessed to Peter? a) $50 per return for failure to furnish a copy of the return to the taxpayer b) $50 per return for failure to furnish preparer's identifying number on the return c) $50 per return for failure to maintain copies of returns prepared or maintain a listing of clients d) All of the above

d) All of the above

Safeguarding taxpayer information is a top priority for the IRS. Which of the following is considered taxpayer information? a) Taxpayer's name b) Taxpayer's identification number c) Number of dependency exemptions d) All of the above

d) All of the above

To comply with the due diligence requirements for the EIC, the CTC/ACTC/ ODC, the AOTC, and/or HOH filing status claimed on a return or claim for refund, a preparer must: a) Meet the knowledge requirement b) Complete Form 8867 truthfully and accurately and complete the actions described on Form 8867 for any applicable credit(s) claimed and HOH filing status, if claimed. c) Submit Form 8867 in the manner required. d) All of the above

d) All of the above

Which of the following are included in the requirement for due diligence in preparing a return or claim for refund that claims Head of Household filing status? a) Determining eligibility for HH status b) Verifying accuracy of taxpayer information c) Meeting record-keeping requirements d) All of the above

d) All of the above

Which of the following constitutes a tax return for the purposes of Circular 230? a) A filed 1040 b) A filed 1040X c) A filed claim for a refund d) All of the above

d) All of the above

Which of the following penalties may be assessed to you as tax preparer? a) $50 per return for failure to furnish a copy of the return to the taxpayer b) $50 per return for failure to furnish preparer's identifying number to the taxpayer c) $50 per return for failure to maintain copies of returns prepared or maintain a listing of clients d) All of the above

d) All of the above

Willie is the owner of an accounting firm. One of Willie's employees prepares an income tax return for a client and opines that a deduction can be claimed for a bad debt. If the return is examined and the deduction is disallowed, Willie will not be subject to a preparer penalty under which of the following circumstances? a) The return preparer had a reasonable basis for the position being sustained on the merits. b) The position on the return had at least a 50% chance of being sustained on its merits. c) There is substantial authority to sustain the position taken on the return. d) Any of the above.

d) Any of the above.

An income tax preparer is required to retain a record of each tax return completed. In what format must a tax preparer keep her records? a) She must keep a copy of each return. b) She must keep an accurate list, either on paper or in a database, of the information in the returns prepared. c) She must keep a card file of her returns. d) Any one of the above methods is sufficient.

d) Any one of the above methods is sufficient.

A fraudulent return can be examined by the IRS: a) At any time during the three year period from its due date. b) At any time during the three year period from its due date or the date it was filed, whichever is later. c) At any time during the three year period from the date it was filed. d) At any time.

d) At any time.

Which of the following is an authorized IRS e-file Provider? a) An electronic return originator (ERO), who originates the electronic submission of tax returns. b) An intermediate service provider, who processes information from an ERO and returns it to the ERO. c) A taxpayer who e-files using commercially available software. d) Both an electronic return originator and an intermediate service provider who processes information and returns it to the ERO.

d) Both an electronic return originator and an intermediate service provider who processes information and returns it to the ERO.

A practitioner who encounters a questionable W-2 (i.e., a W-2 that appears to be altered, forged, etc.) should _________? a) Make corrections to the form. b) Call the police. c) Return the form to the payer. d) Contact the IRS.

d) Contact the IRS.

Which of the following returns may be electronically filed? a) Form 1040 tax returns with fiscal year periods. b) Amended Form 1040 tax returns. c) Any prior year Form 1040 tax return. d) Current year Form 1040 with APO address.

d) Current year Form 1040 with APO address.

For how long must an ERO retain Form 8879, IRS e-file Signature Authorization? a) Until the end of the calendar year b) Until the end of the return period c) For 3 years following the end of the return period d) For 3 years from the return due date or the date the IRS received the return, whichever is later.

d) For 3 years from the return due date or the date the IRS received the return, whichever is later.

A tax preparer retains copies of client returns or a list of returns prepared. For how long must the preparer retain this documentation? a) Until the end of the calendar year b) For one year from the date of filing c) For three years from the date the return was prepared d) For three years following the end of the return period

d) For three years following the end of the return period

Which of the following forms provides questions for a tax preparer completing an Earned Income Tax Credit (EITC) claim? a) Form 2256 b) Form 4454 c) Form 6647 d) Form 8867

d) Form 8867

Julie has authorized her ERO to enter the PIN on her behalf. What form does Julie need to complete and sign? a) Form 1099 b) Form 2848 c) Form 706 d) Form 8879

d) Form 8879

What form must a taxpayer appropriately sign if they use a Practitioner PIN? a) Form 2848 b) Form 8453 c) Form 8821 d) Form 8879

d) Form 8879

When a taxpayer e-files his 1040, and the ERO enters the taxpayer PIN, what documents must the ERO sign? a) The original return, the copy provided to the taxpayer, and Form 8879. b) The original return only. c) The original return and Form 8879. d) Form 8879 only.

d) Form 8879 only.

What is a paid tax preparer not required to do on a tax return he prepared? a) Sign the return b) Include his PTIN c) Include the tax preparation company's EIN d) Include the location where the return was prepared

d) Include the location where the return was prepared

Which of the following is NOT true regarding the preparing of information returns concerning employees who prepare tax returns? a) Annual listings of preparers, identification numbers, and place of work are required for preparers who employ others to prepare returns. b) The period for which the information return is required is a 12-month period beginning July 1 of each year. c) No information return is actually required to be submitted; a list is made and kept by the employing preparer. d) Information returns of income tax return preparers must be maintained by the preparer for two years.

d) Information returns of income tax return preparers must be maintained by the preparer for two years.

Vivian Blake is a tax preparer who participates in the Internal Revenue Service e-file Program as an Electronic Return Originator & Transmitter. Fred Birch has not filed his Form 1040 for tax years 2013 and 2014. Fred hires Vivian in March of 2019 to prepare and file the delinquent returns. Is Vivian allowed to electronically file the delinquent 2013 and 2014 returns? a) Yes, because the IRS prefers that taxpayers use e-file. b) Yes, because the returns were never filed. c) No, because Fred is not deceased. d) No, because the returns are not within the prior two years.

d) No, because the returns are not within the prior two years.

Must a tax preparer review and verify each document that supports the items a taxpayer claims on his tax return? a) Yes, the IRS requires that the taxpayer provide his preparer with these documents. b) Yes, the IRS requires that the tax preparer verify each document. c) No, the tax preparation process would take too long if each tax preparer had to verify every document. d) No, but the tax preparer should advise the taxpayer that the IRS can review and examine each document.

d) No, but the tax preparer should advise the taxpayer that the IRS can review and examine each document.

Which of the following is a requirement to participate in IRS E-File as an Electronic Return Originator? a) Register for e-services, and provide fingerprints when applicable. b) Complete and submit the IRS E-File Application. c) The applicant and all principals and responsible officials must pass a suitability check. d) These are all requirements for participation.

d) These are all requirements for participation.

A taxpayer's return is electronically filed on the due date. Two days later, the IRS acknowledgment indicates the return is accepted. The return is considered: a) Two days late but without penalty b) Late and subject to penalties only c) Rejected unless a valid extension form accompanies it d) Timely filed

d) Timely filed

At what point in the tax preparation process must a tax preparer furnish the tax payer with a copy of his completed return? a) After the client has paid the preparer. b) After the return has been e-filed. c) After the client signs the return. d) When the client signs the return.

d) When the client signs the return.

What is the threshold for correction of a taxpayer's e-filed and rejected return by an ERO without a new signature? a) An ERO can correct a rejected return without new signatures or authorization if changes do not differ from the amount on the original electronic return by more than $50 to Total income or AGI. b) An ERO can correct a rejected return without new signatures or authorization if changes do not differ from the amount on the original electronic return by more than $100 to Total income or AGI. c) An ERO can correct a rejected return without new signatures or authorization if changes do not differ from the amount on the original electronic return by more than $50 to Total tax, Federal income tax withheld, Refund or Amount you owe. d) An ERO can never correct a rejected return without new signatures or authorization.

a) An ERO can correct a rejected return without new signatures or authorization if changes do not differ from the amount on the original electronic return by more than $50 to Total income or AGI.

A calendar-year taxpayer has W-2 wages and withholds taxes through the year. He files his 2018 return and writes the IRS a check for his remaining 2018 tax liability on May 1, 2020. He discovers a mistake in his favor and wants to amend the return to claim a full refund, until when can he do so? a) April 15, 2022 b) May 1, 2022 c) May 1, 2023 d) April 15, 2023

a) April 15, 2022

If a preparer penalty is likely to be assessed pursuant to 26 U.S.C. Sec. 6694 (Understatement of taxpayer's liability by tax return preparer), the tax preparer: a) Can appeal the penalty before it is imposed. b) Cannot appeal the penalty. c) Can only resolve the penalty by pursuing the post-assessment procedure. d) Can file a claim for refund within thirty days of his receipt of the notice and demand.

a) Can appeal the penalty before it is imposed.

Which of the following is a proof of expense? a) Canceled check b) Form W-4 c) ATM Receipt d) Deposit record

a) Canceled check

Dan, a paid tax preparer, had not been paid for his services by his client Jill. In retribution, Dan posted Jill's confidential tax information on a public web site without her consent. Dan may be liable for: a) Criminal penalties, including imprisonment b) Criminal penalties, but not imprisonment c) Monetary but not criminal penalties d) None of the above

a) Criminal penalties, including imprisonment

IRS e-file procedures require that the taxpayer sign Form 8879 authorizing the e-filing of the return. The ERO must enter tax return information (AGI, total tax, tax withheld, refund and amount owed) on Form 8879. Which is the correct order for completing Form 8879? a) ERO enters tax return information, followed by taxpayer signature b) Taxpayer signature followed by ERO entering tax return information c) Taxpayer may sign either before or after the ERO enters tax return information d) Taxpayer must sign before the ERO enters tax return information and initial after it has been entered

a) ERO enters tax return information, followed by taxpayer signature

The phrase records of the client means _________? a) Electronic financial material created by the client before the engagement b) The practitioner's workpapers c) A document prepared and retained by the client after being contacted by the IRS d) An appraisal prepared by the practitioner

a) Electronic financial material created by the client before the engagement

What is the renewal period for a Preparer Tax Identification Number (PTIN)? a) Every year b) Every two years c) Every three years d) Every five years

a) Every year

Some returns are not eligible for the Internal Revenue Service electronic filing program. Which item listed below is generally eligible to be filed through the Internal Revenue Service electronic filing program? a) Form 1040 returns b) Any prior year tax return c) Fiscal year tax periods d) Amended tax returns

a) Form 1040 returns

A tax preparer is generally prohibited from submitting electronic returns to the IRS prior to receipt of which of the following forms? a) Form W-2 b) Form 1099-DIV c) Form 1099-MISC d) Form I-9

a) Form W-2

Which of the following documents must be filed with Form 1040? a) Form W-2 b) Form W-4 c) Form 1099-MISC d) Form 1099-INT

a) Form W-2

The FTC financial privacy rule requires financial institutions, including tax return preparers, to perform which of the following actions? a) Give their customers privacy notices b) Develop, implement and maintain an Information Security Program c) Encrypt electronically stored taxpayer data d) All of the above

a) Give their customers privacy notices

Sandra prepares Linda's income tax return. Linda sold some stock in a corporation and believes the proceeds of the stock are all a return of capital, and therefore, not included in her gross income. After research, Sandra determines that there is reasonable basis for Linda's position, but she does not believe there is a realistic possibility of success on the merits. Under what circumstances can Sandra sign Linda's return if the proceeds are not included in income reported on the return? a) If the position is not frivolous and is adequately disclosed on the return. b) If Sandra documents her disagreement with Linda's position and keeps it in her file. c) If Linda agrees in writing not to dispute any IRS challenge to the position. d) Under no circumstances.

a) If the position is not frivolous and is adequately disclosed on the return.

Ronnie provided all of his income and expense records, but as you are completing his return, you recognize that some of the information has been altered and is fraudulent. If you were to submit the return without amending the falsified information, under penalties of perjury, your conviction could include: a) Imprisonment for no more than 3 years b) Fines up to $750,000 c) A ban from filing taxes d) All of the above

a) Imprisonment for no more than 3 years

Phillip has not filed a tax return since 2006 because his income generally consists only of partnership distributions. Based on his income after deductions, he does not have to file. How long should Phillip keep records of deductions? a) Indefinitely b) 3 years c) 7 years d) He does not need to keep a record because he did not file a return

a) Indefinitely

If a calendar-year taxpayer timely obtains an extension and so files his 2019 return on June 29, 2020, but then discovers a mistake in his favor and wants to amend the return to claim a refund, until when can he do so? a) June 29, 2023 b) October 15, 2023 c) April 15, 2023 d) June 29, 20222

a) June 29, 2023

What is the monetary penalty issued to a preparer in the event that they are found to have submitted a return or claim with an unreasonable position? a) $500 or 50% of the preparer's fee, whichever is greater b) $1,000 or 50% of the preparer's fee, whichever is greater c) $1,500 or 50% of the preparer's fee, whichever is greater d) $2,000 or 50% of the preparer's fee, whichever is greater

b) $1,000 or 50% of the preparer's fee, whichever is greater

An Electronic Return Originator may resubmit a rejected return without additional signatures if the amounts for "Total Income" and "AGI" differ by no more than what amount? a) $25 b) $50 c) $100 d) $150

b) $50

What is the penalty for a preparer who refuses to furnish a taxpayer with a copy of his filed return? a) $25 b) $50 c) $100 d) $500

b) $50

What is the preparer penalty for failure to sign a return when required to do so? a) $25 b) $50 c) $100 d) $530

b) $50

What is the amount of the penalty for failing to provide a copy of the tax return to a taxpayer under §6695(a)? a) $25 for each failure b) $50 for each failure c) $100 for each failure d) $0. The preparer is not required to provide a copy of the return

b) $50 for each failure

What is the penalty for failure to retain a copy of a tax return, or a list, under §6695(d)? a) $25 for each failure b) $50 for each failure c) $100 for each failure d) $0. The preparer is only required to provide the taxpayer with a copy

b) $50 for each failure

A tax return preparer who fails to duly provide his identifying number for securing proper identification of the preparer, his employer, or both, as required, can face a penalty of: a) $25 per each failure not to exceed $26,500 per calendar year. b) $50 per each failure not to exceed $26,500 per calendar year. c) $100 per each failure not to exceed $26,500 per calendar year. d) $530 per each failure not to exceed $26,500 per calendar year.

b) $50 per each failure not to exceed $26,500 per calendar year.

A tax return preparer who fails to furnish copy of return or claim of refund to a client can face a penalty of: a) $25 per each failure not to exceed $26,500 per calendar year. b) $50 per each failure not to exceed $26,500 per calendar year. c) $100 per each failure not to exceed $26,500 per calendar year. d) $530 per each failure not to exceed $26,500 per calendar year.

b) $50 per each failure not to exceed $26,500 per calendar year.

A tax return preparer who fails to duly retain a copy or list of the name and taxpayer identification number of a taxpayer for whom he prepared any return or claim can face a penalty of: a) $25 per each failure not to exceed $26,500 per return period. b) $50 per each failure not to exceed $26,500 per return period. c) $100 per each failure not to exceed $26,500 per return period. d) $530 per each failure not to exceed $26,500 per return period.

b) $50 per each failure not to exceed $26,500 per return period.

What is the preparer penalty for a preparer who fails to comply with the requirements to ascertain information from the taxpayer regarding that taxpayer's eligibility for the EITC? a) $50 b) $530 c) $130 d) $1000

b) $530

What is the penalty for a tax return preparer endorsing or otherwise negotiating a client's return check? a) $130 per check b) $530 per check c) $1,000 per check d) $1,500 per check

b) $530 per check

If a taxpayer provides consent to a tax return preparer to use or disclose the taxpayer's information, but does not agree on a specific period for which the consent is valid, for how long is the consent valid by default? a) 6 months following consent signature b) 1 year following consent signature c) 2 years following consent signature d) 3 years following consent signature

b) 1 year following consent signature

If a taxpayer's return is rejected by the IRS and the ERO cannot fix the problem and re-transmit the return in the time prescribed, the ERO must make reasonable attempts to notify the taxpayer of the reject. How long from the time the return is rejected does the ERO have to try to contact the taxpayer? a) 12 hours b) 24 hours c) 48 hours d) One week

b) 24 hours

For how long must Form 8879 be available to the IRS? a) 1 year b) 3 years c) 5 years d) 10 years

b) 3 years

An independent CPA serving as a tax return preparer for the Unicorn Company recklessly disclosed information about the company that was discovered while preparing the tax return. Which of the following is true? a) Although considered a bad practice, no penalty can be assessed for such behavior. b) A monetary penalty can be assessed against the tax return preparer. c) A penalty can only be assessed if the disclosed information was financial in nature. d) A penalty can only be assessed if the disclosed information specifically included the names of individuals who had not agreed to be so named.

b) A monetary penalty can be assessed against the tax return preparer.

What is the penalty for willful or reckless misconduct for a preparer? a) $500 or 75% of the preparer's fee, whichever is greater b) $1,000 or 50% of the preparer's fee, whichever is greater c) $5000 or 75% of the preparer's fee, whichever is greater d) $10,000 or 50% of the preparer's fee, whichever is greater

c) $5000 or 75% of the preparer's fee, whichever is greater

Michael Young, an Authorized Internal Revenue Service e-file Provider, prepared and electronically transmitted the Form 1040 return of Vivian Blue to the Internal Revenue Service. The Internal Revenue Service notified Michael that the electronic portion of Vivian's return was rejected for processing. Which statement listed below best explains what Michael must do? a) Michael must advise the taxpayer that the return may never be filed electronically. Vivian must return to the office, sign a paper copy of Form 1040 and mail it to the Service. b) If Michael cannot correct the error with the information in his possession, he must take reasonable steps to inform the taxpayer of the rejection within 24 hours and provide the taxpayer with the reject code(s) accompanied by an explanation. c) Michael must mail a paper copy of the return to the IRS with the original Form 8879 that Vivian signed. d) If Michael cannot correct the error with the information in his possession, he must take reasonable steps to inform the taxpayer of the rejection by the return due date or within 1 week, whichever date is earlier.

b) If Michael cannot correct the error with the information in his possession, he must take reasonable steps to inform the taxpayer of the rejection within 24 hours and provide the taxpayer with the reject code(s) accompanied by an explanation.

You own a firm in a small town in Missouri. A couple comes to you to prepare their tax return. They plan to claim a $10,000 payment for fixing up their house as a medical expense. You have explained that you do not feel that this claim will be allowed but they believe it is appropriate and want it to be included. Which of the following statements is true? a) The return cannot be filed until you have determined whether the claim will be allowed or not. b) If you believe that there is at least a 33 percent chance that the deduction will be allowed if examined, then you should complete the return and adequately disclose the expense. c) The return belongs to these taxpayers and you should complete it as instructed. d) If there is not at least a 51 percent chance of this deduction being allowed, you should refuse to take the engagement.

b) If you believe that there is at least a 33 percent chance that the deduction will be allowed if examined, then you should complete the return and adequately disclose the expense.

What is an ERO required to do if the IRS rejects an e-filed return? a) Inform the taxpayer if the reason for the rejection results in a change to the return that increases the tax due by $10 or more. b) Inform the taxpayer if the ERO cannot correct or rectify the reason for the rejection. c) Assist the taxpayer to file a paper return. d) Inform the taxpayer if the reason for the rejection is that the IRS suspects that the taxpayer substantially underreported his income.

b) Inform the taxpayer if the ERO cannot correct or rectify the reason for the rejection.

A calendar-year taxpayer who did not obtain an extension waited until May 1, 2020 to file his 2018 tax return and pay the tax due. Shortly afterward, the IRS discovered an error on the return. Until when can the IRS assess additional tax? a) May 1, 2022 b) May 1, 2023 c) April 15, 2022 d) April 15, 2023

b) May 1, 2023

When should you submit your application to become an Authorized IRS E-File Provider? a) When you file your initial return electronically b) No later than 45 days prior to the date you intend to begin filing returns electronically. c) By April 15 d) You must submit an application each year before January 31.

b) No later than 45 days prior to the date you intend to begin filing returns electronically.

When a prepared return claims the earned income credit, which of the following is NOT true? a) Due diligence requirements apply. b) No special requirements apply to returns claiming earned income credit. c) The preparer may be penalized if no attempt is made to determine eligibility for the credit. d) The preparer must take additional steps to ensure that a client is eligible for earned income credit.

b) No special requirements apply to returns claiming earned income credit.

David is an ERO and did not use the Practitioner PIN method. His client, Bucky, will enter his own PIN. Does a Form 8879 need to be completed? a) Yes, because everyone must complete one. b) No, because Bucky is going to use his own PIN. c) No, because Form 8879 does not have to be completed with a Practitioner PIN. d) Yes, because it is the responsible thing to do.

b) No, because Bucky is going to use his own PIN.

Jack asked his paid tax preparer, Lincoln, to take a particular position on his tax return. Lincoln knew that the position had substantial authority to support it. However, Lincoln did not disclose the position on the return. The position resulted in an understatement of tax. Has Lincoln violated his responsibilities to prepare an accurate return? a) No, because Jack asked him to take the position b) No, because there is substantial authority for the position c) Yes, because an undisclosed position must have a reasonable basis d) Yes, because any position which decreases a taxpayer's liability is unreasonable

b) No, because there is substantial authority for the position

Rejected returns are considered: a) Filed b) Not filed c) Late d) Processing

b) Not filed

Which of the following form 1040 tax returns for individuals can be e-filed? a) Fiscal year tax return b) Returns for the current tax year and two prior tax years. c) Amended tax return d) A and B

b) Returns for the current tax year and two prior tax years.

Tax preparers are responsible for the positions taken on the tax returns they prepare and the positions must be reasonable. In order to be reasonable, an undisclosed position must be at least: a) More likely than not able to be resolved in the taxpayers favor. b) Supported by substantial authority. c) Arguable. d) Reasonably based.

b) Supported by substantial authority.

In a discussion with his rich neighbor, Domenic learns about a investment partnership that develops natural gas wells. Domenic is impressed by the immediate tax savings that the investment offers, due to deductions for intangible drilling costs that are passed through to him from the partnership. Upon investing in this partnership, Domenic paid $35,000 less in taxes than he would have otherwise. This is an example of: a) Tax Evasion b) Tax Avoidance c) Fraud d) A marketed opinion

b) Tax Avoidance

A tax preparer retains copies of client returns or a list of returns prepared for three years following the end of the return period. What is a return period? a) The period from January 1 to April 15th of each year b) The 12-month period beginning on July 1 of each year c) The 12-month period ending on April 15th of each year d) The period from January 1 to June 30th of each year

b) The 12-month period beginning on July 1 of each year

Taxpayers often elect the Direct Deposit option because it is the fastest way of receiving refunds. How is the financial institution that will receive the deposit identified? a) The ERO must obtain independent confirmation of the financial institution's routing number and customer account number from the IRS. b) The ERO may rely upon the taxpayer to provide the bank's routing number and account number. c) The ERO must obtain independent confirmation of the financial institution's routing number and customer account number from the bank itself. d) The ERO must obtain independent confirmation of the financial institution's routing number and customer account number from the FDIC.

b) The ERO may rely upon the taxpayer to provide the bank's routing number and account number.

Identify the item below that does not describe information a preparer must maintain about every return prepared: a) The taxpayer's name and taxpayer identification number. b) The date the return or claim for refund was prepared. c) The taxable year of the taxpayer (or nontaxable entity) for whom the return was prepared. d) The type of return or claim for refund prepared.

b) The date the return or claim for refund was prepared.

An e-file return is considered on time based on: a) The date it is received. b) The electronic postmark date is on or before the due date. c) When it is sent. d) All e-files are considered on time.

b) The electronic postmark date is on or before the due date.

What are the consequences if a tax preparer is required to sign a return, but refuses to do so? a) The preparer could be subject to a $25 penalty for each failure. b) The preparer could be subject to a $50 penalty for each failure. c) The preparer could be subject to a $100 penalty for each failure. d) The preparer could be subject to a $500 penalty for each failure.

b) The preparer could be subject to a $50 penalty for each failure.

Taxpayers should keep supporting documents for items shown on a return, generally: a) Until the end of the calendar year following the year for which the return was filed b) Three years from the latest of the due date of the return or the date the return was filed c) Five years from the due date of the return or the date the return was filed d) Seven years from the due date of the return or the date the return was filed

b) Three years from the latest of the due date of the return or the date the return was filed

What is the goal of the FTC safeguards rule? a) To protect the privacy of the consumer. b) To ensure the security and confidentiality of customer records and information. c) To assess the risks to taxpayer information in your office. d) To punish tax return preparers for non-compliance.

b) To ensure the security and confidentiality of customer records and information.

It is April 1 and Phil has not received his W-2 for the prior year, but he does have his final pay stub indicating YTD income, taxes withheld and benefits paid. Can his tax preparer complete and e-file his tax return? a) Yes, a W-2 isn't required when using e-file. b) Yes, if Phil completes Form 4852. He can amend the return if he receives a W-2 with different amounts. c) No, an ERO cannot e-file a return prior to receiving all W-2's under any circumstances. d) No, Phil cannot e-file if he received benefits from his employer.

b) Yes, if Phil completes Form 4852. He can amend the return if he receives a W-2 with different amounts.

Must a preparer provide the taxpayer with a copy of the return the preparer made and filed? a) Yes, or the preparer could be subject to a $25 penalty. b) Yes, or the preparer could be subject to a $50 penalty. c) Yes, or the preparer could be subject to a $100 penalty. d) Yes, or the preparer could be subject to a $500 penalty.

b) Yes, or the preparer could be subject to a $50 penalty.

Frank has electronically filed a tax return for his client, but the return has been rejected by the IRS. If he cannot rectify the reason for the rejection, how quickly must he inform his client? a) within 12 hours b) within 24 hours c) within 48 hours d) within 72 hours

b) within 24 hours

What penalty may be asserted by the IRS against a practitioner who knows or reasonably should have known the tax on a individual's return she prepared was understated due to reliance on a position that had no realistic possibility of being sustained on its merits? a) $250 b) $500 c) $1,000 d) $1,500

c) $1,000

What is the preparer penalty for unauthorized disclosure of or use of a taxpayer's information? a) $50 for each disclosure, up to an annual maximum of $26,500 b) $100 for each disclosure, up to an annual maximum of $50,000 c) $250 for each disclosure, up to an annual maximum of $10,000 d) $530 for each disclosure, no maximum

c) $250 for each disclosure, up to an annual maximum of $10,000

Last tax season, Jim prepared 600 returns but did not retain a copy or list of the returns he prepared. What penalty may Jim be subject to under IRC section 6695(d)? a) $50 b) $100 c) $26,500 d) $30,000

c) $26,500

James prepares 100 income tax returns for tax year 2019. He does not provide any clients with a completed copy of their tax return because his copier broke during tax season. What is the total amount of penalty, if any, that the IRS can impose on James for these returns? a) $0 b) $50 c) $5,000 d) $26,500

c) $5,000

Tom, a paid tax preparer, was assessed a penalty of $1,000 for taking an unreasonable position on a tax return. An Administrative Law Judge also determined that Tom acted with willful or reckless conduct on the same return. Tom's fee for preparing the return was $1,500. What is Tom's total penalty for his violations of Sec. 6694 on this return? a) $1,000 b) $4,000 c) $5,000 d) $6,500

c) $5,000

If a tax return preparer fails to retain a copy of the tax return or a list with the name and identification number of the taxpayer for whom the return was prepared, they can be penalized: a) $10 for each occurrence up to a maximum of $5,000/year b) $25 for each occurrence up to a maximum of $12,500/year c) $50 for each occurrence up to a maximum of $26,500/year d) $530 fine and up to one year in prison

c) $50 for each occurrence up to a maximum of $26,500/year

What penalty might a non-bank tax preparer be subject to for cashing a client's refund check? a) $50 b) $130 c) $530 d) $1,000

c) $530

To satisfy the earned income credit due diligence requirements, a preparer must retain all of the following EXCEPT: a) A copy of the completed Eligibility Checklist or Alternative Eligibility Record. b) A copy of the Computation Worksheet or Alternative Computation Record. c) A copy of the social security cards for the taxpayer and each qualifying child. d) A record of how and when the information used to complete the Eligibility Checklist or Alternative Eligibility Record and the Computation Worksheet or Alternative Computation Record was obtained by the preparer, including the identity of any person furnishing the information.

c) A copy of the social security cards for the taxpayer and each qualifying child.

What is the relationship between penalties for filing returns with unreasonable positions and penalties for willful or reckless misconduct? a) Each penalty is assessed independently and in its entirety - without exception. b) A penalty for an unreasonable position is added to a penalty for misconduct. c) A penalty for an unreasonable position reduces a penalty for misconduct. d) None of the above.

c) A penalty for an unreasonable position reduces a penalty for misconduct.

Which of the following people is a tax preparer? a) A person who is compensated for preparing as a fiduciary a return or claim for refund for any person. b) A person who is compensated for preparing a claim for refund for a taxpayer in response to any notice of deficiency issued to such taxpayer. c) A person who is compensated for employing others to prepare tax returns. d) All of the above.

c) A person who is compensated for employing others to prepare tax returns.

Which of the following statements is true regarding records required to be maintained by return preparers? a) A tax return preparer must keep a complete copy of each return or claim for refund filed. b) A tax return preparer must maintain a list of the names, Identification numbers, and tax years for all prepared returns. c) A tax return preparer shall retain a completed copy of tax returns, or a record of the name, tax ID number, taxable year of the taxpayer, type of return or claim prepared, and name of the individual preparer required to sign the return. d) A tax return preparer is required to keep all records for a period of 10 years following the close of the return period.

c) A tax return preparer shall retain a completed copy of tax returns, or a record of the name, tax ID number, taxable year of the taxpayer, type of return or claim prepared, and name of the individual preparer required to sign the return.

The following statements are true with respect to the IRS e-file program, EXCEPT: a) Taxpayers often elect the Direct Deposit option because it is the fastest way of receiving refunds. The Electronic Return Originator (ERO) must accept any Direct Deposit election to any eligible financial institution designated by the taxpayer. b) The Internal Revenue Service e-file Program allows taxpayers to schedule the payment for withdrawal on a future date. Scheduled payments must be effective on or before the return due date. As an example, a Provider may transmit an individual income tax return in February and the taxpayer can specify that the withdrawal be made in April as long as it is on or before the return due date. c) An authorized Internal Revenue Service e-file Provider is not considered to be an income tax preparer as long as their services are limited to typing, reproduction, or other mechanical assistance in the preparation of a return". However, they are still subject to assessment of any and all return preparer penalties by the Internal Revenue Service. d) Form 8879, IRS e-file Signature Authorization, must be signed after the return is prepared and before the electronic data portion of the return is submitted.

c) An authorized Internal Revenue Service e-file Provider is not considered to be an income tax preparer as long as their services are limited to typing, reproduction, or other mechanical assistance in the preparation of a return". However, they are still subject to assessment of any and all return preparer penalties by the Internal Revenue Service.

A penalty may be assessed on any preparer or: a) An administrative employee who enters customer information but does not have primary responsibility for the return. b) Any member of a firm who gives advice (written or oral) to a taxpayer or to a preparer not associated with the same firm c) Any person who prepares and signs a tax return or claim for refund or has overall supervisory responsibility for the advice given by the firm with respect to the return or claim d) Any officer or director of the firm, regardless of responsibilities within the firm.

c) Any person who prepares and signs a tax return or claim for refund or has overall supervisory responsibility for the advice given by the firm with respect to the return or claim

The IRS does not require any particular method of maintaining records. Which of the following method may be used? a) Checkbook method b) Electronic storage system c) Both checkbook and electronic storage system d) None of these is an acceptable method for records

c) Both checkbook and electronic storage system

If a return preparer penalty is proposed because of an understatement of tax liability and that understatement includes a change to earned income credit, which penalties might be imposed upon the preparer? a) One for understatement of tax liability. b) One for failure to be diligent in claiming EITC. c) Both penalties may be imposed, one for understatement of tax liability and a second penalty for failure to be diligent in claiming earned income credit. d) One or the other, but not both, penalties may be imposed.

c) Both penalties may be imposed, one for understatement of tax liability and a second penalty for failure to be diligent in claiming earned income credit.

Samantha Sharp, a tax preparer, prepares and electronically files Form 1040 tax returns. Samantha prepared the tax return for Tom, her client. Tom's return contained forms that were not e-file eligible, and Samantha informed him that she would need to send a paper copy of Form 1098-C to the IRS along with Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return. On March 1st Samantha electronically filed Tom's tax return, which was a refund return. On March 3rd, Samantha received acknowledgment from the Internal Revenue Service that Tom's return had been accepted. On March 10th, Tom received his refund. By what date must Samantha mail Form 8453 to the IRS? a) By March 13th, (within three (3) business days after Tom receives his refund). b) By March 5th, (within five (5) business days after the return was electronically filed). c) By March 6th, (within three (3) business days after the return is acknowledged as accepted by the IRS). d) By March 31st (All Forms 8453 signed during the month must be sent to the IRS by the last day of the month).

c) By March 6th, (within three (3) business days after the return is acknowledged as accepted by the IRS).

How is Form 8453 filed? a) By fax. b) By e-file. c) By mail. d) All of the above.

c) By mail.

Alexander Halle filed an income tax return that contained numerous errors so that his taxable income was understated. The Internal Revenue Service has discovered these errors and is looking into whether penalties can be assessed or the statute of limitations has expired. Which of the following statements is not true? a) If Halle filed his income tax return on March 25, Year One, the normal statute of limitations expires three years from the due date of the return. b) If Halle received an extension and filed his income tax return on June 9, Year One, the normal statute of limitations expires in three years from that date. c) If Halle failed to report 20 percent or more of his income, the statute of limitations is extended to six years rather than just three years. d) If Halle is guilty of tax fraud, the statute of limitations does not apply.

c) If Halle failed to report 20 percent or more of his income, the statute of limitations is extended to six years rather than just three years.

The following statements are true regarding the penalty for understatement of liability under §6694, EXCEPT: a) For unreasonable positions, the penalty is $1,000 or 50% of preparer's fee, whichever is greater. b) For willful or reckless conduct the penalty is $5,000 or 75% of preparer's fee, whichever is greater. c) If a return preparer understates tax liability on a return, the IRS will impose a penalty even if the preparer shows that there is reasonable cause and the tax return preparer acted in good faith. d) The return preparer is subject to a penalty for an unreasonable position if the preparer knew (or reasonably should have known) of the position

c) If a return preparer understates tax liability on a return, the IRS will impose a penalty even if the preparer shows that there is reasonable cause and the tax return preparer acted in good faith.

A tax return preparer must keep a copy of the tax return, or retain, on a list, the name and taxpayer identification number of the taxpayer for whom the return was prepared. The records must be available for inspection for the 3-year period following the close of the return period during which the return or claim for refund was presented for signature to the taxpayer. The return period ends on what date? a) April 30th b) May 30th c) June 30th d) July 30th

c) June 30th

Ted prepared an Earned Income Tax Credit (EITC) for a client and verified information by asking all of the questions on Form 8867. He also verified his client's identity and prepared an EIC computational checklist. What else does he need to do? a) Pay the $100 charge for filing an EITC. b) Pay the $500 charge for filing an EITC. c) Meet a recordkeeping requirement. d) Nothing. Ted is doing everything he needs to follow regulations.

c) Meet a recordkeeping requirement.

John Jones prepared the tax return for Mr. William Smith. The return of Mr. Smith contained a schedule C, wages (Form W-2) and retirement income (Form 1099-R). Mr. Smith signed a Form 8879, IRS e-file Signature Authorization, which allowed John Jones to electronically file Mr. Smith's tax return. Based upon the information in the tax return of Mr. Smith, which statement below describes the documents that Mr. Jones is required to maintain for Mr. Smith's electronically filed tax return? a) Mr. Jones must only maintain a paper copy of the tax return and W-2. b) Mr. Jones must only retain one of the signed Forms 8879. c) Mr. Jones must retain a copy of the signed Form 8879, copies of Forms W-2 and 1099-R, as well as any supporting documents that are not included in the electronic return data. d) Mr. Jones does not have to retain any of the documents used in the preparation of Mr. Smith's return. Mr. Jones should secure a signed statement from Mr. Smith that lists all the documents used in the preparation of the return, and that they were all returned to Mr. Smith.

c) Mr. Jones must retain a copy of the signed Form 8879, copies of Forms W-2 and 1099-R, as well as any supporting documents that are not included in the electronic return data.

By what time must a preparer furnish a completed copy of a return to a taxpayer in order avoid a penalty under §6695(a)? a) Within 3 days of filing the return b) Immediately after filing the return c) No later than the time it is presented for the taxpayer's signature. d) Within 5 days of filing the return if sending copies by mail.

c) No later than the time it is presented for the taxpayer's signature.

When must a tax preparer provide a taxpayer with a copy of the taxpayer's return? a) Upon request b) Within 30 days of the filing of the return c) No later than the time the return is presented for the taxpayer's signature d) No later than the time the return is filed with the IRS

c) No later than the time the return is presented for the taxpayer's signature

Can a taxpayer amend an e-filed return to change his direct deposit selection or election? a) Yes, as long as the amended return is timely filed. b) Yes, but due to the speed in which the IRS funds refunds, this kind of amendment can only be done by telephone or in person at the IRS. c) No, it is not permitted. d) No, because the e-filed return cannot be amended.

c) No, it is not permitted.

What is the maximum penalty a tax preparer may face if he does not obtain consent before using tax return information for any purpose other than to prepare, or assist in preparing, the tax return? a) $50 for each violation b) $250 for each violation c) Not more than $1,000 or imprisoned not more than one year, or both, for each violation. d) $0. The taxpayer provides consent to use tax return information when signing the return.

c) Not more than $1,000 or imprisoned not more than one year, or both, for each violation.

Tax preparers must provide an identifying number on returns which they sign. Which number is the generally accepted identifying number? a) Social Security Number b) EFIN c) PTIN d) EIN

c) PTIN

Which of the following may a tax return preparer use as identifying information to include with his or her signature on a return or claim for refund? a) Social security number b) Birth date and name c) PTIN d) All of the above

c) PTIN

Paid tax preparers should sign the returns they prepare and provide their _________? a) Social Security Number. b) Date of birth. c) PTIN. d) None of the above.

c) PTIN.

If a preparer penalty is assessed pursuant to 26 U.S.C. Sec. 6701 (Aiding or abetting an understatement of tax liability), the tax preparer can suspend collection by: a) Immediately filing an appeal of the penalty. b) Filing an appeal of the penalty within thirty days of his receipt of the notice and demand. c) Paying 15% of the penalty and filing a claim for refund within thirty days of his receipt of the notice and demand. d) Filing a claim for refund within thirty days of his receipt of the notice and demand.

c) Paying 15% of the penalty and filing a claim for refund within thirty days of his receipt of the notice and demand.

Yasmin, a federally authorized tax practitioner, prepares a client's tax return that includes an uncertain tax position. Which of the following accurately describes preparer penalties under the federal tax code related to uncertain tax positions? a) If the client's tax return is examined by the IRS, Yasmin may be exempt from penalty if there is at least a reasonable basis for the tax position b) If the position relates to a tax-shelter it must be reasonable to believe that the position would more likely than not be sustained on its merits. c) If the tax position is undisclosed, lacks substantial authority, and a reasonable basis cannot be proven, Yasmin may be subject to penalties of $1,000 or greater d) All of the above

d) All of the above

A tax practitioner may not sign a return or claim for refund if it meets which of the following descriptions? a) The return or claim lacks a reasonable basis. b) The return or claim is in an unreasonable position according to the Internal Revenue Code. c) The return or claim is a willful attempt to understate tax liability. d) All of the above.

d) All of the above.

A taxpayer must keep investment records pertaining to _________? a) Purchase price. b) Sales price. c) Commissions. d) All of the above.

d) All of the above.

Frankie is a truck driver who is also a licensed return preparer and specializes in preparing income tax returns claiming the Earned Income Credit (EIC). Frankie will not be subject to a preparer penalty for an erroneously claimed EIC if he complies with which one of the following? a) Completion of an eligibility checklist based upon information provided by the client. b) Completion of the computation worksheet for the EIC based upon information provided by the client. c) Knowledge or reason to know that the information used to determine eligibility for an amount of the EIC is correct. d) All of the above.

d) All of the above.

How long should you keep your tax records? a) 3 years if you owe additional tax. b) 7 years if you file a claim for a loss from worthless securities. c) No limit if you do not file a return. d) All of the above.

d) All of the above.

Which of the following are considered among the responsibilities of taxpayers when completing electronic returns? a) Enter a PIN or Authorize the ERO to enter or generate their PIN. b) Sign and date the proper form. c) Confirm that the direct deposit information is correct. d) All of the above.

d) All of the above.

Why is it important for a taxpayer to maintain records? a) To identify sources of income and track expenses. b) To prepare and support items on tax returns. c) To track basis of property. d) All of the above.

d) All of the above.

What are the requirements to become an IRS Authorized E-File Provider? a) Every principal and responsible official in your firm must sign up for e-services. b) Obtain approval for e-services before submitting e-file application. c) Pass a suitability check d) All of these are requirements

d) All of these are requirements

An enrolled practitioner who prepares tax returns must always: a) Sign the tax return in the preparer area when required by regulations. b) Furnish an identifying number on any return he is required or permitted to sign. c) Promptly return a clients tax records regardless of whether there is a dispute regarding payment of fees. d) All of these are requirements.

d) All of these are requirements.

What does the provider need to include on an IRS E-File Application? a) A Responsible Official who is an individual with authority over the Provider's IRS e-file operation. b) All Principals who are authorized to act for the entity in legal and/or tax matters. c) Firm name and business type. d) All of these are requirements.

d) All of these are requirements.

Which of the following current-year and timely completed tax returns can be e-filed? a) A joint return where both taxpayers have SSNs. b) A joint return where one spouse has an SSN and one spouse has an ITIN. c) A return for a taxpayer who has adopted a child that has an ATIN, but who could not be provided with an SSN in time to file. d) All of these returns may be e-filed.

d) All of these returns may be e-filed.

Which of the following statements is accurate regarding preparer retention of records? a) The preparer must retain a completed copy of each return or claim for refund prepared or retain a record, by list, card file, or otherwise of information, as required by regulation, about each return prepared. b) The preparer must retain information about the preparer of each return presented to a taxpayer for signature. This information may be retained via retention of a copy of the return or claim for refund, maintenance of a list or card file, or otherwise. c) The preparer must make the copy or record of returns and claims for refund and record of the individuals required to sign available for inspection upon request by the district director. d) All of these statements are accurate.

d) All of these statements are accurate.

What does an Electronic Return Originator (ERO) do? a) An ERO electronically submits returns it collects from taxpayers. b) An ERO electronically submits returns it prepares for taxpayers. c) An ERO originates the electronic submission of income tax returns on behalf of a third party. d) An ERO electronically submits returns it collects from, or prepares for, taxpayers.

d) An ERO electronically submits returns it collects from, or prepares for, taxpayers.

Although IRS e-file procedures do not require that the ERO submit Form 8879, IRS e-file Signature Authorization, the Form must be retained. Which of the following is a valid way to retain Form 8879? a) A card file with the name and taxpayer identification number of each taxpayer who signed Form 8879 b) A spreadsheet with the name and digitized signature of each taxpayer who signed Form 8879 c) A voice recording of each taxpayer authorizing the e-file of his return d) An electronic copy of Form 8879, in accordance with IRS recordkeeping guidelines

d) An electronic copy of Form 8879, in accordance with IRS recordkeeping guidelines

Victoria is resubmitting a client's rejected electronic tax return. In order to resubmit the return without additional signatures, which of the following must differ by no more than $14 from the rejected return to the new return? a) Total Tax b) Federal Income Tax Withheld c) Amount You Owe d) Any of the above

d) Any of the above

Trent's Tax Service prepared George Dell's 2019 return for which Mr. Dell paid Trent's $100. The return was audited and changes were made to both income and expenses on the return but no additional tax was due. These changes were the direct result of negligent actions on the part of Trent's Tax Service. Is the IRS going to penalize Trent's Tax Service for this understatement? a) Yes, Trent's may be liable for a $250 penalty for understatement of taxpayers liability due to an unrealistic position under IRC Section 6694. b) Yes, Trent's may be liable for a $250 penalty for understatement of taxpayers liability due to a negligence under IRC Section 6694. c) Yes, Trent's may be liable for a $250 penalty for understatement of taxpayers liability due to willful or reckless conduct under IRC Section 6694. d) No.

d) No.

E-file providers are subject to preparer penalties for violation of applicable laws. Which of the following is a tax preparer? a) An e-file provider who uses a computer to fill in the blank spaces on a fillable IRS form by using information provided by the taxpayer. b) An e-file provider who photocopies attachments to IRS forms and assembles them for mailing by numbering the pages. c) An e-file provider who electronically corrects transposed numbers on a completed tax return. d) None of the above.

d) None of the above.

What method does the IRS use to initiate contact with taxpayers to request personal or financial information? a) Email b) Text message c) Social media d) None of the above.

d) None of the above.

The development, implementation and maintenance of a written Information Security Program of taxpayer information by tax return preparers is: a) A recommended best practice b) Highly encouraged c) Part of Sarbanes-Oxley (SOX) d) Required by the Safeguard Rules in the Gramm-Leach-Bliley Act

d) Required by the Safeguard Rules in the Gramm-Leach-Bliley Act

Barbara is an enrolled practitioner who only prepares tax returns. One of her clients was audited by the IRS and a substantial income tax deficiency resulted. The IRS determined that Barbara was an income tax return preparer and the underpayment was due to an unreasonable position. The IRS assessed a preparer penalty. If Barbara wants to contest the validity of the penalty, what can she do? a) She can contest the validity of the penalty in tax court without making any payment of the penalty b) She can contest the validity of the penalty in tax court but has to pay the entire penalty beforehand and claim a refund c) She can contest the validity of the penalty in district court without making any payment of the penalty d) She can contest the validity of the penalty in district court but has to pay at least 15% of the penalty beforehand and claim a refund

d) She can contest the validity of the penalty in district court but has to pay at least 15% of the penalty beforehand and claim a refund

How long should a taxpayer keep copies of her sales slips and expense receipts? a) If she records the information in a checkbook, ledger, or computer program, she can discard the receipts immediately after transcribing the information. b) She can discard the documents once she files her tax return. c) She can discard the documents once she receives her refund. d) She should keep each document for as long as it may be needed for the administration of any provision of the tax code.

d) She should keep each document for as long as it may be needed for the administration of any provision of the tax code.

During a recent tax year, the Applegates filed their federal income return and reported income of $72,000. However, they omitted one $20,000 item because they incorrectly believed it to be nontaxable. The government later discovers the problem and wants to assess the tax. What is the statute of limitations? a) Three years b) Four Years c) Five Years d) Six Years

d) Six Years

Which of the following is an acceptable standard for providing advice on a position taken on a tax return? a) That a position taken will not cause a return to be audited. b) That a position taken will not be raised on audit. c) That a position taken will be settled. d) That a position taken has a one in three or greater likelihood of being sustained on its merits.

d) That a position taken has a one in three or greater likelihood of being sustained on its merits.

Where should a taxpayer file a complaint regarding identity theft? a) The Federal Bureau of Investigations b) The Internal Revenue Service c) The National Security Administration d) The Federal Trade Commission

d) The Federal Trade Commission

Under what circumstance will the Internal Revenue Service initiate contact asking for personal or financial information by email? a) When the customer's identity has been marked as suspicious. b) When the preparer of the return is found in violation of Circular 230. c) When a return is filed via an ERO. d) The IRS does not request personal information by email.

d) The IRS does not request personal information by email.

A tax preparer can be subject to penalty if a return he prepared understates a taxpayer's tax liability due to the tax preparers willful conduct or reckless or intentional disregard of rules or regulations. The penalty is: a) The greater of the understated liability or the fee for preparing the return. b) The greater of the understated liability or one-half of the fee for preparing the return. c) The greater of $1,000 or one-half of the fee for preparing the return. d) The greater of $5,000 or 75% of the fee for preparing the return.

d) The greater of $5,000 or 75% of the fee for preparing the return.

What is the preparer penalty for understatement of tax liability due to willful or reckless conduct when preparing a tax return? a) $1,000 b) 50% of the preparer's fee c) The greater of $1,000 or 50% of the preparer's fee d) The greater of $5,000 or 75% of the preparer's fee

d) The greater of $5,000 or 75% of the preparer's fee

If a position is a tax shelter, what must a preparer do to assist his client to avoid understatement penalties? a) The tax preparer must not prepare the return. b) The tax preparer must disclose the tax shelter. c) The tax preparer must be aware of substantial authority for the position. d) The tax preparer must both be aware of substantial authority for the position and must hold a reasonable belief that the tax treatment is more likely than not proper.

d) The tax preparer must both be aware of substantial authority for the position and must hold a reasonable belief that the tax treatment is more likely than not proper.

Amy is a paid tax return preparer. Because her experience is limited, she only handles basic individual returns and relies heavily on software to prepare tax returns for her clients. By using the tax preparation software, Amy is able to prepare these returns by interviewing her clients, making a few key determinations, and entering the information obtained from the clients into the tax preparation software. Does Amy need to obtain a PTIN? a) No, because she is only preparing basic returns b) No, because she uses tax software c) Yes, because she has limited experience d) Yes, because she is a paid preparer who prepares substantially all of a tax return

d) Yes, because she is a paid preparer who prepares substantially all of a tax return

Jeffrey, a paid tax preparer, advised his client Carla regarding a tax shelter. On Carla's tax return, Jeffrey included form 8275 Disclosure Statement on which he detailed the tax shelter position and the substantial authority to support it. The position resulted in an understatement of tax on Carla's return. Has Jeffrey violated his responsibilities to prepare an accurate return? a) No, because tax shelters are considered tax avoidance, not tax evasion b) No, because the position is disclosed c) No, because the position is disclosed and has substantial authority d) Yes, because the position does not meet the more likely than not standard

d) Yes, because the position does not meet the more likely than not standard

Must an ERO keep a copy of a client's Form 8453? a) No, this form is kept by the client; the ERO's file should indicate that the form was provided to the client. b) No, this form is filed electronically; the ERO is required only to keep an electronic file that contains the information from the 8453. c) Yes, the ERO must keep a copy of each 8453 for one year from the date the return was filed or due, whichever is later. d) Yes, the ERO must keep a copy of each 8453 until the end of the calendar year in which the associated return was filed.

d) Yes, the ERO must keep a copy of each 8453 until the end of the calendar year in which the associated return was filed.

Must an ERO provide an e-filer whose return has been rejected for serious problems with an explanation of why the return was rejected? a) Yes, the ERO must provide a written explanation to the e-filer of the reason for the rejection and must send it via certified mail within three business days of the rejection. b) Yes, the ERO must provide a written explanation to the e-filer of the reason for the rejection and must send it via certified mail within 24 hours of the rejection. c) Yes, the ERO must provide the taxpayer with the reject code or codes and an explanation within three business days of the rejection. Notice can be provided by telephone. d) Yes, the ERO must provide the taxpayer with the reject code and an explanation within 24 hours of the rejection. Notice can be provided by telephone.

d) Yes, the ERO must provide the taxpayer with the reject code and an explanation within 24 hours of the rejection. Notice can be provided by telephone.