TAX Test Two
How long must a person required to file an FBAR maintain specified records of foreign accounts for inspection?
5 years from April 15th of the year following the calendar year reported.
What is a 90-day letter?
A Statutory Notice of Deficiency.
Jim makes cash contributions of less than $250 to a qualified charitable organization. What type of record must he maintain in order to deduct the contribution?
A bank record showing the name of the organization, date of the contribution and amount
Who will not be given a CAF number?
A business taxpayer's employee who prepares the business's annual tax return.
Enrolled agents generally must complete continuing education credits for renewed enrollment. Which of the following describes the credit requirements?
A minimum of 16 hours must be completed in each year of the enrollment cycle
Which of the following people is a tax preparer?
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 spreadsheet with the name and taxpayer identification number, tax year of each taxpayer for whom a return was prepared, and the type of return
What authority is granted to a tax return preparer using Form 2848, Power of Attorney and Declaration of Representative?
Allow an enrolled agent to represent a taxpayer before the IRS
Taxpayers with income or expenses that receive special treatment under the regular tax system may be subject to an additional tax known as the:
Alternative Minimum Tax
Bill and Jane sold their home on June 16th. Through May 31, they made home mortgage interest payments of $1,250. The settlement sheet for the sale of the home showed $100 interest paid for the 15 days from June 1-15. How much can Bill and Jane deduct for home mortgage interest, assuming they meet all other qualifications?
$1,350
Based on the following information, what is the total allowable deduction against the decedent's estate? Mortgages and notes (receivable) $10,000 Income in respect of a decedent $5,000 Funeral expenses $12,000 Attorney fees $20,000
$32,000
What is the amount of net earnings from self employment that determines whether or not a taxpayer must file Schedule SE and pay self-employment tax.
$400
Which of the following penalties may be assessed to you as tax preparer?
$50 per return for failure to furnish a copy of the return to the taxpayer $50 per return for failure to furnish preparer's identifying number to the taxpayer $50 per return for failure to maintain copies of returns prepared or maintain a listing of clients All of the above<<<
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:
11 or more returns
Chad receives his enrollment in the last year of an enrollment cycle in the month of November. Which of the following satisfies Chad's continuing education requirement for his initial year of enrollment?
2 credits of federal tax and 2 credits Ethics
What is the penalty for understatement of tax due to negligence or disregard of the rules or regulations?
20% of the underpayment.
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?
3 years
The annual gift tax exclusion amount is allowed on which of the following gifts:
Both $30,000 cash to Friend A and $30,000 car to Friend B
Failure to file an answer to a complaint instituting a proceeding for disbarment by the original or extended deadline constitutes:
An admission of the allegations in the complaint and a waiver of a hearing.
Which of the following statements is correct?
An enrollment cycle is the three successive enrollment years preceding the effective date of renewal.
Which of the following entities are required to file Form 709, United States Gift Tax Return?
An individual
Which of the following taxpayers is eligible for the standard deduction?
An individual claimed as a dependent on another person's return
Identify the individual below from whom a tax preparer, in practice before the Internal Revenue Service, may knowingly accept assistance:
An individual who has temporary recognition to practice before the IRS.
All of the following constitute practice before the IRS, EXCEPT:
Appearing as a witness for a taxpayer
If a taxpayer sells his home during the tax year, which home mortgage interest can he deduct (assuming he meets all other qualifications)?
Interest paid up to, but not including, the date of sale
A tax preparer has an obligation to advise her client of the consequences of failing to report cash income if she:
Is told by the client that he is occasionally paid under the table.
Which of the following taxpayers qualifies for a standard deduction?
Joan - she is filing Single with earned income of $32,000
Joseph Smith, a tax preparer admitted to practice before the IRS, has represented Stephen Francis before the Internal Revenue Service and also prepared returns for Stephen in each of the last three years. Stephen was divorced last year, and his ex-wife, Lindsay, stops by Joseph's office and asks Joseph to represent her before the Internal Revenue Service with respect to the examination of her return that she filed separately from her husband in a year in which they were separated but not yet divorced. Which of the following statements is true?
Joseph may represent Lindsay, provided both she and Stephen waive the conflict of interest in writing.
Which of the following is not written by the IRS?
Judicial Decisions
Which one of the following is not an adjustment to total income in arriving at adjusted gross income?
Contributions to a Roth IRA
A practitioner is subject to which of the following standards when preparing, approving, and filing tax returns?
Due diligence.
The Alternative Minimum Tax attempts to:
Ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax.
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.
False
Regulations for safeguarding taxpayer information apply only to written and electronic documents.
False
State officers or employees are automatically qualified to practice before the IRS.
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.
False
When completing an electronic tax return for a taxpayer, only the signature of the taxpayer is required.
False
All of the following are deductible taxes, EXCEPT:
Federal income taxes
Which of the following acts is not negligence?
Filing a false return.
Charles, a sole proprietor, contributes to his self-employed pension plan. Where will he take his deduction on his income tax return?
Form 1040, as an adjustment to Income
The IRS generally can levy against property:
If over 30 days have passed after rejecting a request for an agreement.
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?
No, because the return period is before the two prior tax 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?
No, because the returns are not within the prior two years.
Mr. Salter, a widower, died and left his traditional IRA to his son Jimmy, age 40. What are Jimmy's options with regard to the inherited IRA?
None of the above
Rejected returns are considered:
Not filed
Which one of the following could prevent an individual from qualifying for the child and dependent care credit?
Not identifying the care provider on the tax return
Real estate taxes may be deducted:
Only if the taxpayer itemizes deductions
A taxpayer signs an electronically filed return by use of a _________?
PIN
An unenrolled preparer authorized by Form 8821 to receive a taxpayer's confidential tax information is unable to perform which of the following actions?
Prepare a written response to the IRS.
Which of the following tasks can be performed by any Enrolled Agent (EA) on behalf of their client?
Prepare and sign a protest to challenge examination results in the IRS Appeals Office.
Joanna is an unenrolled tax return preparer. She is authorized to perform which of the following functions?
Preparing a tax return
Catherine has observed that her client has not complied with revenue laws. Which of the following fall under her responsibilities as a practitioner?
Promptly informing the client of the noncompliance and its consequences
The development, implementation and maintenance of a written Information Security Program of taxpayer information by tax return preparers is:
Required by the Safeguard Rules in the Gramm-Leach-Bliley Act
Sara Birch became an Enrolled Agent this year. Sara is ordering business cards and advertising for her accounting and tax practice. Of the following presentations listed below, which one will violate the Circular 230 rules for advertising?
Sara Birch, Enrolled Agent, Certified to practice before the Internal Revenue Service.
A tax practitioner may charge a contingent fee for which of the following:
Services related to an IRS examination of an original tax return or amended tax return filed within 120 days of a notice of examination Services related to a claim for credit or refund filed in connection with the determination of statutory interest or penalties Services connected to judicial proceedings All of the above<<<
A taxpayer who timely filed a return wants to claim a loss for worthless securities. Until when can he do so?
Seven years from the due date of the return.
If you are self-employed you may be able to deduct 100% of the premiums paid for health insurance established under your business for yourself and your family. The following are considered self-employed for purposes of the deduction, EXCEPT:
Shareholder owning 100% of stock in a C Corporation
An enrolled practitioner who prepares tax returns must always:
Sign the tax return in the preparer area when required by regulations. Furnish an identifying number on any return he is required or permitted to sign. Promptly return a clients tax records regardless of whether there is a dispute regarding payment of fees. All of these are requirements.<<<
Of the following types of IRA accounts, which is prohibited from receiving a direct deposit of a tax refund?
Simple IRA
You are preparing the current year tax return for Mr. and Mrs. Clarence Alexander. The return was done in the previous year by John Roberts CPA. You discover that a $30,000 itemized deduction was incorrectly taken by the taxpayers in the previous year. What should you do about this mistake?
Talk with the taxpayers and urge them to file an amended return.
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?
The Electronic Return Originator (ERO).
When a taxpayer is younger than age 59.5 and takes an early distribution from a traditional IRA, there is a 10% additional tax that applies to the part of the distribution that the taxpayer must include in gross income. Which of the following circumstances represent an exception to this rule?
The distribution is to buy, build, or rebuild a first home The taxpayer receives the distributions as an annuity The distribution amount is rolled over into another retirement plan within 60 days All of the above<<<
John Small put $1,000 into a Roth individual retirement account (IRA) when he was 48 years old. When he turned 62, he took the entire amount of $1,900 out. The extra $900 had been earned over the years. Which of the following statements is true
The entire $1,900 is tax free when removed from the Roth IRA.
Edwin gave his grandson Todd $30,000. Todd is 15 years old and lives with his parents. Which of the following statements regarding the generation-skipping transfer tax is true?
The gift is subject to both the regular gift tax and the generation-skipping transfer tax.
Jerry has prepared and filed a client's tax return. His client requests he return records used during the preparation. Jerry keeps a copy of the records but returns the originals to his client. This is a permissible action for a tax preparer.
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.
True
Practice before the IRS includes anything connected to a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under law or regulations administered by the IRS.
True
For most cases, taxpayers who establish an installment agreement to pay additional taxes owed on their return have how long to repay the balance?
Up to 72 months
Can an ERO ever correct and resubmit tax return data without obtaining new signatures or authorizations from the taxpayer?
Yes, if the changes do not differ from the amount on the original electronic return by more than $14 to Total Tax.
Before the Office of Professional Responsibility commences a proceeding for censure, suspension, or disbarment of a practitioner, will the practitioner be given an opportunity to dispute the facts that will form the basis for the proceeding?
Yes, in all but unusual circumstances.
Is Circular 230 part of the Code of Federal Regulations?
Yes, it is in Title 31.
When e-filing their federal return, a taxpayer who meets the requirements to file both Form 8938, Statement of Specified Foreign Financial Assets and Form 114, Report of Foreign Bank and Financial Accounts should
attach only the Form 8938 and file the Form 114 separately.
An unenrolled return preparer cannot represent a taxpayer before the IRS ______
unless the unenrolled return preparer has an AFSP Record of Completion for the tax year of any tax return he prepares and signs after December 31, 2015.
Peter paid the annual $500 flat tax imposed by his local government for the registration of his car. How much of the local tax can Peter deduct as a personal property tax on Schedule A?
$0
Where are the proceedings for disbarment of an enrolled agent held?
At a time and place set by an Administrative Law Judge.
Alternative Minimum Tax is caused by:
Deferral items and exclusion items
Claudia receives a request from the IRS for records concerning one of her clients, but she does not have these records. After informing the requesting officer that the records are not in her possession, she must make inquiry of the concerned client about who may have the requested records, then verify this information and conduct further inquiries until the records are located.
False
Disclosure of any taxpayer information without prior consent from the taxpayer is prohibited in all cases.
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.
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.
False
For tax matters involving an estate, only an IRS power of attorney is acceptable when granting a representative power to act on a taxpayer's behalf.
False
Leonard receives a request for information about a client from the IRS. Because of the flexible timeline with IRS matters, Leonard places this request at the bottom of his priority list. Leonard has no obligation to fulfill this request in a timely manner.
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.
False
Samantha is a tax return preparer whose former coworker has been suspended from practice. This coworker has continued to practice before the IRS in violation of the suspension with help from Samantha in an advisory capacity. Samantha is protected from disciplinary action because she is not directly participating in the suspended practice.
False
Which of the following is allowed as a miscellaneous deduction on Schedule A?
Federal estate taxes on income in respect of a decedent.
What must a paid preparer do with Form 8867, Paid Preparer's Due Diligence Checklist?
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 actions will not result in a revocation of a power of attorney?
Filing a new Form 8821.
Which of the following documents must be filed with Form 1040?
Form W-2
Estimated tax liability exists when:
Individuals will owe at least $1,000 in tax after subtracting withholding and credits.
Form 8960 is used to compute the Net Investment Income Tax for the following taxpayers that have income above the statutory threshold amounts:
Individuals, Estates and Trusts
In some cases, a spouse will be relieved of the tax, interest, and penalties on a joint return. Which of the following types of relief is not relief from a joint tax liability?
Injured spouse relief.
What is another name for title 26 of the U.S. Code (26 USC)?
Internal Revenue Code
Who writes Treasury Regulations (26 CFR)?
Internal Revenue Service
What are some of the criteria for the IRS to grant a taxpayer's request to transfer an examination to an area other than the area in which the taxpayer lives.
Location of books and records. Convenience of the IRS. Convenience of the taxpayer. All of the above.<<<<
John is figuring out his Alternative Minimum Taxable Income. He must add back in deductions taken for:
Tax-exempt interest from specified private activity municipal bonds Depletion that is more than the adjusted basis Certain passive activity loss deductions All of the above<<<<
Taxes deductible as an itemized deduction include all of the following EXCEPT:
Taxes you paid on property owned by your parents or children.
John Doe gambles during the year and has gambling winnings of $13,000. In addition, he also has gambling losses of $15,000. How is this reported for federal income tax purposes?
The $13,000 is taxable income and $13,000 is an other itemized deduction.
You may have to pay AMT if, AMT:
taxable income is more than the exemption amount.
Which of the following types of income could be subject to the Net Investment Income Tax?
taxable mutual fund distribution
Duke has several traditional IRAs with deductible contributions from past years. He received a $10,000 distribution from one of his accounts at the age of 61. On his tax return, Duke reports:
the entire amount of $10,000
A taxpayer received a notice from the IRS saying a prior year's tax return had been examined, creating a tax assessment of $2,560. The taxpayer disagrees with the amount of tax assessed. The taxpayer could request an audit reconsideration in all of the following situations EXCEPT:
the full amount owed has already been paid
Qualified business income (QBI) is:
the net amount of qualified items of income, gain, deduction and loss from a qualified trade or business, only to the extent included or allowed in the determination of taxable income for the year.
In preparing Form 8867, Paid Preparer's Due Diligence Checklist, how long should a return preparer retain copies?
three years from the filing of the return
At what point in the tax preparation process must a tax preparer furnish the tax payer with a copy of his completed return?
When the client signs the return.
In which circumstance(s) can a conflict of interest exist for a tax preparer?
When the two clients were married to each other. When the two clients are married to each other but file MFS. When the two clients are a mother and son who own rental real property together. All of the above.<<<
Ben has a filing status of single. He has only one traditional IRA and his basis is $8,800. On December 31, he converts $44,000 of the $88,000 IRA value to a Roth IRA account. Ben's AGI before considering the conversion is $62,000. What amount of income is added to Ben's tax return as a result of the IRA conversion?
$39,600
What is the last date upon which a 2019 calendar year filer can contribute to his HSA for the 2019 tax year?
April 15, 2020
Lenny, age 52, and Norma, age 49, file a joint return for tax year 2019. Lenny and Norma are not covered by retirement plans. Their modified AGI is $150,000 all of which came from Lenny's wages. They wish to make the maximum allowed deductible IRA contributions for tax year 2019, which of the following is correct:
Norma may make a deductible contribution of $6,000 and Lenny may make a deductible contribution of $7,000.
A self-employed taxpayer may take a deduction on his/her personal return for ___ of the employment tax paid.
One-half (employer-equivalent portion)
Helen Hayward pays the following amounts. Which of these expenditures will she be able to use to reduce the amount that she reports as adjusted gross income (AGI)?
One-half of self-employment tax
Andy has a traditional IRA account. His IRA can invest in which of the following as an allowable investment?
One-ounce silver coins minted by the U. S. Treasury Department
Roy is 30-years-old and has a traditional IRA with a value of $100,000. Which of the following is a prohibited transaction in his IRA?
Pledge his IRA as security for a loan to return to school.
Roger Miller, single and age 75, has income of $50,000. He wants to contribute to a Roth IRA for himself. Can he?
Yes, if he received taxable compensation in the year he plans to contribute to the Roth IRA
Roy's qualified retirement plan was levied by the IRS in 2019 for delinquent tax liability he owed from his 2015 individual income tax return. The total amount levied from the retirement plan was $9,550. Roy is 31-years-old and his 2019 adjusted gross income was $135,650. Roy's penalty for early distribution is:
$-0-
Heidi, a 55-year-old single woman, received two retirement distributions during 2019 totaling $25,000. Heidi retired in July 2019 and used the distributions to pay off 3 credit cards. The first distribution, made on September 1, was for $12,000 from her employer's pension plan. The second distribution of $13,000 was made from her father's pension plan who died during 2017 at the age of 78, for which Heidi was a beneficiary. How much tax on early distributions does Heidi owe for 2019?
$0
You usually work and live in Springfield but you are assigned to a job in Indianapolis for an indefinite period of time. How much, if any, of the following monthly expenses can you take as an expense on your tax return? Rent: $2,500 Meals $ 500 Travel $ 150 round-trip airfare to go home each weekend
$0
The requirement to file the FinCEN Form 114 applies to U.S. Persons with a financial interest in or signature authority over any foreign financial account(s), if the aggregate value of these accounts, at any time during the calendar year, exceeds:
$10,000.
Mr. and Mrs. Van Winkle have three loans outstanding: $1.4 million used to buy their principal residence in 2016. In 2019 interest was $120,000 and the loan had an average balance of 1.2 million in 2019. $160,000 home equity loan used to buy a ski boat in 2019. Interest was $16,000 and the loan had an average balance of 150,000. $80,000 loan to buy a new car in 2019. Interest was $8,000 and the loan had an average balance of $75,000. How much of the 2019 interest can the Van Winkles claim as an itemized deduction?
$100,000
If the child's income from interest and dividends (including capital gain distributions) is less than _________ in 2019, the parent may elect to include that income on the parent's return rather than file a return for the child.
$11,000
John, age 51, and his wife, Susan, age 45, file MFJ. John works part-time and received $20,000 in compensation. Susan does not work. How much can they make in combined contributions to their IRAs for the tax year 2019?
$13,000
Vera and Jack (wife and husband) contributed $15,000 in cash to their synagogue during the year. They also donated $3,000 to a private foundation which is a nonprofit cemetery organization. They knew a 30% limit applies to contributions to a private foundation. Their adjusted gross income for the year was $25,000. Vera and Jacks' deductible contribution for the year and any carryover to next year is:
$15,000 with $3,000 carryover to next year
Roberto Manzela made the following contributions to his church, a qualified charity: Land with a tax basis of $4,000 and a fair value of $16,000 and shares of stock with a tax basis of $6,000 and fair value of $9,000. Both assets had been held for several years. The taxpayer's adjusted gross income (without including any gain on the stock) is $60,000. What is the limit on the amount that can be claimed as an itemized deduction?
$18,000
Eileen paid her real estate tax bill which included a base amount of $2,600 (which was based on the assessed value of her home) and a $20 per month charge for trash collection. How much can Eileen deduct on Schedule A for real estate taxes?
$2,600
John donated $100 to the United Way, $200 to Veterans of Foreign Wars, and $300 to his neighbor whose home was destroyed by a tornado. How much is John's deduction for charitable contributions?
$300
Paul paid the annual $500 tax imposed by his local government for the registration of his car. $300 of the tax is based on the car's value. $200 is based on the car's weight. How much of the tax can Paul deduct as personal property tax on Schedule A?
$300
Susan Everhardt is a single taxpayer with one child. Susan worked in maintenance during the year and reports adjusted gross income of $14,000. She had to pay exactly $1,000 this year to have her child taken care of so that she could be employed. What is the amount of child care credit that she is allowed as a reduction to her income taxes for the period?
$350
Paula won $5,000 in the lottery. She also won $200 playing bingo at her lodge hall. She is not a professional gambler. She kept meticulous records of her gambling losses, which total $6,550. How much may she deduct on her Schedule A, as Other Itemized Deductions not subject to the 2% limitation?
$5,200
What is the penalty for a preparer who refuses to furnish a taxpayer with a copy of his filed return?
$50
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:
$530 for each check.
Barry reached age 50 in 2019. Which of the following is an allowable catch-up contribution for Barry to a retirement plan?
$6,000 for a 401(k) plan $3,000 for a SIMPLE plan $1,000 for a traditional IRA All of the above
Joe has the following records of charitable contributions he made during the tax year. How much can he deduct on Schedule A, Itemized Deductions? $300 check to local church but no written acknowledgment $600 by payroll deduction of $50 per month to United Way $400 fair market value of furniture to a qualifying shelter with receipt and acknowledgment from the shelter dated February 1 of the following year. The acknowledgment does not indicate the date of the contribution.
$600
Frank is making monthly payments to his ex-wife Nancy in the amount of $1,500 per month under a divorce decree that was signed in September 2018. Of this total, $500 is intended for child support and $1,000 is for alimony. He is required to make payments for all of 2019. Frank's payments to Nancy in 2019 totaled only $14,000. How much of this amount does Nancy report as income for 2019?
$8,000
What is the highest amount a single taxpayer can show for adjusted gross income and still claim the tuition and fees deduction for 2019?
$80,000
What is the Additional Medicare Tax rate?
.9%
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?
1 year following consent signature
Susie, a tax preparer, completed a tax return for her client, Dan. Dan's return caused a conflict of interest. How long should Sue keep written consent due to the conflict of interest?
36 months
What is the relationship between penalties for filing returns with unreasonable positions and penalties for willful or reckless misconduct?
A penalty for an unreasonable position reduces a penalty for misconduct.
Which of the following people is a tax preparer?
A person who is compensated for employing others to prepare tax returns.
The option to request an online installment agreement is available, for a fee, to whom?
A taxpayer who has an outstanding federal tax liability of $50,000 or less.
Who presides over a hearing on a complaint for disbarment based on a violation of the laws or regulations governing practice before the IRS?
An Administrative Law Judge.
If a practitioner is suspended from practice by decision of an administrative law judge, what can the practitioner do?
Appeal to the Secretary of the Treasury.
When is the deadline to file FBAR Form 114?
April 15th
Which of the following is evidence of income?
Bank statements.
Which of the following is a proof of payment?
Cash receipt.
The following circumstances may create AMT liability, EXCEPT:
Charitable contributions.
Generally, which of the following rules apply to Roth IRA's?
Contributions are always non-deductible.
What is the maximum allowable deduction for contributions to a Roth IRA for 2019?
Contributions are not deductible
Which of the following statements is correct regarding a Roth IRA?
Contributions may be made at any age
Which statement pertaining to estimated tax payments is NOT correct?
Estimated tax payments are required when the withholding taxes are greater than the overall tax liability
Include Alternative Minimum Tax (AMT) on the return if the tentative minimum tax:
Exceeds normal income tax liability
A taxpayer may authorize a third party to discuss their return by completing the third party designee section of their return. This authorization only applies to attorneys, CPAs or enrolled agents.
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.
False
Advising a client how to avoid accuracy-related penalties on a return violates the limitations placed on a tax return preparer.
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.
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.
False
Modernized e-file (MeF) will not allow returns after October 15.
False
Once the client has provided records to a tax practitioner, the records become the property of the practitioner.
False
Only tax preparers employed by a tax firm must furnish a taxpayer with a copy of a return.
False
Tax practitioners who share authority over a firm's practice are protected from sanction in the event that they are found to have failed to prevent or correct misconduct by an associate, employee, or member.
False
Unenrolled tax return preparers have the same authority in practice as attorneys or Certified Public Accountants (CPAs).
False
AMT exemption amounts are based on:
Filing status
Which of the following statements is correct regarding electronically filed returns?
Fiscal year individual tax returns may not be electronically filed.
The tax collection period is suspended for all of the following EXCEPT:
For a period of 6 months after an appeal of a tax court decision regarding innocent spouse relief.
Which funds cannot be transferred to a taxpayer's traditional IRA without tax consequence?
Funds from a traditional IRA that the taxpayer inherited from his brother
In general, which of the following items are allowable deductions against a decedent's estate (Form 706)?
Funeral Expenses Mortgages (decedent's liability) Charitable Bequests All of the above<<<
A married couple can appoint a tax preparer as a representative regarding a return they filed MFJ by
Having both husband and wife execute separate Forms 2848.
In a year when there is no waiver of the required minimum distribution (RMD), what penalty could be imposed upon a taxpayer who fails to take his RMD?
He will have to pay a 50% excise tax on the amount that was not distributed as required.
What is a paid tax preparer not required to do on a tax return he prepared?
Include the location where the return was prepared
Molly is a practitioner who willfully failed to sign a tax return even though federal tax law requires the signature. The IRS may sanction Molly under:
Incompetence and Disreputable Conduct
Rodney is an enrolled agent who wants to receive the IRS Annual Filing Season Program Record of Completion. He takes an Annual Federal Tax Refresher (AFTR) course from an approved IRS Continuing Education Provider. How does this impact his continuing education requirements?
It has no impact for AFSP or his EA continuing education requirements.
Jenn and Steve sold their investment property in February. Because of this, they estimate owing $30,000 in taxes. They did not have tax liability in the previous year. Are they required to pay estimated tax on April 15?
No, because they had no tax liability in the previous year.
Peter and his son lived with his mother all year in 2019. Peter is 25 years old, and his only income was $9,300 from a part-time job. His mother's adjusted gross income was $15,000 and all her income was from her job. Which of the following is NOT correct?
Peter is a qualifying child for his mother.
Which of the following is NOT conduct for which a tax preparer may be sanctioned under Circular 230?
Refusing to provide information to an IRS agent when the enrolled agent reasonably believes that the information is privileged.
An unenrolled tax return preparer with an AFSP Record of Completion is authorized to do which of the following:
Represent taxpayers before customer service representatives
Which of the following is practice before the IRS?
Representing a client in connection with an IRS audit.
What is not one of the criteria for transferring a pending examination to a different district?
Requirements of local law
Ruby is going to pay her estimated tax with a money order. Which of the following information must be included on her Estimated Tax Payment voucher?
Social Security Number Address Payment amount as indicated by the money order All of the above<<
All of the following are non-deductible taxes, EXCEPT:
State income tax
A taxpayer should file Form 5329 to calculate which of these taxes?
The additional taxes for excess accumulation, excess contribution, and early distribution on various types of plans.
Which of the following applies to the allowable credit for prior year minimum tax?
The allowable credit cannot reduce the current year's tax below the current year's tentative minimum tax.
Which of the following is NOT a required component of a complaint against a circular 230 practitioner?
The complaint must notify the respondent an answer is due within 15 days from the date of service.
A refund may be directly deposited into which individual retirement account?
Traditional IRA Roth IRA SEP-IRA All of the above<<<
Mary Ellen Leahy received a Notice of Deficiency. In order to stop interest from accruing she paid the tax assessed while she prepared her petition for Tax Court. Is this permissible?
Yes, although it is not required.
An Enrolled Agent (EA) can represent a taxpayer
before any administrative level of the IRS
The Net Investment Income Tax applies to certain net investment income, which includes:
interest, dividends, capital gains, rental and royalty income, reduced by expenses properly allocable to the income
Who must sign Form 8453?
neither
Qualified business income (QBI) does not include income earned through:
performing services as an employee capital gains interest or dividends all of the above <<
How can a taxpayer terminate a filed power of attorney?
By filing a new Form 2848.
Elaine and Hugh divorced on September 1, 2019. As part of the divorce decree, beginning in September, Hugh agreed to pay Elaine's last tuition payment of $8,000, child support payments of $500 per month, and $1,500 a month for the mortgage payment on a home titled in his name. Elaine and the children will continue to live in the home. What is the amount that Hugh can deduct as alimony for 2019?
$0
Withdrawals, other than required distributions, from a qualified plan (QP) or IRA maintain tax deferred treatment as long as the funds are rolled over into another QP or IRA within how many days?
60
An active member of the US Armed Forces may deduct qualified moving expenses from gross income. Which of the following items is considered a qualified moving expense?
Airfare for the taxpayer's spouse to fly to the new duty station (the taxpayer drove separate)
Regarding retirement plans, prohibited transactions are transactions between the plan and a disqualified person. Which of the following is not exempt from the prohibited transaction rules?
An employer whose employees are covered by the plan
Scott McTavish made a rollover contribution from his traditional IRA to a newly created Roth IRA on December 1, 20X1. Also, on February 1, 20X3 he made another rollover contribution from an employer IRA to the same account. Which of the following is correct?
He may not withdraw funds tax-free earlier than January 1, 20X6.
A contribution to a traditional individual retirement account (IRA) is NOT deductible for tax year 2019 in which of the following situations:
The taxpayer's only source of compensation is taxable interest.
Who can contribute to a taxpayer's HSA?
All of the above
Tom Johnson has an IRA account. He wants to expand his IRA's portfolio into other sorts of investments. What can he use his IRA funds to purchase without penalty?
Gold bullion
Jason is a doctor who provides humanitarian services for the Red Cross. He is required to file a US tax return. He went to Haiti to perform duties for the Red Cross during Operation Unified Response, which was designated as a contingency operation. He arrived in Haiti on December 1, 20X1, and returned home April 21, 20X2. Without considering a potential leap year, when is the latest date that Jason can file and pay his 20X1 taxes?
Jason must file and pay his 20X1 taxes by January 31, 20X3
On June 30, 2019, John Smith made a gift of $10,000 to his daughter. John will need to file a gift tax return (Form 709) on or after January 1, 2020, but no later than:
John will not have to file a gift tax return for this gift
Which of the following is NOT a requirement for record retention of a paid tax preparer?
Maintain a copy of the software used, if any, in preparing each year's returns
If a client requests a return of their records, the practitioner:
Must promptly return all records which are necessary to comply with federal tax obligations
During the course of examining Ollie's income tax return, the Revenue Agent required information from third-party sources. In which of the following circumstances is the Revenue Agent NOT required to give Ollie reasonable notice before contacting third parties?
Pending criminal investigation Providing notice might result in reprisal against the contact Ollie authorizes the contact All of the above<<<
Which of the following is disallowed for a practitioner under disbarment or suspension from practice before the IRS?
Performance of any action related to practice before the IRS Assisting a non-disciplined practitioner with matters related to practice before the IRS Receiving assistance from a non-disciplined practitioner with matters related to practice before the IRS All of the above<<<
Tom Smith has been doing very well playing cards in a regularly held illegal poker game. He has won nearly $50,000. Because he knows his wife disapproves of gambling, he has not told her about any of this and has kept the money he's won in a box in their attic. The IRS found out about the card game and sought to recover taxes due from Tom and his wife, who have always filed MFJ. What should his wife do to protect herself from liability?
Promptly file an innocent spouse form.
The earned income credit is available for _________?
Resident aliens filing joint returns
Miranda is a tax practitioner with principal authority and responsibility for her firm's practice. One of the employees of her firm is found to have engaged in a pattern of practice which violates rules and regulations for tax return preparation. Miranda discovered this fact but had yet to take action. For which of the following will Miranda be subject to discipline, herself, if found to be true?
She did not take reasonable steps to ensure that the firm complies with rules and regulations She knew of the practice, but did not take prompt action to correct the noncompliance Both of the above<<
Kristin picked up some odd jobs over the holiday break and made $385. This is her income for the entire year. Which of the following statements is true?
She does not need to report the income.
Before filing Form 2848, an enrolled agent must make sure that the Form includes which of the following numbers?
The Enrolled Agent's enrollment card number. The Enrolled Agent's CAF number if assigned. The Enrolled Agent's PTIN number. All the above.<<
Who is the owner of an EFIN?
The firm owns the EFIN.
A representative who signs a Form 2848, Power of Attorney, declares under penalty of perjury that he or she is aware of which of the following:
The regulations in Treasury Department Circular No. 230.
The qualified business income deduction is a(n):
deduction from adjusted gross income
If a taxpayer had excess Social Security tax withheld. They may be able to claim the excess as a credit against their income tax on their income tax return, if the taxpayer:
had more than one employer and too much social security tax withheld
A practitioner admitted to practice before the IRS can be sanctioned under Circular 230 in each of the following ways EXCEPT:
imprisonment
Mr. Green must use a wheelchair. Upon advice from his doctor, he installed an elevator and widened the front entrance of his house, incurring $10,000 and $3,000 in respective costs. The addition of the elevator increased the fair market value of his house by $8,000. Mr. Green decided to join a health club primarily to improve business contacts and for recreational purposes. He paid a $1,250 annual membership fee to make use of this facility. Compute Mr. Green's currently allowed medical expense.
$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?
$5,000
What is the total amount of savings bonds that a taxpayer may purchase with a single tax refund?
$5,000
Jerry has two dependent children, Greg and Mandy, who are attending an accredited college. Greg is a senior who spent $7,000 for tuition and fees for his 4th year. Mandy, a freshman with no prior postsecondary education, had tuition expenses of $4,000. Jerry meets all the income and filing status requirements for the education credits. There is no tax-free assistance to pay these expenses. Jerry's tax liability before credits equals $14,000. What is the maximum education credit that Jerry may claim on his tax return?
$5,000 American Opportunity Credit
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?
$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.
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?
$50
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?
$50
What is the amount of the penalty for failing to provide a copy of the tax return to a taxpayer under §6695(a)?
$50 for each failure
What is the penalty for failure to retain a copy of a tax return, or a list, under §6695(d)?
$50 for each failure
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:
$50 for each occurrence up to a maximum of $26,500/year
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:
$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:
$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:
$50 per each failure not to exceed $26,500 per return period.
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?
$50 per return for failure to furnish a copy of the return to the taxpayer $50 per return for failure to furnish preparer's identifying number on the return $50 per return for failure to maintain copies of returns prepared or maintain a listing of clients All of the above<<<
Gail, who is married, gave a guitar signed by Elvis Presley's barber worth $50,000 to her brother, Ron. Gail's basis in the guitar is $20,000. What amount will Gail report as the value of the gift on Form 709?
$50,000
The installment agreement is one of the acceptable methods of paying off a tax debt to the United States Treasury. Financial information on a Collection Information Statement may be required as a condition of the installment agreement. Generally, an installment agreement will be accepted without this statement if the dollar amount is:
$50,000 or less
What is the penalty for willful or reckless misconduct for a preparer?
$5000 or 75% of the preparer's fee, whichever is greater
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?
$530
What is the penalty for a tax return preparer endorsing or otherwise negotiating a client's return check?
$530 per check
Michael, an active duty member of the US Army, incurs the following expenses when he moves duty stations from Texas to Georgia. $158.40 in mileage (880 miles x 18 cents) $75 tolls $300 for lodging $200 meals If Michael is reimbursed for 100% of the above expenses, how much of the reimbursement can be excluded from gross income?
$533.40
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?
$26,500
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)?
$26,500
What is the maximum preparer penalty for failure to sign multiple tax returns in a single year when required to do so?
$26,500
Denise had college tuition expenses of $15,000. To help pay her tuition, she took an early distribution from her IRA for $12,000. How much of the distribution will be subject to the 10% additional tax because she is younger than age 59.5?
$0
Frank's car was completely destroyed in an automobile accident for which Frank was at fault. He did not file a claim with his insurance company because he feared his premiums would be raised. His loss was $4,500. His policy had a $1,000 deductible. How much casualty loss can Frank claim on his return (before the deduction limits)?
$0
What is the fee to receive an EFIN from the IRS?
$0
Jake takes an early distribution of $15,000 from his IRA and uses the funds to help him purchase his first home. How much of the distribution is not subject to the early withdrawal penalty?
$10,000
Matt paid interest as follows: $100 on his personal credit card. $200 on funds borrowed in order to purchase $6,000 in tax-exempt securities. $500 interest on his personal car loan. He does not use his car for business. $10,000 on his home mortgage. What is the amount of Matt's deductible interest?
$10,000
Sophia is requesting an installment plan to pay taxes owed on her return. She has filed all returns and paid all amounts owed for the past five years, and the IRS has determined that she cannot pay the amount in full by the due date. She agrees to pay the full amount within three years and to comply with all tax laws throughout the agreement. The IRS must accept Sophia's request as long as she owes no more than what amount?
$10,000
George had the following income and expenses: Interest and dividend income of $8,000 Gross wages of $100,000 Margin interest of $10,000 Mortgage interest of $6,000 Interest on a mobile home used as a second home $3,000 Credit card interest of $2,000 How much interest can George deduct on Schedule A?
$17,000
What is the maximum amount of contributions that a single taxpayer may consider for purposes of calculating the Credit for Qualified Retirement Savings Contributions (Form 8880)?
$2,000
When a child has more than _________ in income from interest, dividends, or other investments in 2019, part of that income may be taxed at the parent's tax rates or at the estate and trust's tax rates, instead of the child's tax rates.
$2,200
Gil is 51-years-old and received two retirement distributions from retirement accounts during the current tax year. All of the distributions were used to pay off Gil's credit card debt. The first distribution was in May for $25,000 from a traditional IRA that he established in 2012. This was a complete liquidation of the entire IRA account. The second distribution was in August for $10,000 from a 401(k) plan Gil had with a former employer. This was the first of a series of equal annual distributions Gil is taking from the 401(k) based upon his life expectancy. How much is Gil's penalty on early distributions?
$2,500
Jim makes his mortgage payments on the 1st of every month. In addition to the $1,200 mortgage, he includes $300 which goes into escrow for payment of homeowner's insurance and real estate taxes. During the year, the bank paid $2,800 in real estate tax and $500 in homeowner's insurance for Jim from his escrow account. How much of the amount paid for real estate tax and homeowner's insurance can Jim deduct on Schedule A?
$2,800
Steve has qualified business income and qualified business losses from the following: Nautical Boats $100,000 loss carryover from 2017 allowed in 2019 Nautical Boats $250,000 qualified business income from 2019 Sailing Ships $50,000 qualified business loss from 2019 What is Steve's qualified business income or loss for 2019?
$200,000 qualified business income
Trudy, age 46, is single. Her wages were $16,600. Her permanently disabled child, Brandy, age 26, and Trudy's 10-year-old son, Juniper, lived with her the entire year. Use the following excerpt of the Earned Income Tax Credit table to compute Trudy's earned income credit. Earned Income Credit (EIC) Table - (excerpt, not full table) for Single, Head of Household, or Qualifying Widow(er):
$4,985 (Credit two children)
What is the preparer penalty for unauthorized disclosure of or use of a taxpayer's information?
$250 for each disclosure, up to an annual maximum of $10,000
A married taxpayer filing jointly may owe Net Investment Income Tax if modified adjusted gross income exceeds which of the following thresholds:
$250,000
For 2019, a .9% Additional Medicare Tax applies when income exceeds one of the following threshold amounts:
$250,000 Married filing jointly $200,000 Single, Head of household, or Qualifying widow(er) $100,000 Married filing separately Both A and B are correct
Janet and David have three children all under the age of ten. The twins, who are three years old, attended Pre-School Nursery, Inc., costing a total of $4,000. Mark, who is nine, attended After-School Nursery, Inc. at a cost of $2,500. Janet has earned income of $5,000 and David earns $45,000. What amount of childcare expenses are to be used to determine the credit?
$5,000
Jeremy decided to itemize on his tax return. He has the following receipts. Compute the amount of tax deductions he can take on his Schedule A, Itemized Deductions. State income tax $3,000 Federal income tax $12,000 County real estate tax $2,000 Fee for his car inspection that he uses only personally $50 Homeowners' association fees on his personal home $500 Self-employment tax $1,000
$5,000
John and Rebecca are married, both are employed, and they have three children all under the age of 10. The two youngest children are in preschool and the oldest child is in grade school. They claim their children as dependents and file a joint return. Their adjusted gross income (AGI) is $35,000. John earned $29,000 and Rebecca earned $6,000. During the year, they paid $2,000 each for the two children to attend preschool. They also paid Rebecca's mother $3,000 to watch the oldest child after school. How much of their childcare payments are eligible to calculate the child and dependent care credit on their return?
$6,000
Which of the following is correct regarding tax credits on an individual income tax return?
A. Non-refundable credits only reduce tax B. The IRS treats refundable credits the same as payments of tax C. Most tax credits are refundable D. Both A and B are correct<<
Sharon Li is filing her income tax return for the current year. She has a number of costs and has come to you for advice. Which of the following expenses can reduce her tax bill?
Amount paid for child care costs to allow person to be employed
A penalty may be assessed on any preparer or:
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
Of the following, who is always considered an income tax return preparer?
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.
Ray was suspended from practice for four months by the Office of Professional Responsibility. Which of the following is Ray permitted to do during the period of suspension?
Appear as a witness for a taxpayer.
Which of the following is NOT practice before the IRS?
Appearing as a witness for a taxpayer.
Rachel is due a refund for overpayment of taxes. She can do which of the following with the amount to be refunded?
Apply the amount to her estimated tax liability for the following year Request the amount be refunded in the form of a check Request the amount be deposited directly into her checking account All of the above<<
For a taxpayer who reaches age 70.5 in 2019, distributions from qualified retirement plans must begin no later than:
April 1 of the year that follows the later of, the calendar year in which you retire from employment with the employer maintaining the plan or you reach age 70.5
James must renew his status as an enrolled agent practitioner. He submitted his application for renewal timely on November 15, 2019. What is the effective date of renewal for his enrollment?
April 1, 2020
Juan, a single man, retired under a qualified employee plan in 2018. He will reach age 70 1/2 on August 20, 2019. By what date must Juan receive his first required minimum distribution?
April 1, 2020
Lila must apply to renew her enrollment with the IRS by Jan 31, 20X1. When may she destroy records documenting her continuing professional education from 20X1?
April 1, 20X8
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?
April 15, 2022
Becky is single and works for a small magazine publisher. She was not covered by a qualified plan at her place of employment during the tax year. She establishes an IRA for the tax year and contributes $5,000. Which of the following can she NOT purchase as an investment within her IRA?
Artwork
Mike is a tax preparer. For the past five years, the information that Anne provided Mike to prepare her return included a Schedule K-1 from a partnership showing significant income. However, Mike did not see a Schedule K-1 from the partnership among the information Anne provided to him this year. What does due diligence require Mike to do?
Ask Anne about the fact that she did not provide him with a Schedule K-1.
Patrick receives a salary from his employer. To avoid having to make estimated tax payments on his other income, which of the following is an option?
Ask his employer to take more tax out of his earnings.
A fraudulent return can be examined by the IRS:
At any time during the three year period from its due date. At any time during the three year period from its due date or the date it was filed, whichever is later. At any time during the three year period from the date it was filed. At any time.<<<
Which of the following statements about a parent's election to report their child's interest and dividend income is incorrect?
At the end of the tax year, the child must be under age 17 (or under 21 if a full-time student)
Julie, who lives in Washington, DC, operated a business without books and records. Her business income and expenses were reported on Schedule C (Form 1040). Julie's tax return for 2017 was examined and substantial adjustments were proposed. Julie disagreed with the adjustments and wants to take her case directly to Tax Court. A Statutory Notice of Deficiency was issued to Julie by the IRS Area Director. Julie can file a petition for a Small Tax case before the U.S. Tax Court during which of the following periods beginning from the date of the issuance of the notice?
90 days
Qualified business income (QBI) is the net amount of qualified items of income, gain, deduction and loss from a qualified trade or business. QBI includes income earned through a business operated as a: 1 Sole proprietorship 2 Partnership 3 S corporation 4 Trust or estate 5 C corporation
1, 2, 3, 4
The Section 199A deduction applies to: Qualified business income (QBI) Qualified real estate investment trust (REIT) dividends Qualified publicly traded partnership (PTP) income Qualified cooperative dividends
1, 2, 3, 4
If a child has investment income, the parent may elect to include that income on the parent's return rather than file a return for the child. The parent can make that election on Form 8814 only if the following conditions are met: 1). The child was under age 19 (or under age 24 if a full-time student) at the end of the year 2). The child had income only from interest and dividends (including capital gain distributions), and the child's gross income was less than $11,000 in 2019 3). The child is required to file a return unless the parent makes this election 4). The child does not file a joint return for the year 5). No estimated tax payment or prior year overpayment applied to this year under the child's name and Social Security number, and no federal income tax was withheld from the child's income
1, 2, 3, 4, 5
An individual taxpayer's Total Tax includes: 1. income tax 2. alternative minimum tax 3. non-refundable tax credits 4. refundable tax credits 5. other taxes
1, 2, 3, 5
During 2018, Mary gave several gifts to relatives. Which of the following gifts must be reported in an annual gift tax return? $25,000 to her mother to help pay for medical expenses A $20,000 Federal tax-exempt municipal bond to her sister 100 shares of stock to her daughter (Mary's basis in the stock was $10,000 and the fair market value at the date of gift was $20,000) $20,000 to a qualified university for her son's dormitory fees
1, 2, 3, and 4
Generally, how long does the IRS have to collect outstanding federal taxes?
10 years from the date of assessment.
What is the penalty for distributions from a traditional IRA before age 59.5?
10% of the distribution
Parker has $90,000 income from self-employment. What is his self-employment tax rate?
15.3%
Lantern Corporation is in the process of dissolving and has filed a request with the Internal Revenue Service (IRS) for a prompt assessment. Assuming all other requirements are met, if the request is granted, the period within which the IRS may assess a tax liability is shortened to how many months?
18 months.
What is the minimum age at which an individual may become a tax return preparer?
18 yrs
How many continuing education credits does an enrolled agent need to complete if he or she is initially enrolled during an enrollment cycle?
2 hours of qualifying continuing education credits per month AND 2 of those hours must be ethics per year.
The child and dependent care credit is a percentage of eligible expenses. What is the range of the percentage and how is the percentage determined?
20-35%, based on AGI
John, a single taxpayer, died on March 3, 20X2. Based on the following information, determine the value of John's gross estate. FMV on John's date of death $250,000Life insurance on John's life (payable to John's estate) $700,000John's revocable grantor trust $50,000Stock given to John's son in 20X1 (no gift tax was paid)
950,000
What are grounds for censure, suspension, or disbarment and/or the imposition of a monetary penalty?
A practitioner is shown to be incompetent or disreputable. A practitioner fails to comply with any part of Circular 230. A practitioner, with intent to defraud, willingly and knowingly, misleads or threatens a client. All of the above.<<<
Which of the following statements is true?
A practitioner must exercise due diligence in determining the correctness of oral or written representations made by the practitioner to clients with reference to any matter administered by the Internal Revenue Service.
Censure refers to which of the following types of sanctions imposed on a tax practitioner for incompetence or disreputable conduct?
A public reprimand with possible conditions for future practice
Which of the following statements is NOT true regarding the Child Tax Credit for 2019?
A qualifying child must be under age 13 at the end of 2019.
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?
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?
24 hours
Dan files his taxes jointly with his wife. Their 2019 alternative minimum taxable income (AMTI) is $1,165,000, which exceeds their AMT exemption. Dan must reduce his exemption by what percentage of excess AMTI?
25%
What is the flat tax rate applied to Alternative Minimum Tax Income in calculating a taxpayer's tentative minimum tax for 2019?
26% up to $194,800, 28% thereafter
For how long must Form 8879 be available to the IRS?
3 years
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?
3 years
A claim for refund must be filed?
3 years from date for filing the original return or 2 years after paying the tax, whichever is later
How long should you keep your tax records?
3 years if you owe additional tax. 7 years if you file a claim for a loss from worthless securities. No limit if you do not file a return. All of the above.<<<
Melissa has published a schedule of fees for her tax preparation services. For how long after the last date of publication must these fees remain the same?
30 days
Looking to drum up new customers, Able Tax Preparation company publishes a discounted fee schedule in the local newspaper. How long must they adhere to that schedule before they may make a change?
30 days from the last date of publication
Jim gave his church a gift of capital gain property that he values at its FMV of $5,000. What is the AGI limit for this contribution to a qualified charitable organization?
30%
What is the AGI limit for contributions of capital gain property to a 50% organization when figuring the deduction using the fair market value without reduction for appreciation?
30%
What tax rate applies to most types of U.S. source income received by a nonresident alien?
30%
When the law requires withholding on a payment of U.S. source income to a nonresident alien, the payor must generally withhold at what rate?
30%
Qualified business income (QBI) of the taxpayer does not include:
A reasonable compensation paid by an S corporation B guaranteed payment for services rendered, and, an amount paid or incurred by a partnership to a partner, acting other than in his or her capacity as a partner, for services both A and B are correct
Which of the following is considered a qualified home for purposes of the home mortgage interest deduction?
A second home A condominium A home in which you live for half the year and rent to others for the other half All of the above <<<
Which of the following individuals is not a qualifying person for the child and dependent care credit in 2019?
A spouse who is a fulltime student at a qualifying educational institution
Due diligence requires that ________:
A tax preparer always use reasonable care in evaluating another preparer upon whose work product the first agent will rely.
Jeremiah, a cash basis taxpayer, is a salesman. He sold $100,000 of merchandise in March 20X1. His commission is 2% of sales. In November 20X1, he received $2,000 in commissions for those sales and an advance of $7,000 in commissions for future sales in 20X2. What amount must Jeremiah include in his income for 20X1?
9,000
Which of the following statements is true regarding records required to be maintained by return preparers?
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.
Which of the following is true about foreign income taxes paid?
A taxpayer may take either an itemized deduction or a credit for foreign income taxes paid.
In which of the following situations could a taxpayer possibly claim the Child and Dependent Care Credit?
A taxpayer who has their 20 year old niece provide childcare for $150 per week.
What is authorized by a duly filed Form 8821?
A third party can request a taxpayer's confidential tax information.
Danielle expects a large refund this year. She was shocked when her husband informed her that all of her refund will be applied against his delinquent student loans when they file a joint return. Her tax preparer suggested filing an injured spouse claim as a way to prevent this from happening. Which of the following is NOT a proper method for filing an injured spouse claim?
Attach Form 8379 with Form 1040 and file as MFS
Which of the following individuals may practice before the IRS?
Attorneys Certified Public Accountants (CPAs) Enrolled Agents All of the above<<<
For what purpose does a taxpayer use Form 8821, tax information authorization?
Authorize the IRS to provide specific confidential tax return information to anyone designated
In the event a taxpayer who has received a Notice of Tax Due and Demand For Payment fails to pay the taxes shown on the notice and also fails to contact the IRS to challenge the notice or otherwise work something out, the IRS can do any of the following, without further due process, EXCEPT:
Compel a sale of the taxpayer's residence
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?
Completion of an eligibility checklist based upon information provided by the client. Completion of the computation worksheet for the EIC based upon information provided by the client. Knowledge or reason to know that the information used to determine eligibility for an amount of the EIC is correct. All of the above.<<<
Who writes the tax laws found in the Internal Revenue Code (26 USC)?
Congress
A practitioner who encounters a questionable W-2 (i.e., a W-2 that appears to be altered, forged, etc.) should _________?
Contact the IRS.
What is a nonresident taxpayer able to report on Form 1040NR-EZ?
Deductions for state and local income taxes
Sally had to pay Alternative Minimum Tax (AMT) this tax year. She can recapture that amount in future years in the form of a credit if the AMT tax paid was due to:
Deferral items
Many individual tax credits are nonrefundable. That term means that the credit cannot be larger than the amount of income tax. If a taxpayer has income taxes of $200 but a Lifetime Learning Credit of $290, the extra $90 does not generate a refund to the taxpayer. Which of the following income tax credits is refundable? In other words, it can generate a refund even if no tax payments have been made by the taxpayer.
Earned income credit
Which of the following are considered among the responsibilities of taxpayers when completing electronic returns?
Enter a PIN or Authorize the ERO to enter or generate their PIN. Sign and date the proper form. Confirm that the direct deposit information is correct. All of the above.<<<
Dr. Steve and Joyce are married and have total adjusted gross income of $190,000. Taxable income is $169,200 after claiming deductions. For 20X2 the tax on $169,200 would be $43,960. They have withholding of $36,960 during 20X2. In 20X1 they paid a total of $42,000 in taxes for the year on an adjusted gross income of $185,000. What is the requirement for estimated taxes in 20X2?
Estimated payments of $2,604
What are the requirements to become an IRS Authorized E-File Provider?
Every principal and responsible official in your firm must sign up for e-services. Obtain approval for e-services before submitting e-file application. Pass a suitability check All of these are requirements
When must an enrolled agent apply for renewal of his enrollment?
Every third year that follows the initial enrollment term.
What is the renewal period for a Preparer Tax Identification Number (PTIN)?
Every year
Select all that apply: Unenrolled tax return preparers may not:
Execute waivers Receive refund checks Execute closing agreements All of the above<<<
If the IRS files a Notice of Federal Tax Lien it will ______
Expire on its own after ten years.
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?
Extended Validation SSL Certificate Weekly external network vulnerability scans Reporting of Security Incidents All of the above<<<
Which of the following statements about foreign tax compliance is false?
FBAR Form 114 is submitted to the Internal Revenue Service.
A tax preparer may be sanctioned by the Secretary of the Treasury if the preparer:
Fails to sign a tax return he prepares without reasonable cause.
All of the following constitutes a failure under Section 6695, EXCEPT:
Failure to enclose written notification of errors or omissions known to preparer
All of the following are considered examples of disreputable conduct for which a tax preparer can be disbarred or suspended EXCEPT:
Failure to timely pay personal income taxes.
What can a taxpayer do if his charitable contributions for the year are above the 50% or 30% limits?
Carry over the excess in each of the next 5 years
A document prepared by a practitioner must be returned upon request to the client, even if the client fails to meet contractual obligations to pay fees charged for the preparation.
False
A federally-authorized tax practitioner must supply the IRS with any requested information regardless of whether or not the practitioner believes the information to be privileged.
False
A tax preparer must promptly advise a client if they know of any error or omission on a tax return. As long as notification is made in writing, the preparer can sign the return but must send a copy of the written notification along with the return when filed.
False
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.
False
A tax return preparer must keep a full copy of a completed tax return for each client for whom a return was prepared.
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.
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.
False
An unenrolled tax return preparer may only negotiate a refund check for a client for whom the preparer has completed the return.
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.
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.
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.
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.
False
Edmund and Meredith are working together on a tax return for one of Meredith's clients. Though Edmund has been suspended from practice before the IRS, he is only in charge of communicating with the IRS about returns and is not filing them himself. This protects the two practitioners from disciplinary proceedings.
False
Even if a practitioner has principal authority and responsibility for overseeing a firm's practice, discipline for misconduct will apply only to the practitioners directly involved in the misconduct.
False
If Ellie itemizes her deductions, which of the following deductions is also allowed for purposes of the Alternative Minimum Tax?
Casualty and theft losses
What is a popular target for fraud and abuse that an Electronic Return Originator (ERO) should look out for?
Earned Income Tax Credit (EITC)
On which form is mortgage interest paid reported to a taxpayer by the mortgage holder?
Form 1098
When must a tax preparer provide a taxpayer with a copy of the taxpayer's return?
No later than the time the return is presented for the taxpayer's signature
Which of the following taxes is deductible as an itemized deduction on Schedule A?
State and local income taxes
Ellen paid her real estate tax bill which included a base amount of $3,600 (which was based on the assessed value of her home) and a $400 tax assessed to repair the existing public sidewalk. How much can Ellen deduct on Schedule A for real estate taxes?
$4,000
What penalty might a non-bank tax preparer be subject to for cashing a client's refund check?
$530
Must an aggrieved taxpayer make use of the IRS appeals process?
No, a taxpayer can bypass the IRS appeals process but if he files in Tax Court, the Tax Court will refer the case to the IRS appeals system.
Which of the following is NOT an Electronic Return Originator (ERO)?
A software developer that develops software for the purposes of transmitting electronic return information directly to the IRS
The IRS does not require any particular method of maintaining records. Which of the following method may be used?
Both checkbook and electronic storage system
Which of the following is allowed as an itemized deduction?
Casualty and theft losses from income-producing property
In the case of a deceased taxpayer with an IRA, which of the following can elect to rollover the account into their own name?
The spouse
Jack Jones, a tax preparer, was convicted under Texas state law of embezzlement for his involvement in a scandal at his firm. Does this conviction affect his ability to practice before the IRS?
Yes, because it is a crime of dishonesty.
In order to convince her client to use her tax services, Beatrice presents the client an offer. If the return is challenged by the IRS, she will reimburse a portion of the fee charged to prepare the tax return. This is a permissible arrangement for a tax practitioner.
False
In the course of an audit, Stephen appears as a witness for a taxpayer before the IRS. This constitutes practice before the IRS.
False
Information about a firm's practices for the collection and sharing of information are restricted to only associates and employees, not clients.
False
It is the responsibility of a tax practitioner to verify all information furnished by a client in the process of preparing that client's tax return.
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.
False
Leda is preparing a tax return for a client that will result in a penalty for that client. It may be possible to avoid such a penalty, but Leda is not required to inform the client on the avoidance of penalties and regulations for adequate disclosure.
False
Oral information supplied by a tax practitioner to the Department of the Treasury is NOT subject to discipline if it is false or misleading.
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.
False
Tax returns using ANY foreign or overseas address cannot be filed electronically.
False
The IRS sets the maximum fee a tax preparer can charge for tax preparation services.
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.
False
Who is eligible for the Section 199A deduction on qualified business income?
Fiduciaries, beneficiaries of trusts and estates, and Individual taxpayers
Sam is the sole shareholder in an S corporation. The S corporation was examined and the IRS proposed a $20,000 deficiency. What must Sam do to request an Appeals conference?
File a formal written protest.
If a taxpayer disagrees with the IRS after the conclusion of an appeals conference, what can he do?
File a petition in US Tax Court File a petition in US District Court File a petition in US Court of Federal Claims Any of the above depending on the matter in dispute<<<
A taxpayer can revoke a power of attorney by ______
Filing a copy of a previously filed Form 2848 with the word, REVOKE written across the top and the taxpayer's signature and date of revocation written on the page. Filing a new Form 2848. Filing a written statement of revocation with the appropriate IRS office. All of the above.<<<
Karina, a partner in a growing tax accounting firm, is reviewing her firm's policies for compliance with federal law. She comes across an article for best practices for compliance with the Gramm-Leach Bliley (Financial Modernization) Act of 1999. Which of the following statements is FALSE?
Financial institutions which outsource certain functions are exempted from the requirements of the Act
Frank has $51,000 in foreign financial assets on the last day of the tax year. He does not hold signature authority or more than 50% ownership over any accounts. According to FATCA requirements, which of the following must he file with his federal tax return?
Form 8938
A tax preparer is generally prohibited from submitting electronic returns to the IRS prior to receipt of which of the following forms?
Form W-2
Of the following statements below, which one is not considered practice before the Internal Revenue Service?
Furnishing information at the request of the Internal Revenue Service.
What income is a nonresident alien required to report on his U.S. income tax return?
Gain from the sale of inventory he purchased in Germany and sold in the United States.
James is calculating his Other Itemized Deductions for the tax year. Which of the following is deductible as an Other Itemized Deduction?
Gambling losses up to the amount of gambling winnings
If an audit results in additional tax liability, can a taxpayer avoid the accrual of interest on that liability if he acquiesces to changes proposed and signs an agreement at the conclusion of an audit?
Generally, no.
The FTC financial privacy rule requires financial institutions, including tax return preparers, to perform which of the following actions?
Give their customers privacy notices
If, after a Collection Due Process hearing with the Office of Appeals to discuss an Internal Revenue Service levy or lien, a taxpayer does not agree with the Appeals determination, what can he do?
He can commence a lawsuit in the appropriate federal court within thirty days from the determination.
If the IRS disallows, rejects, or fails to address within six months a taxpayer's timely filed claim for a refund, what can the taxpayer do?
He can take any of these actions.
Which of the following is generally NOT deductible as an itemized deduction on Schedule A?
Homeowner's insurance premiums
Which of the following statements is correct with regard to the payment of household employment taxes?
Household employment taxes are included on the employer's individual income tax return and are due by April 15th of the following year.
Sandy is an enrolled agent. He is preparing a brochure to hand to prospective clients and would like to explain the enrolled agent designation. Which of the following language is Sandy not permitted to use?
I am certified by the IRS.
Medical expenses for a decedent paid after death: I are liabilities of the estate and must be claimed on decedent's estate tax return II are liabilities of the estate and may be claimed on decedent's estate tax return III are deductible on decedent's final return if paid during the one-year period after death and the estate elects to treat them as paid by the decedent IV are nondeductible
II, III
Which of the following sections of the Internal Revenue Code offers provisions for the protection of taxpayer information for tax return preparers?
IRC § 7216
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?
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.
Jonah moves from Florida to Virginia at the request of his employer. Which of the following statements regarding moving expenses incurred by Jonah is correct?
If Jonah is an active member of the US military moving permanent duty stations, any qualified moving expenses for which Jonah is reimbursed may be excluded from income
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?
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.
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?
Jenny should use a protocol like CAPTCHA to protect her website against malicious bots Jenny must run weekly vulnerability scans in accordance with PCIDSS. Jenny's website must be registered with a domain registrar in the US accredited by ICANN. All of the above<<<<
Cassy, a single individual, has not been required to file a gift tax return in any prior year. In 2019, Cassy paid $20,000 tuition directly to State University for her sister, Andrea. She also gave her brother $8,000 to pay medical bills for his daughter. She also donated $20,000 to the United Way. Must Cassy file a gift tax return for 2019?
No.
Does Form 2848 have a provision that allows a taxpayer to authorize his attorney, CPA, or enrolled agent to receive and endorse refund checks on his behalf?
No.
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?
No.
If a taxpayer's case is determined pursuant to the small tax case procedure in Tax Court and the taxpayer is unhappy with the outcome, can he appeal the decision?
No.
Is a practitioner permitted to sign a return that contains a frivolous position?
No.
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?
No.
Practice before the Internal Revenue Service comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to ________
Preparing and filing documents. Corresponding and communicating with the IRS. Representing a client at conferences, hearings, and meetings. All of the above.<<<
Which of the following individuals must submit fingerprint cards when registering for IRS e-services?
Principal of a small tax practice
A client is an individual taxpayer who is requesting assistance with a proposed penalty. All of the following are methods of addressing the penalty, EXCEPT:
Prior to assessment, the representative can request binding arbitration to reconsider the penalty.
Which of the following cannot be cited as precedent in a tax case?
Private Letter Rulings
A practitioner may withhold records from the IRS if he or she believes in good faith and on reasonable grounds that the records or information is _________?
Privileged
Identify the appropriate action that a practitioner should take when he or she becomes aware of an error or omission on a client's return.
Promptly advise the client of such noncompliance, error, or omission
A taxpayer who claims the child and dependent care credit must identify the care provider. Which piece of information is not required?
Provider's phone number
In order to be eligible for the health insurance premium tax credit, the taxpayer must_______?
Purchase coverage through the Marketplace
A taxpayer must keep investment records pertaining to _________?
Purchase price. Sales price. Commissions. All of the above.<<
Which of the following is NOT a credit against gross estate tax in determining net estate tax?
Qualified charitable contributions
For purposes of the Credit for Qualified Retirement Savings Contributions (Form 8880), a taxpayer must report recent distributions from which of the following sources?
Qualified retirement plans
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?
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.
After the issuance of a Statutory Notice of Deficiency, failure to timely file a petition with Tax Court will result in which of the following?
The Internal Revenue Service will assess the tax it says the taxpayer owes.
Ben and Amanda Jonsen live in a state that assesses a tax on income. For Year One, they paid $7,000 in connection with the state income tax. However, this state also has a general sales tax. The Jonsens are trying to determine how these two taxes affect their income taxes for the year. Which of the following statements is true?
The Jonsens can include either the state income tax or the state general sales tax as an itemized deduction but not both.
Jason and Elena Kordosky have two children, both of whom are dependents for tax purposes. Their son Robert is a first-year freshman at State University and their daughter Amanda is a fourth-year senior at Tech College. The Kordoskys paid $9,000 in tuition and related educational costs for each of their children. Provided the Kordosky's income is within any applicable limits, which of the following statements is true?
The Kordoskys can take the American Opportunity credit in connection with both of their children.
If an enrolled practitioner willfully and knowingly misleads a client, the enrolled practitioner can be censured by or suspended by or face monetary penalties imposed by:
The Secretary of the Treasury or his delegate.
Which official has the authority to censure, suspend, or disbar a practitioner from IRS practice?
The Secretary of the Treasury. and An Administrative Law Judge.
Regarding a Tax Information Authorization, Form 8821, which of the following statements is correct?
The appointee can advocate the taxpayer's position The appointee can execute waivers The appointee can represent the taxpayer by correspondence None of the above<<<
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:
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?
The greater of $5,000 or 75% of the preparer's fee
The IRS defines net earnings from self-employment as:
The gross income from a trade or business, less business deductions.
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?
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:
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.
The IRS may release a levy if
The levy creates an economic hardship for the taxpayer. The fair market value of the property seized exceeds the liability for which the levy was made. The taxpayer timely agrees to extend the ten-year tax collection period. All of the above.<<<
Discharge of property from a federal tax lien may be granted if which of the following conditions are met?
The lien encumbers more than one piece of property and the value of all the properties taken together exceeds twice the amount of the lien.
Mr. and Mrs. Robert Zimmerman have adjusted gross income of $90,000. They had their personal automobile damaged by a severe storm. The car was worth $60,000 before the storm but only $40,000 afterwards. Zimmerman's loss was attributable to a federally declared disaster. The car had a tax basis of $72,000. They spent $23,000 to have the car repaired. The insurance company paid them $14,000. They had no other casualties this year. Which of the following is true?
The loss is not an itemized deduction because their loss is less than $9,100.
Assuming they are not currently under suspension or disbarment - only attorneys or CPAs are authorized to practice before the IRS:
False
Henry Pierce did not file a tax return for 2015. When is the last date the IRS can assess tax.
The tax may be assessed at any time
If a position is a tax shelter, what must a preparer do to assist his client to avoid understatement penalties?
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.
If a client's ex-wife informs a tax preparer that a client has unreported cash income, the tax preparer must take what sort of action?
The tax preparer must make reasonable inquiries of the ex-wife and of the client regarding the allegation of unreported cash income.
The requirement to exercise due diligence applies to which tax preparer?
The tax preparer who prepares and files Mr. Smith's return. The tax preparer who helps another tax preparer prepare Mr. Smith's return. A and B.<<
If a taxpayer is expecting a refund check from a tax return, who is able to receive this refund check?
The taxpayer
Who chooses the date when installment payment is due?
The taxpayer
If the IRS sells a taxpayer's real property to satisfy an outstanding tax liability,______
The taxpayer can only redeem the property within 180 days of the conveyance.
In which of the following circumstances should a taxpayer not request an installment agreement on Form 9465?
The taxpayer can pay the amount in full within 120 days The taxpayer is currently in bankruptcy status The taxpayer's offer in compromise has been accepted All of the above<<<
What can prevent a taxpayer from shifting the burden of proof to the IRS?
The taxpayer does not cooperate with all reasonable requests for documents.
Which of the following conditions must be present for the IRS to be required to accept an installment agreement request?
The taxpayer has filed timely returns for the last five years. The IRS determines the taxpayer cannot pay the tax in full. The taxpayer agrees to pay the tax in full within three years if the amount is $10,000 or less. >>>All of these are requirements.
The IRS selected Brittany's return for an examination and requested that she support her claimed business expenses. Brittany refused to provide the IRS with any of the requested information because she thought that the examination was an unwarranted invasion of her privacy. The IRS issued a Notice of Deficiency and Brittany filed a petition with the Tax Court. Which party has the burden of proof in the Tax Court proceedings?
The taxpayer has the burden of proof because she did not cooperate with reasonable IRS requests for information.
If a taxpayer qualifies to take the foreign tax credit, which of the following statements is true?
The taxpayer may not take the foreign earned income exclusion and foreign tax credit for the same income
An Enrolled Agent (EA) prepared an individual income tax return for a taxpayer with a balance due of $25,597. The taxpayer is not able to pay the entire amount upon filing and would like to set up an installment agreement. Which of the following statements are correct with regard to this agreement?
The taxpayer must be in filing compliance.
What is it called when the IRS seizes a taxpayer's personal property to satisfy a tax debt?
A levy.
Which amount of 2019 self-employment income is subject to Medicare tax, reported on Schedule SE?
All net earnings
Under what circumstance will the Internal Revenue Service initiate contact asking for personal or financial information by email?
The IRS does not request personal information by email.
Who is permitted to represent a taxpayer before the Appeals office of the IRS?
The taxpayer's father.
Who cannot sign a formal written protest on behalf of a MFJ filer to request an appeals conference?
The taxpayer's unenrolled tax preparer.
Which contribution does NOT qualify for the retirement contribution credit?
Employer contributions
The amount of tuition and fees paid by the taxpayer for the taxable year is found on _________?
Form 1098-T
By signing and dating the Declaration of Taxpayer, Doug, a taxpayer, is stating that:
The return is true, correct, and complete
Rainer is designating a representative to act on his behalf for tax matters. He does not use Form 2848, he instead has his representative sign a Declaration of Representative. In addition to providing identifying information and contact information for himself and his representative, what other information must Rainer provide?
The types of tax involved in the arrangement The specific year or period involved A clear designation of the scope of granted authority All of the above<<<
Which of the following is NOT an information security incident which may require reporting to the IRS or other authorities?
Theft of IRS forms and publications
For 2020, a taxpayer with no qualifying children may NOT claim the earned income credit if:
Their only income is $5,000 in interest on a CD
Hank Bauer died early in Year One with an estate valued at several million dollars. In his will, he left a considerable amount of money (approximately 72 percent of his asset value) to his spouse, Shirley Jermaine Bauer. In determining the amount of his taxable estate for federal estate tax purposes, what amount is subtracted in connection with this bequest to his spouse?
There is no limitation
Lana Roswell died early in Year One with an estate valued at several million dollars. In her will, she left a considerable amount of money (approximately one million) to charitable organizations. In determining the amount of her taxable estate for federal estate tax purposes, what amount is subtracted in connection with these charitable bequests?
There is no limitation
Carlos Perez files his tax return and a question has risen as to how long the government has to assert that errors were made. The statute of limitations is generally three years from the due date of the return. Which of the following statements is true?
There is no statute of limitations when there is fraud involved in a tax return.
Conditions imposed on a practitioner who has been censured or suspended are designed to enforce high standards of conduct and reflect the nature of the behavior resulting in the sanction.
True
Donovan uses live news coverage of a local community event to advertise his fees for tax preparation. Because this solicitation is not recorded and because Donovan does not retain a recorded copy of the transmission, he is subject to disciplinary action for violating solicitation regulations.
True
What is the preparer penalty for failure to sign a return when required to do so?
$50
In general, how long are practitioners required to keep most records?
3 years
The Net Investment Income Tax rate is?
3.8%
What is the preparer penalty for claiming Head of Household filing status without completing the Paid Preparer's Due Diligence Checklist, Form 8867?
530
Mr. Brown died on September 30, 2019. His gross estate was valued at $10,670,000. Unless an extension is granted, a Federal Estate Tax Return (Form 706) must be filed on or before:
A Federal Estate Tax Return does not have to be filed
What is the Centralized Authorization File (CAF) ?
A database of all appointed representatives.
Which of the following statements about self employment income is NOT true?
A self-employed taxpayer may take a deduction on his personal return for 60% of the employment tax paid
A taxpayer uses Form 5329 to calculate additional taxes. Which of the following taxes is NOT reported on Form 5329?
Additional tax due to the Alternative Minimum Tax
Even if a request to pay by installment is granted, the taxpayer is still subject to _________?
Both interest and a late payment penalty
Which of the following is a proof of expense?
Canceled check
Which of the following deductions is NOT added back into taxable income to arrive at alternative minimum taxable income?
Charitable contributions
What payment methods are available for making required tax payments?
Check Money order Credit/Debit card All of the above<<<
Mabel is itemizing expenses and is calculating her medical expense deduction. Which of the following is NOT an expense includible as a medical expense?
Cost of an over-the-counter allergy pill used to treat diagnosed allergies to pollen
Which of the following is a tax deductible contributions for an individual taxpayer?
Donation of a rare vase to the Smithsonian Museum
Jackie has received a notice from the Internal Revenue Service stating that her Social Security Number has been compromised. Which form should she file?
Form 14039
What effect does a taxpayer's bankruptcy proceeding have on unresolved tax debt.
IRS collection activity is temporarily stayed.
Are there exceptions to the 10% penalty on early distributions from a traditional IRA?
No Yes, if the taxpayer uses the distribution to pay for his college tuition Yes, if an unemployed taxpayer uses the distribution to pay for his health insurance premiums B and C<<<
Self-employment tax contributes to which of the following:
Retirement benefits, disability benefits, survivor benefits, and hospital insurance benefits
Andrew is a US resident. He has signature authority of a foreign trust in Sweden which earns him $80,000 taxable interest for the tax year. Which forms must he file?
Schedule B, Form 114, and Form 8938
What must a tax preparer do if he knows that his client has filed an erroneous tax return?
The tax preparer must advise his client about the consequences of failing to correct the error.
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.
True
If a monetary penalty is placed on a practitioner for incompetence or disreputable conduct, the practitioner may still be subject to other sanctions.
True
If a practitioner uses direct mail or electronic communication to solicit his/her services, the practitioner must retain a copy of the communication as well as a list of those contacted.
True
If a tax practitioner prepares or advises a return which violates rules or regulations, his/her past performance as a practitioner will be considered in determining whether he/she acted willfully, recklessly, or through gross incompetence.
True
If a taxpayer uses Form 2848, Power of Attorney and Declaration of Representative, a representative of the taxpayer can sign a return for that taxpayer, if permitted.
True
It is permissible for a taxpayer to authorize an Electronic Return Originator (ERO) to enter the taxpayer's PIN on an electronic return.
True
Practitioners should act promptly when dealing with matters before the IRS.
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.
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.
True
Alternative Minimum Tax paid in one year can be recaptured in a future year as a credit.
True, but it cannot reduce the future year's tax below the tentative minimum tax for that year
Phil, an enrolled practitioner, prepares William's income tax return. William gives Phil power of attorney, including the authorization to receive his federal income tax refund check. Accordingly, the IRS sends William's $100 refund check to Phil's office. William is very slow in paying his bills and owes Phil $500 for tax services. Phil should:
Turn the check directly over to William.
Each enrolled agent must complete 72 hours of qualified continuing education during each three-year enrollment cycle and must do so by completing no fewer than 16 hours of qualified continuing education per each year of that cycle. How many hours of qualified continuing education must an individual who receives his initial enrollment to practice during an enrollment cycle complete for each month he is enrolled during that enrollment year?
Two hours per month.
Which of the following taxpayers may be eligible for the premium tax credit?
Tyra who purchases health insurance on the exchange, with an income that is 200% of the federal poverty level
Which of the following constitutes Earned Income for purposes of calculating the Earned Income Tax Credit?
Union Strike Benefits
Which of the following is NOT a deduction that an individual taxpayer can take in arriving at adjusted gross income in filing a federal income tax return?
Union dues paid by employee
Harry claimed gambling losses on his income tax return. The return was examined by the IRS and the losses were disallowed. Harry pursued an appeal before the IRS Appeals Office, which sustained the Revenue Agent's adjustment. Harry now wants to take his case to a judge. In which of the following courts can Harry file a tax action?
United States Court of Federal Claims. United States District Court. United States Tax Court. All of the above.<<<
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?
Until the end of the calendar year following the last transmission or use.
How long must an ERO retain his copy of Form 8453?
Until the end of the calendar year in which the associated return was filed.
Generally, for how long should a taxpayer retain records?
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?
Up to $1,000 or imprisonment for not more than one year or both, for each violation
What is the penalty for failure to disclose income on Form 8938?
Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose (up to $50,000), for a potential maximum penalty of $60,000; criminal penalties may also apply.
What is the purpose of the Centralized Authorization File (CAF) number?
Use of the CAF number allows IRS to verify an individual's authority to represent the taxpayer before the IRS.
Which of the following uses of taxpayer information can be conducted without prior acquisition of taxpayer consent?
Use to compile lists for soliciting tax return business.
Which of the following actions for solicitation would render a tax practitioner subject to disciplinary action?
Utilizing the term "certified" to describe their professional designation Implying a relationship of employment with the IRS Claiming an ability to garner special consideration from the IRS for their client 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?
Verifying Taxpayer Identity Numbers (TINs) Verifying the taxpayer's address Checking for suspicious or altered documents All of the above<<<
Violet made no estimated tax payments for 20X1 because she thought she had enough tax withheld from her wages. In January 20X2, she realized that her withholding was $2,000 less than the amount needed to avoid a penalty for the underpayment of estimated tax, so she made an estimated tax payment of $2,500 on January 10, 20X2. Violet filed her 20X1 return on March 1, 20X2, showing a refund due of $100. Which of the following statements is not true regarding the estimated tax penalty?
Violet will not owe a penalty for any quarter because her total payments exceed her tax liability.
When a child meets all the conditions on Form 8814, their investment income may be included on their parents' return, rather filing a separate return for the child. Which of the following types of income is not considered investment income for this purpose?
Wages from a part-time job
A taxpayer who does not agree with the changes proposed to be made to his return as a result of an examination (that is, the proposed changes) must take what step next?
Wait until he receives a thirty-day letter from the IRS.
Wayne Arnold is not very bright but he has a generous heart. He's not aware of what could create AMT liability for him. The following circumstances may create AMT liability, EXCEPT:
Wayne's donations to the March of Dimes.
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?
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.
A taxpayer can challenge a summons that was issued to a third party in which of the following circumstances?
When the taxpayer is provided with notice of the third-party summons.
The IRS may require a represented taxpayer to provide evidence under oath _________
When the taxpayer's enrolled agent is unwilling to declare his/her own knowledge that the facts are true and correct.
The tax collection period is suspended for all of the following EXCEPT:
While the IRS and the Office of Appeals consider a request for an installment agreement or an offer in compromise. During the pendency of a collections due process hearing. During the pendency of a tax court review. >>>While the taxpayer travels for 3 months outside the country.<<<
When the IRS is required to send a notice or other written communication to the taxpayer, the IRS _____________, unless the taxpayer has provided the IRS with other instructions.
Will send the original to the taxpayer and a copy to the representative authorized on Form 2848.
Fred and Wilma are married and file a joint tax return. Each operates a business as a sole proprietor. Wilma's business has a profit of $15,000. Fred's cattle ranch has a profit of $5,000. Which of the following statements is correct?
Wilma owes self-employment tax.
How is a disbarment or suspension proceeding against an individual commenced?
With a complaint signed by the Director of the Office of Professional Responsibility.
An enrolled practitioner's communications with his client are confidential______
With regard to non-criminal tax matters before the IRS or in non-criminal tax proceedings in federal court.
John Green, who resides in Manhattan, disagrees with the IRS examiner and her supervisor regarding his income tax case. His appeal rights were explained to him and he decided to go to Tax Court. When can he file his petition in Tax Court?
Within ninety days of the date the IRS mails a Notice of Deficiency to him.
Gary's 65th birthday is on January 1, 2020. Can Gary claim the higher standard deduction for taxpayers who are age 65 and older on his 2019 return?
Yes
Jay Roberts, a sole proprietor of a restaurant, neglected to remit trust fund taxes for his employees. The IRS pursued collection and in January 2009 recorded a Notice of Federal Tax Lien in the public records of the county where Jay Roberts resides. In February 2009, Jay Roberts inherited his mother's house which is also in the county where he resides. Does the federal tax lien encumber the inherited real property?
Yes
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?
Yes, because a copy must be given to the taxpayer when it is presented to the taxpayer for signature.
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?
Yes, because a disclosed position must have a reasonable basis
Joseph Marino lives in New York and owns his own software technology business. The business is headquartered in New York but also has a second location in Arizona. Joseph usually spends the winters in Arizona and spends one week per month in Arizona during the rest of the year. Because of space limitations in New York, Joseph keeps all of his personal and business tax records in the Arizona office. In 2009, he received notice that his 2008 tax returns were going to be audited in New York. Can Joseph move the examination to Arizona?
Yes, because it's more convenient for Joseph to be audited in Arizona.
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?
Yes, because she is a paid preparer who prepares substantially all of a tax return
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?
Yes, because the electronic format was acceptable to both
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?
Yes, because the position does not meet the more likely than not standard
Roger and Keith are partners in a body shop business. Each had his individual 2014 return examined and each disagreed with the IRS. Roger decided to take his case to IRS Appeals. After the conference, Roger still disagreed with the IRS. Keith decided to bypass IRS Appeals. After satisfying certain procedural and jurisdictional requirements, can both Roger and Keith take their cases to court?
Yes, both can.
Can an enrolled practitioner ever represent conflicting interests before the IRS?
Yes, but if proper consent is not obtained from each party, the practitioner could be subject to sanction.
Can the IRS contact third parties in the course of examining a tax payer's filed return?
Yes, but only upon general notice to the taxpayer that the IRS might do so.
Frank and Nancy were divorced in 2018. Nancy has custody of their 8-year-old daughter and they live in a house that is still owned by Frank and Nancy. Frank paid all of the mortgage payments in 2019, as required by the divorce decree. Does Nancy include the mortgage payments in her 2019 income?
Yes, but she only needs to report one-half of the mortgage payments made.
Karl Robinson had his income tax return examined, which resulted in adjustments. Karl administratively appealed the adjustments. Some of the adjustments were sustained, and this left Karl with an income tax deficiency of $45,000. Can Karl appeal his case pursuant to the small tax case procedure?
Yes, his appeal will be made to U.S. Tax Court pursuant to the small tax case procedure.
John Davis is an enrolled agent and he has been helping one of his clients with a collection matter. After one disappointing meeting with IRS staff, the client decides to pursue the case in Tax Court. Can John continue to represent his client before the tax court?
Yes, if John is admitted to practice before the court as a non-attorney or attorney.
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?
Yes, if Phil completes Form 4852. He can amend the return if he receives a W-2 with different amounts.
A refund check arrives at your office for Jose, a friend and long-time client. The check is for $150, and the cost to prepare his return is $200. Jose instructs you to cash the check and agrees to pay you the difference next week. Which of the following statements is correct?
You cannot cash the check.
Which of the following statements means you may be self-employed?
You carry on a trade or business as a sole proprietor or an independent contractor. You are an active member of a partnership that carries on a trade or business. You have a part-time business in addition to your regular job. All of the above.<<<<<<
James owns an apartment house with four units. He lives in one of the four units and rents the other three. Property taxes on this apartment house amount to $1,000 for the current year. James is having financial difficulties and is unable to pay this assessment. His sister, Janice, pays the entire $1,000 on the apartment house. How much of this payment can she take as a tax deduction when computing her itemized deductions for federal income tax purposes?
Zero
Tom Haynes lives in the top floor of a house owned by his mother who lives on the bottom floor. Of the total square footage, the bottom floor has 60 percent and the top floor has 40 percent. Haynes pays the county real estate tax on this house for the current year of $10,000. The tax amount was based on the assessed value. It was not overdue at the time of payment. What amount of this payment can Tom Haynes include as an itemized deduction for the current year?
Zero
A net operating loss or capital loss that cannot be used on a decedent's final return:
is not deductible on the estate's income tax return
If a taxpayer and the IRS fail to settle a non-docketed examination controversy in the IRS Appeals Office, the next event to occur is
issuance of a notice of deficiency
Under Treasury Department Circular No. 230, all of the following are considered to be incompetence and disreputable conduct EXCEPT:
willfully disclosing tax return information with the consent of the taxpayer.
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?
within 24 hours
Mr. and Mrs. Roberto Hamrick own considerable investments in marketable securities. During 2019, they give a portion of these investments worth $16,000 to Mrs. Jane Sanderson, Mrs. Hamrick's sister. The shares had originally cost $13,000. In connection with the determination of any applicable gift tax, what amount is taxable?
zero
Ramish is enrolled to practice before the IRS but does not prepare tax returns on a regular basis. She agrees to prepare and sign a tax return for a friend for a nominal fee. Unfortunately, the return is now under examination by the IRS and revenue agents have requested confidential records from the support underlying the return. She quickly looks to Treasury Circular 230 to validate her responsibilities when practicing before the IRS and finds all of the following to be true EXCEPT:
Ramish must immediately turn over any records in her possession to the IRS, whether or not she believes in good faith that they contain privileged information
The practitioner will be presumed to have exercised due diligence when he or she engages in _________?
Reasonable reliance on the work of others.
Rita has a $10,000 QBI loss carryforward from the prior year. Her QBI in the current year (without considering the loss carryforward) is $8,000. Which of the following statements is true?
Reduce Rita's QBI to $0 by the prior year loss. She has a $2,000 QBI loss carryforward.
When Susan and Tom were married in June, Susan assumed Tom's last name. In order to prevent delays in processing a return, what should Susan do before filing her return?
Report the name change to the Social Security Administration (SSA) on Form SS-5.
Which of the following form 1040 tax returns for individuals can be e-filed?
Returns for the current tax year and two prior tax years.
What type of contribution is excluded from the Credit for Qualified Retirement Savings Contributions?
Rollover contribution
Which of the following statements is NOT true regarding tax benefits for education?
Room and board are qualifying expenses for the American Opportunity Credit.
When filing a separate return for a married taxpayer, what information must be provided about the taxpayer's spouse?
SSN and full name
Which of the following constitutes a conflict of interest?
Samantha believes that representing her client will adversely affect another of her clients.
Which of the following examples indicate practice before the IRS?
Samantha, who attends an IRS examination where she represents her father
The following enrolled individuals are subject to sanction for disreputable conduct, EXCEPT:
Sarah, who provides a written opinion in favor of a partnership whose principal purpose is the avoidance of tax.
The retirement contribution credit is commonly referred to as the _________?
Saver's credit
Deductions can be itemized on which of the following schedules?
Schedule A
Sarah is the owner of a non-profit organization that operates in third-world countries. For this reason, she has signatory status and draws foreign income from accounts she maintains in a foreign bank. Her account balance reached $30,000 during the tax year. Which forms will she need to file?
Schedule B, Form 114
In order to determine the size of the contribution a taxpayer can make to his IRA, he must know how much compensation he received during the tax year. Which one of the following kinds of income satisfies the definition of compensation for IRA contribution purposes?
Schedule C income
Joyce has taxable income of $200,000 from self-employment. What schedule does Joyce use to calculate the self-employment taxes due on her net earnings from self-employment?
Schedule SE
The IRS began an examination of Mr. Jones's income tax return. Mr. Jones hired Tyler, an enrolled practitioner and former IRS employee, to represent him before the IRS. Tyler wrote a memorandum to Mr. Jones outlining the issues that might be raised by the IRS and how to address these issues. Tyler correctly marked this memorandum as confidential and privileged under Section 7525 of the Internal Revenue Code. During the examination, the Revenue Officer assigned to the case asked Tyler for a copy of the memorandum. Mr. Jones, invoking the Section 7525 privilege, told Tyler not to disclose it to the Revenue Officer. Tyler is not required to provide the Revenue Officer with a copy of the memorandum because:
Section 7525 extends the attorney client privilege to Federally authorized tax practitioners.
How long does the IRS have to collect outstanding federal taxes?
Ten years from the date of assessment.
Alternative minimum tax for individuals requires certain adjustments and preferences. Which of the following is a preference or adjustment item for non-corporate taxpayers?
Standard deduction Incentive stock options Tax-exempt interest on certain private activity bonds All of the above<<<
Which of the following state income taxes may be deducted on Schedule A?
State and local income taxes withheld from wages Estimated income taxes paid during the year to state or local governments A prior year's state or local income taxes paid during the year All of the above
Which of the following is not the potential source of an increase to the standard deduction?
State and local real estate taxes paid, up to $500 ($1,000 if MFJ)
Sammi is calculating her Alternative Minimum Tax (AMT). Which of the following adjustments may impact her AMT?
Subtract any refund of state and local taxes included in gross income Add the amount claimed for the standard deduction Add any itemized deductions for taxes All of the above<<
Which of the following is NOT a test to determine if a child is a qualifying child for the Earned Income Tax Credit (EITC)?
Support
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:
Supported by substantial authority.
Which of the following sanctions for incompetent or disreputable conduct prohibits a practitioner from practice before the IRS for a determined period of time of less than five years?
Suspension
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:
Tax Avoidance
To which court may a taxpayer petition, without first paying the disputed tax, regarding a disagreement with the Internal Revenue Service?
Tax Court
Which of the following is the IRS not required to agree with?
Tax court decision
Which of the following is NOT a reason the IRS may deny a request to participate in IRS E-File?
Tax practice is not big enough
Which of the following, when greater than total tax due, can result in a refund?
Tax withheld from Form W-2 Estimated tax payments Earned income credit All of the above<<<
Refunds are made in the form of checks or direct deposit. Which of the following is NOT a qualified deposit for purposes of receiving a tax refund?
Taxpayer requests the entire deposit to a SIMPLE IRA
Safeguarding taxpayer information is a top priority for the IRS. Which of the following is considered taxpayer information?
Taxpayer's name Taxpayer's identification number Number of dependency exemptions All of the above<<<
Two taxpayers married on November 30. That same year, the husband enrolled in an accredited college to further his career and subsequently received a Form 1098-T, Tuition Statement. The wife was employed with an income of $45,000 and paid for the husband's education expenses. Based on their circumstances, what is the correct method to report the education credit?
Taxpayers must file a joint return to claim an education credit.
Which of the following is an acceptable standard for providing advice on a position taken on a tax return?
That a position taken has a one in three or greater likelihood of being sustained on its merits.
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?
The 12-month period beginning on July 1 of each year
Edward received a Form 1099-MISC shortly after filing his tax return in January. The 1099 indicates an additional $5,500 in income. He decides not to file a Form 1040X amended tax return. Weeks later he receives an IRS form CP 2000 in the mail. Which of the following statements is true?
The CP 2000 reflects any corrections the IRS made to his original return, and considers those changes in a recalculation of the tax due.
How is a proceeding for violation of the regulations in Circular 230 instituted against an attorney, certified public accountant, enrolled agent, or enrolled actuary?
The Director of OPR signs a complaint naming the attorney, certified public accountant, enrolled agent, or enrolled actuary and files the complaint in the Director's office.
The OPR has discovered that Terrel, an enrolled agent, has violated the provisions of Circular 230 by knowingly aiding and abetting another person to practice before the Internal Revenue Service during a period of suspension. The director of the OPR decides to institute a proceeding for a sanction. Which of the following statements regarding the proceeding is incorrect?
The Director of the OPR will not confer with a practitioner concerning allegations of misconduct once a proceeding has been instituted.
A taxpayer filed an appeal of an IRS examination and then signed IRS Form 8821, Tax Information Authorization, on behalf of an Enrolled Agent (EA). Which of the following is correct?
The EA may not represent the client before IRS Appeals based on the Form 8821.
An Enrolled Agent (EA) is in the process of representing Taxpayer A before the Internal Revenue Service for a tax matter. Taxpayer A's ex-husband also asked the EA to represent him for the same matter. Which of the following is NOT required for the EA to represent both?
The EA must notify the Office of Professional Responsibility that the EA will be representing both taxpayers
What are an ERO's obligations with regard to an e-filed return that has been rejected by the IRS?
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.
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?
The ERO may rely upon the taxpayer to provide the bank's routing number and account number.
Each individual applying for renewal as an Enrolled Agent must complete CPE credits during each year of enrollment. How long must each practitioner maintain records of their completed CPE credits?
The Enrolled Agent applying for renewal must retain the information required (as listed in Circular 230) which documents successful completion of qualified CPE credits, for a period of 4 years following the date of renewal of enrollment.
Which of the following is true regarding the Report of Foreign Bank and Financial Accounts (FBAR) requirements?
The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network.
Under which of the following circumstances has an e-filed return been timely filed?
The IRS acknowledges that, before the due date, it accepted the transmitted return.
What is an Electronic Filing Identification Number (EFIN)?
The IRS assigns an EFIN to identify IRS Authorized IRS e-file Providers.
To collect outstanding tax liabilities, the IRS can do any of the following EXCEPT what?
The IRS can levy unemployment benefits
The IRS has the burden of initially producing evidence in court proceedings against an individual taxpayer in cases that involve which of the following?
The IRS has the burden of production in all of these circumstances.
Who has the burdens of proof and production with respect to a taxpayer penalty if the taxpayer provides reasonable cooperation, adequately substantiates items, and maintains required records?
The IRS has the burden of proof and the initial burden of production.
Holden has been granted power of attorney to represent one of his clients in completing a tax return. In order to assist with the complex case, the client has also granted Holden the power to delegate authority on Form 2848. Holden delegates his authority to another representative. This arrangement results in which of the following?
The IRS recognizes both Holden and the delegate as the taxpayer's representative.
If the IRS levies property and sells it at a sale _______________
The IRS will apply the proceeds from the sale to the cost of the levy and sale first before applying it to the tax liability.
The first step in the IRS collections process is:
The IRS will send a notice of tax due and demand payment.
Benjamin Lee owns a large truck that he drives for his own personal use. The truck has a tax basis of $59,000 but a fair value of $64,000. As a result of a sudden hailstorm, the truck is severely damaged so that its value drops to $37,000. His insurance company only pays him $16,000 because of several deductible clauses in the contract. Mr. Lee uses that money to repair the truck but it only has a value of $57,000 thereafter. If Mr. Lee reports an adjusted gross income of $50,000, what amount of this casualty loss can be included on his income tax return as an itemized deduction? Assume that he had no other casualties during the year.
$0
Floyd and Lucy tried adopting a child who is a US citizen. They paid $10,000 in qualified adoption expenses in 2019. The adoption never became final. How much of the adoption credit can Floyd and Lucy take?
$10,000 - the amount of expenses paid - even though the adoption never finalized
What is the maximum penalty for a non-willful failure to disclose income with Form 114?
$10,000 per violation
Susan paid $250 each month to send her daughter Roberta to after-school activities so Susan could work during the year. Susan's AGI was $14,950. Roberta was in 8th grade and celebrated her 13th birthday on July 1st. How much of the expenses can Susan use to figure the child and dependent care credit?
$1,500
Celeste, who is single, worked recently for a telephone company in France, and earned $1,500 for which she claimed the foreign earned income exclusion. In addition, she earned $1,200 as an employee of an answering service while she was in the U.S. She also received alimony of $400 for the year from her 2006 divorce. What is her maximum amount of allowable contribution to a traditional IRA for the current year?
$1,600
How much income should Devin, who uses the cash method of accounting, report on his 20X0 return from the following separate transactions? $300 (gross) was garnished from his wages to pay his debts on his December 14, 20X0 paycheck $500 (gross) paycheck received December 28, 20X0, but not cashed until January 2, 20X1 $900 (gross) wages paid directly to his mother at his request on November 30, 20X0
$1,700
Minnie's tax return shows the following income: $800 wages $6,490 unemployment compensation $1,000 alimony received under the terms of a divorce decree finalized before 2019 $8,000 rental income from apartment buildings she owns What is Minnie's earned income for the purpose of determining how much she can contribute to an IRA?
$1,800
The Tax Court has generally held that taxpayers who rely on software to justify errors on self-prepared returns are
liable for the Section 6662 accuracy-related penalty.
A CPA or an Enrolled Agent has privilege in relation to tax matters that include communications regarding
representation before the IRS
A decedent's final return can include:
the full standard deduction based on filing status for the decedent
Failure to take a required minimum distribution (RMD) can result in an excise tax equal to?
50% of the RMD amount
Which of the following applies to radio or television broadcasting regarding advertisement of electronic filing?
A pre-recorded broadcast advertisement must be kept until the end of the calendar year following the last transmission or use.
Marge Godfrey sold her investment property on March 30, 20X2, at a gain of $50,000. Marge expects to owe $10,000 in additional income taxes on this sale. She had a tax liability of $900 for 20X1 and will have no withholding for 20X2. Marge's first estimated tax payment is due on what date?
April 15, 20X2
James files his 20X1 tax return on February 15, 20X2 and pays his entire tax liability of $2,000 on that date. When is the last day James can file a claim for refund of his $2,000?
April 15, 20X5
A decedent's final return is due?
April 15th following the year of the decedent's death
Generally, you must begin receiving distributions from your traditional IRA no later than which of the following dates?
April 1st of the year following the year in which you reach age 72
A taxpayer must use a power of attorney to do which of the following?
Authorize an individual to represent a taxpayer at a conference with the IRS.
John died on June 1, 20X1. After determining that an estate tax return will be required, his executor decided to use the alternate valuation date for valuing the gross estate. Which of the following dates will be the alternate valuation date?
December 1, 20X1
What number does a Authorized IRS e-file Provider need to electronicly file a tax return?
EFIN
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?
ERO enters tax return information, followed by taxpayer signature
Mark and Rachel filed jointly and owe on their return. However, Mark recently filed for divorce. Rachel earned all of the income. Who is responsible for the entire tax liability?
Each is legally responsible for the entire liability
During the tax year, Marco exercised an incentive stock option (ISO) offered by his employer and still owns the stock. He is calculating his Alternative Minimum Tax. Which of the following options should Marco take?
Include the excess of the fair market value over the amount he paid for the stock
A nonresident alien taxpayer does not qualify for a social security number. What identifying number should he use on his tax return?
Individual Taxpayer Identification Number (ITIN)
What is an ERO required to do if the IRS rejects an e-filed return?
Inform the taxpayer if the ERO cannot correct or rectify the reason for the rejection.
Which of the following is NOT true regarding the preparing of information returns concerning employees who prepare tax returns?
Information returns of income tax return preparers must be maintained by the preparer for two years.
Which of the following is subject to withholding for a U.S resident?
Interest Rent Royalties None of the above<<
Pradeep lives and works in Bangalore, India as a self-employed contractor where he helps U.S. companies outsource computer programming projects to Indian software designers. He is not a U.S. citizen or resident at any time during the year. All of Pradeep's income is from his U.S. contracts. Which of the following is true regarding Pradeep's tax obligations to the United States?
It is not necessary for Pradeep to file a U.S. income tax return.
A disagreement with the Internal Revenue Service can be taken to the United States Tax Court if:
It pertains to income tax. A statutory notice of deficiency has been issued. A petition is filed within 90 days from the notice date on the statutory notice of deficiency (150 days if it is addressed to the taxpayer outside the United States). All of the above.<<<
Jake is 58 years old and permanently disabled. He had to withdraw money from his IRA account. Which of the following statements is true?
Jake does not have to pay the 10% additional tax on the distribution from his IRA because he is disabled.
If the IRS selects a return for audit and the taxpayer responds that he was audited three years ago, will the IRS discontinue the examination pursuant to the repeat audit rule?
No, because the repeat audit rule does not apply in this case.
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)?
PTIN
Tax preparers must provide an identifying number on returns which they sign. Which number is the generally accepted identifying number?
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?
PTIN
What are the two paths an individual can take to become an enrolled agent?
Past service in the IRS or demonstration of special competence in tax matters.
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:
Paying 15% of the penalty and filing a claim for refund within thirty days of his receipt of the notice and demand.
Which of the following statements is NOT true regarding NRA withholding?
Payment to any foreign government is not subject to NRA withholding.
Peter's wife Margo is a nonresident alien and does not have a SSN or ITIN. How can Peter file his tax return if Margo does not apply for an ITIN?
Peter can file a married separate return
Which of the following is subtracted from taxable income when calculating Alternative Minimum Tax Income (AMTI)?
Refund of state and local taxes
Which of the following is a requirement to participate in IRS E-File as an Electronic Return Originator?
Register for e-services, and provide fingerprints when applicable. Complete and submit the IRS E-File Application. The applicant and all principals and responsible officials must pass a suitability check. These are all requirements for participation.<<<
The following statements regarding confidentiality privilege are true, EXCEPT:
The confidentiality protection applies to communications relating to criminal tax matters.
Which of the following is a medical expense that an individual can take as an itemized deduction by listing on Schedule A of Form 1040?
The cost of necessary reconstructive surgery after a mastectomy
Identify the item below that does not describe information a preparer must maintain about every return prepared:
The date the return or claim for refund was prepared.
What is the AGI limit for deducting qualified mortgage insurance premiums as an itemized deduction on Schedule A?
The deduction begins to phase out when AGI exceeds $100,000
Early distributions from a traditional IRA may incur an additional tax, unless an exception exists which exempts the taxpayer from the additional tax. Which of the following is NOT an exception?
The distribution is due to casualty or theft.
An e-file return is considered on time based on:
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?
The preparer could be subject to a $50 penalty for each failure.
After Form 8879 is completed, what should be done with it?
The preparer keeps the form for records.
Robert is preparing a tax return for a client. Because of the complicated nature of the return, he advises the client to represent information on the return in a way that disregards a certain tax regulation. Rober is not acting with incompetence or negligence if he believes in good faith that the regulation does not apply to his client's complex case, and also advises the submission of a document that evidences a challenge to that regulation.
True
Samantha is providing advice to a client on tax matters. Though her advice is only spoken, she must still exercise due diligence on all statements regarding the IRS.
True
Why is it important for a taxpayer to maintain records?
To identify sources of income and track expenses. To prepare and support items on tax returns. To track basis of property. All of the above.<<<
If an IRS examiner believes that a practitioner filed a return that contains a frivolous position, to whom does he report his concern?
To the Director of the Office of Professional Responsibility.
Ms. Smith hired Tom, a tax preparer, to prepare her Federal income tax return for 2019. While gathering information to prepare the return, Tom discovered that although Ms. Smith was required to file Federal income tax returns for the 2015 tax year and the 2016 tax year under the Federal tax laws, she did not file these returns. What must Tom do?
Tom must inform Ms. Smith about the consequences of failing to file those returns.
What kind of transfer of qualified retirement plan assets cannot be made tax free?
Transfer to Roth
A contingent fee is one that is based on whether or not a position taken on a tax return or other filing avoids challenge by the Internal Revenue Service or is sustained either by the Internal Revenue Service or in litigation.
True
A practitioner may not advertise using the word "certified" or otherwise imply an employment relationship with the IRS.
True
A practitioner may publish the availability of a written schedule of fees, including fixed fees for specific services and hourly rates.
True
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.
True
Adele has been found to have knowingly misrepresented information about a tax return process to her client. The Secretary of the Treasury, or delegate, is able to impose sanctions against her.
True
Agatha is an unenrolled tax return preparer. She has prepared a tax return for a client and filed it with the IRS. Each phase of this process, from advising the completion of the return to filing falls under her responsibility for due diligence.
True
An electronically filed return is not considered filed until the IRS acknowledges acceptance of the electronic portion of the tax return for processing.
True
An unenrolled tax return preparer may prepare all or substantially all of a tax return or claim for a refund of tax.
True
An unenrolled tax return preparer must submit any information or records concerning a matter before the IRS if the request was made by an authorized IRS officer or employee.
True
Cecelia has been granted power of attorney over a taxpayer in order to act on his behalf in tax matters. She still, however, cannot grant consent for the disclosure of the taxpayer's returns unless specifically authorized to do so on Form 2848.
True
Claude is a tax preparer whose office includes administrative staff. These staff members assist Claude with his preparations, but he has trained them carefully and oversees their work. He does his best to find qualified employees and regularly evaluates their performance. Claude has exercised due diligence over the accuracy of his preparations.
True
Must an ERO keep a copy of a client's Form 8453?
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?
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.
While in the process of examining or collecting a tax liability, is the IRS permitted to contact third parties?
Yes, the IRS can contact any third party but must provide the taxpayer with a general notice before making inquiries.
In a proceeding against a practitioner that ends with a decision to disbar the practitioner, can the practitioner appeal?
Yes, the practitioner has 30 days to file an appeal.
If a taxpayer gives his consent to the IRS to extend the statute of limitations for a particular tax return, will interest accrue during the extension period?
Yes.
Is a practitioner who has been charged with violating a part of Circular 230 permitted to be represented by counsel?
Yes.
Is an ERO representative permitted to sign an 8879 by using a rubber stamp?
Yes.
Joseph received a bill from the Internal Revenue Service for additional tax due of $1,000 plus accrued interest of $150. If Joseph pays the $1,000 tax in full, will he be liable for additional interest?
Yes.
Must a paid preparer sign and fill in the other blanks in the paid preparer's area of the return?
Yes.
Which of the following situations would require the filing of Form 709 for 2019?
You and your spouse agree to split your gifts, which total $20,000 You gave more than $15,000 during the year to any one donee Any of the gifts you made were of a future interest All of the above<<<
All of the following require a US person to file FBAR Form 114 EXCEPT:
You are the owner of a foreign based corporation who has more than 50% of total share. You receive more than 50% of the beneficial interest from a foreign trust. You hold signature authority over a foreign partnership and receive over $80,000 in annual income from the partnership. You have $7,000 in non-interest based foreign income during the tax year and do not hold signature authority over a foreign account.<<<<<<
A decedent's final return may claim:
any tax credits that applied to the decedent before death
The premium tax credit is only available to individuals and families with household incomes ________
at least 100—but no more than 400—percent of the federal poverty level.
An individual taxpayer dies on March 12, 20x2 before filing his 20x1 income tax return. If the decedent met the filing requirements at the time of his death, the individual responsible for filing the decedent's tax return should file:
decedent's 20x1 and 20x2 tax return
The IRS must provide a taxpayer with an opportunity for a hearing _______ levying the taxpayer's property.
either before or after
Once enrolled, practitioners must renew enrollment according to their enrollment cycle. How often must a practitioner renew enrollment?
every 3 years
Cheryl is 40 and works for a company part-time. She is not qualified to participate in the company's retirement plan because she is part-time. In 2019, she files as single, and her earnings are $34,000. Also, in 2019 she contributes $3,500 to an IRA (traditional). How much of the $3,500 contribution may she deduct?
$3,500
Consider the following expenditures and determine the total amount that would be deducted as adjustments to income in arriving at adjusted gross income (assuming no income limitations) on Form 1040, Individual Income Tax Return: $1,000 interest paid on student loan $2,000 paid to a SIMPLE retirement plan $100 jury duty pay given to the employer $500 expenses from the non-business rental of personal property
$3,600
Peter and Jill are married and file a joint return. In 2019, Jill was a media relations manager for a large firm and earned $98,000. Peter owns a graphic design business that showed a net profit of $500. In 2019 Jill was covered by an employer's plan, Peter was not. Neither has reached age 50. Their Modified Annual Gross Income was $155,000. What is the maximum deductible amount that can be contributed to a traditional IRA for Peter?
$6,000
Lacy has family coverage under a high deductible health insurance plan and participates in a health savings account through payroll deductions. At the beginning of the year, Lacy's HSA has a $10,000 balance. She contributes $3,000 to her health savings account and her employer matches her contribution. Additionally, the following amounts are distributed from the health savings account during the year: $300 for prescription eyeglasses $600 for insulin $1,000 for hair transplants and a wig What is the total amount excluded from gross income?
$6,900
Angie is 52 and earned $40,000 in wages. She opened an IRA account. What is the maximum she can contribute for 2019 tax year?
$7,000
Alice and Mike file a joint return for 2019 on April 15, 2020. Alice, who is a non-working spouse, is 49. Both Alice and Mike contributed $4,000 each to a traditional IRA although they qualified to contribute the maximum amount. They filed their return timely. On June 1st, 2020, Mike's mother gave each of them $1,000. What additional amount of the gift may Alice and Mike contribute to each of their IRA's for the year 2019?
0.
Jacob's return is missing information regarding his IRA contribution. Which of the following sections of his tax return should have included this content?
Adjustments to Income
You hire a household employee (who is an unrelated individual over age 18) to care for your child and agree to pay cash wages of $100 every week. You expect to pay your employee $2,100 or more in 2019. If you decide to not withhold the employee's share of social security and Medicare taxes and instead pay them from your own funds, what is the weekly gross income you must report for the employee's wages?
$107.65
The 2019 AMT exemption for taxpayers filing a joint return (MFJ) whose AMTI is less than $150,000 is:
$111,700
Kevin earns $20,000 working part-time at a garlic bread bakery. He has no other income or adjustments to income. He makes cash contributions of $2,000 per month to his church. If Kevin itemizes his deductions, how much can he deduct for his charitable contributions?
$12,000
Simon Verzales made several contributions to qualified charities. Land (which had been held for four years) with a tax basis of $4,000 and a fair value of $9,000 was donated to a church. Cash of $6,000 was given to a university. Household goods with a cost of $900 and fair value of $250 were given to a hospital. The taxpayer's adjusted gross income is $50,000. What amount can Simon include within itemized deductions as charitable contribution for the year?
$15,250
Maria, a single taxpayer, hired a nanny through a placement agency and pays her $200 cash a week to care for her 6-month-old daughter. The nanny watches Maria's daughter at Maria's home. Maria provides a schedule for the nanny regarding when to feed her daughter and when to lay her down for a nap. How much, if any, can Maria withhold from the nanny's weekly pay for Social Security and Medicare taxes in 2019?
$15.30
Of the following medical expenses paid by Bill during 20X2, how much can he deduct (before limitations)? $1,000 for his wife Mary's hospitalization in 20X1; they were married in 20X2 $1,000 for Mary's daughter's braces; she is Bill and Mary's dependent in 20X2 $2,000 for Bill's son's 20X1 medical treatment; he was Bill's dependent in 20X1 but does not qualify for 20X2
$4,000
Kim files head of household and has adjusted gross income of $80,500, no foreign source income and a tax before credits of more than $10,000. Her dependents include her son Richard, who turned 17 in 2019, her daughter, Sheila, who turned 12 and her niece, Andrea, who turned 6. All of the children are U. S. citizens and lived with her all year. What is the amount of child tax credit (including any credit for other dependents) she may claim on her 2019 tax return?
$4,500
Jennifer Lyndon owns a large truck that she drives for her own personal use. The truck has a tax basis of $39,000 but a fair value of $45,000. As a result of a massive tornado, the truck is severely damaged so that its value drops to $2,000. Her insurance company only pays $26,000 because of several deductible clauses in the contract. She spends this money and another $3,000 of her own money to repair the truck but it has a value of only $35,000 thereafter. If Ms. Lyndon reports an adjusted gross income of $60,000, what amount of this casualty loss can be included on her income tax return as an itemized deduction? Assume she had no other casualties during this tax year and the area was declared a disaster by the President.
$6,900
What is the amount of the additional tax applied to an early distribution of a traditional IRA when there are no exceptions?
10%
Which of the following nonresident alien taxpayers is not required to file Form 1040NR?
A nonresident alien who is married to a U.S. citizen or resident at the end of the tax year.
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 $1,000 fine, up to one year's imprisonment, or both.
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 $50 penalty
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 $530 penalty
What is a CAF number for?
A CAF number assists IRS personnel in determining whether a practitioner has been appointed as a taxpayer's representative.
Alternative Minimum Tax Income (AMTI) is calculated by adding or subtracting what two types of items from taxable income?
Adjustments and tax preference items
Which of the following is an authorized IRS e-file Provider?
Both an electronic return originator and an intermediate service provider who processes information and returns it to the ERO.
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?
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.
When attending a meeting with the IRS on a taxpayer's behalf, a representative should always do what with the filed Form 2848?
Bring a copy to the meeting.
Which of the following is nondeductible?
Burial and funeral expenses
How can a taxpayer terminate a filed tax information authorization?
By filing a new Form 8821.
How is Form 8453 filed?
By mail.
Which method is not acceptable for revoking a power of attorney?
Calling the appropriate IRS Service Center and informing an agent.
The Office of Professional Responsibility can censure, suspend or disbar a practitioner from practice before the Internal Revenue Service for incompetence and/or disreputable conduct. Which one of the following is considered disreputable conduct?
Conviction of any criminal offense under the revenue laws of the United States. Conviction of any criminal offense involving dishonesty or breach of trust. Giving false or misleading information or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof. All of the above.<<<
Exceptions to the 10% early distribution penalty on IRA withdrawals include the following, EXCEPT:
Distributions made after reaching age 55.
Donald, a tax preparer, has knowledge that a client has not complied with the revenue law of the United States. What is Donald required to do?
Donald must advise his client about the non-compliance and the consequences of failing to correct the error.
Which credit, if claimed, will disqualify the taxpayer from taking the tuition and fees deduction?
Education credit
Which documents will the IRS accept via facsimile?
Form 2848. Form 8821. Both.
The Office of Professional Responsibility can censure, suspend, or disbar a practitioner from practice before the Internal Revenue Service for incompetence and/or disreputable conduct. Which one of the following is considered disreputable conduct?
Giving false or misleading information, or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof
Gloria filed as head of household and would like to take the $2,000 Child Tax Credit for Sara in 2019. Which of the following statements is correct regarding the Child Tax Credit?
Gloria must have taxable income to claim the full $2,000 Child Tax Credit.
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?
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.
Under which, if any, of the following circumstances is a representative appointed pursuant to Form 2848 permitted to receive and endorse a refund check on a client's behalf?
If authorized by the taxpayer a tax return preparer may affix the taxpayer's name to a refund check for the purpose of depositing the check into an account in the name of the taxpayer.
Richard's 2015 and 2016 returns were examined for charitable contributions and employee business expenses. Both examinations resulted in no change to the return as filed. In 2019, Richard is notified that his 2017 return has been selected for examination for claimed business bad debts. Is Richard eligible to have the examination discontinued?
No, because the repeat examination rule does not apply.
An Enrolled Agent (EA) represents a married couple in an ongoing examination. One afternoon, the taxpayer-wife shows up early to a meeting at the EA's office. Off the record, the taxpayer-wife confides to the EA that the examination is causing marital strife, and that the taxpayer-wife is not sure but now suspects that her spouse may have taken erroneous business deductions. All of the following activities would address the conflict of interest EXCEPT:
Politely advising the client that this meeting was not appropriate, and make sure that no further meetings occur unless both spouses are present.
Caroline received an audit notification letter scheduling an appointment for July 1, 2018 for the examination of her tax year 2016 Form 1040 return. The week before the scheduled appointment, she received a telephone call from the Internal Revenue Service office canceling the appointment. She was told that she would be contacted at a later date to reschedule the appointment. She was not contacted until July 1, 2019, when she was advised of a new appointment date. Errors identified in the examination resulted in her owing additional tax of $4,000 plus accrued interest of $600. Caroline does not believe that she should have to pay interest for the period that she was waiting for her appointment to be rescheduled. How should she proceed?
Request an abatement of the interest by filing a Form 843 with the Internal Revenue Service center where she filed her 2016 return
Sue must make estimated tax payments of $4,000 for the tax year. She makes the following payments: 1st Payment - credit of $1,000 from her previous year refund 2nd Payment - $500 on April 20th 3rd Payment - $500 on May 31st 4th Payment - $1,000 on August 15th 5th Payment - $500 on October 15th 6th Payment - $500 on December 30th Which of the following statements is true?
She has made timely estimated payments
In 20X1, Sarah Scott earned income of $60,000 and paid income taxes in a timely fashion of $19,000. In 20X2, Scott had earned income of $68,000 and her total income tax was $23,000. She had made timely quarterly payments during the year that amounted to $20,000. In connection to the possibility that she is subject to a penalty for underpaying her income taxes in 20X2, which of the following statements is true?
She has no penalty because she paid more than her tax for the previous year.
The Director of Practice notified Sally in February 2019 that she passed the Special Enrollment Examination. She submitted her application for enrollment, and received the initial enrollment on June 15, 2019. Her Continuing Professional Education requirements until the first full renewal cycle are:
She must complete two hours of credit for each full month and each part of a month left in the current renewal cycle
Waiting more than three calendar days to submit a return to the IRS once the ERO has all necessary information for origination is considered:
Stockpiling
Where should a taxpayer file a complaint regarding identity theft?
The Federal Trade Commission
An individual taxpayer incurred a casualty loss attributable to a federally declared disaster during the current tax year. Which of the following statements is true about taking a loss on the person's income tax return within itemized deductions?
The taxpayer must deduct any insurance coverage from the amount of each loss and then also deduct a $100 floor for each separate casualty. The resulting total for all casualties during the period is deductible to the extent it exceeds 10 percent of adjusted gross income.
Which of the following is NOT a condition for deducting home mortgage interest?
The taxpayer must own and use the home in 2 of the 5 years prior to taking the deduction.
What effect will a bankruptcy proceeding have on an IRS levy of property?
The taxpayer receives an automatic stay and the IRS must release the levy while the bankruptcy is pending.
For purposes of the child and dependent care credit, a qualifying person is:
Under age 13 when the care is provided
The IRS filed a Notice of Federal Tax Lien and thereby encumbered Tom Robinson's residence. Can he appeal the lien?
Yes, by requesting a hearing with the Office of Appeals.
Must a Circular 230 practitioner provide the Director of the Office of Professional Responsibility with any information he may have concerning violation of Circular 230 regulations by any person?
Yes, except when the practitioner believes in good faith and on reasonable grounds that such information is privileged.
When a taxpayer disagrees with the result of an Appeals conference, can he appeal the result?
Yes, he can appeal to Federal District Court or to Federal Claims Court or to Tax Court.
May an enrolled practitioner publish and distribute a schedule of the fees he charges for representation of the taxpayer before the IRS?
Yes, he can do both.
George age 60, a single taxpayer, has W-2 income of $31,000 and self-employment income of $3,000. During the 2019 tax year he contributed $6,000 to his IRA (traditional). George has excess contributions of how much?
$-0-
In 2015, Susan, age 58, established a Roth IRA account. In what year can Susan receive distributions from her Roth IRA without tax or penalty?
2020
Jenny would like to take a distribution from her IRA account. Her distribution would be considered an early distribution if she was age:
50
In order to roll over to another IRA or qualified retirement plan and not be subject to the additional 10% tax, within what amount of time must the roll over take place?
60 days
Pedro borrows money to pay for his junior year at State University. Pedro may be able to deduct the interest he pays on the loan if he obtains the loan from which of the following sources?
A loan he obtains from a federal post-secondary education loan program
A taxpayer can make contributions to a traditional IRA at any time during the year, but at the latest by:
April 15 - the due date for filing the return
Which of the following is NOT included in a taxpayer's total income?
Child support received
Christy is 57, and her husband passed away, leaving her as the beneficiary of his IRA account. Which of the following statements is true if she takes a distribution from the account?
Christy does not have to pay the 10% additional tax on a distribution from the IRA because she is her husband's beneficiary.
Which of the following is more than the allowable deductible contribution amount to a self-employed retirement plan?
Contribution of $10,000 to a self-employed individual's own defined contribution Keogh plan. The individual's net earnings from self-employment (on Schedule C) are $40,000
A taxpayer is considering both a traditional individual retirement account (IRA) and a Roth IRA. Which of the following is true?
Contributions to a traditional IRA are tax deductible but eventual distributions are taxable while contributions to a Roth IRA are not tax deductible but eventual distributions are tax free.
John Baker is 75 years old and so must take an annual required minimum distribution (RMD) from his IRA account. For a year in which no waiver of the RMD exists, what is the latest date upon which he can take his RMD?
December 31 of the tax year
With regard to required distributions from a qualified retirement plan, a taxpayer must do which of the following by the required beginning date:
Distribute the entire balance in the plan, or begin receiving periodic distributions in annual amounts calculated to distribute the entire balance over the life expectancy of the taxpayer.
An eligible individual and his dependent child are covered under an "employee plus one" HDHP offered by the individual's employer. What kind of HDHP coverage does this employee have?
Family plan.
Adam did not receive the required minimum distribution from his qualified retirement plan. Which form is he required to fill out?
Form 5329
Jane Adams and Cecilia Adams are sisters who work at the same company. One is 29 and the other is 31. This year, Jane put $2,200 into a traditional individual retirement account while Cecilia put the same amount into a Roth individual retirement account. They are now each filing their income tax return for this year. Which of the following statements is true?
Jane will reduce the amount reported as her adjusted gross income this year but Cecilia will not.
All of the following types of accounts are permitted for Individual Retirement Arrangements EXCEPT:
Joint IRA accounts for married couples.
Kirk passed away. At his death, he had a traditional IRA with a basis of $25,000 and a FMV of $50,000. Kirk had taken no distributions and all the contributions he made were non-deductible. As the spousal beneficiary, which of the following applies to his wife Jenny?
Kirk's $25,000 basis in the IRA may be treated as basis to Jenny upon Kirk's death
Marjorie worked for many years and contributed the maximum amount allowed to her traditional IRA each year. Now, at age 55, she wants to follow her dream and open a yoga studio. Can she use the funds in her IRA as collateral for a small business loan without affecting the IRAs tax status?
No
Can a 75 year old taxpayer convert all of the funds in a traditional IRA to a Roth IRA account?
No, the taxpayer is required to take a required minimum distribution from the traditional IRA
Miriam Wallesto has come to Wilma Randolph to do her federal income taxes. Ms. Wallesto has gross income for the year of $40,000. She spent $100 this year and wants to know if that amount can be used to reduce her adjusted gross income. Under which of the following will she NOT be able to use that amount to reduce the amount reported as her adjusted gross income?
She changed jobs this year and spent the money moving 55 miles to be closer to the new place of business because she rides her bicycle to work.
Sally, age 38, contributes $5,000 to a Roth IRA. Her tax professional informs her that the contribution is not allowed because her income is too high. What is the consequence if she does not remove the contribution and any associated earnings?
She must include the earnings as income in the tax year of the contribution, plus pay a 6% excise tax on both the contribution and earnings.
In February 2019 Susan (age 60) contributed $5,000 to her traditional IRA account for tax year 2019. Over the course of the year, earnings of $1,000 were allocable to this contribution. In January 2020, Susan withdrew the $6,000 (contribution and earnings). Susan is preparing her 2019 tax return, what are the tax consequences for Susan?
She must report $1,000 as income in 2019
Which of the following is compensation for the purpose of contributions to individual retirement accounts?
Taxable alimony and separate maintenance paid under the terms of a divorce decree finalized before 2019
Mr. and Mrs. Jack Stephen Collins have chosen to home school their daughter Janet. She is currently in the fourth grade. They have been forced to buy certain supplies (such as books and test tubes). In the current year, they spent several hundred dollars for supplies to be used in Janet's education. They are now trying to determine the amount that they can deduct as educator's expenses in arriving at adjusted gross income. Which of the following statements is true?
These expenditures are not deductible in arriving at adjusted gross income.
Max Snyder teaches science in the fifth grade of his local public school. Because of budgetary cutbacks, he is forced to buy certain supplies (such as test tubes) himself. In the current year, he spent three hundred dollars for supplies to be used by his students. Which of the following statements is true?
These expenditures can be deducted in arriving at the taxpayer's adjusted gross income but only up to a set limit.
Bonnie, is single and age 35. She received income from the following sources in 2019: wages of $2,500 dividends and interest of $600 royalty income of $400 capital gains of $35,000 What is the maximum amount of money that she can contribute to a traditional IRA?
$2,500
Which of the following taxpayers could be considered to be self-employed for the purposes of claiming the self-employed health insurance deduction?
All of the above
For purposes of Form 5329 (Additional Tax on Qualified Plans), a traditional IRA is:
Any IRA, including a SEP IRA, other than a SIMPLE IRA or Roth IRA
Susan took 3 days off from work to volunteer at a local food bank. If she had gone to work, Susan would have earned $100 (before taxes) each day. How much can Susan deduct as a charitable contribution for her services at the food bank?
$0
Tim wants to use his refund to buy $2,500 in savings bonds for his nephews. Which form does Tim have to complete and return?
Form 8888
A contingent fee is a fee that is based on a percentage of a refund reported on a return. An enrolled practitioner may not charge a contingent fee for:
Preparing a client's tax return.
How can you ensure you receive credit for continuing education programs you complete?
All of these actions help ensure you receive proper credit.
Calculation of Alternative Minimum Tax (AMT) is based on a percentage of?
Alternative Minimum Tax Income (AMTI)
Jason and Margaret report AGI of $66,000 on their 2019 joint tax return. They each contribute $5,000 to a qualified retirement plan for 2019. What is the amount of their saver's credit (formerly retirement savings contributions credit)?
$0
Karen is an accountant for XYZ Company. She has met the minimum educational requirements of her employer. XYZ changed the minimum requirements and Karen was required to take a computer course to keep her job. The course cost $1,000 and XYZ reimbursed Karen $600 toward the cost of the course under an accountable plan. How much education expense can Karen deduct?
$0
Ken attends a religious seminary where he pays $3,000 tuition each year. The seminary is a qualified 50% educational organization. How much of the tuition payments may be deducted as a charitable contribution?
$0
Lisa traveled from Philadelphia to New York on a business trip for her employer. She is not reimbursed for the travel expenses. Lisa spends two days in business meetings and one day on vacation. Lisa's meals cost $90 ($30 per day), lodging costs $360 ($120 per day), and train fare costs $102. What is the total amount of Lisa's allowable business-related travel expense?
$0
Robin, an employee, had the following unreimbursed employee expenses: $100 professional license renewal $75 subscription to a professional journal $500 business liability insurance Her adjusted gross income was $40,000. What net amount can Robin deduct?
$0
Sam is employed as a financial planner at a local bank. Sam spends a great deal of his own time and money entertaining clients. A lot of Sam's business is conducted in restaurants and on the golf course. Sam incurred the following expenses: $2,000 in meal expenditures for client business dinners $300 in babysitting fees during client business dinners $1,000 in golf club membership dues $200 in golf equipment What is the amount that Sam can deduct as an unreimbursed employee expense?
$0
Mary Smith made only the following transfers of interest in personal property during the current tax year: $40,000 cash to the Democratic Party, a political organization (as defined in section 527(e)(1)) $25,000 cash to Good Care Health, Inc. for medical care (as defined in section 213(d)) of her ailing resident father 100 shares of common stock of ABC Inc. with a basis to Mary of $5,000 and fair market value (FMV) of $10,000 to Save the Walnut Foundation, a section 501(c)(3) organization What is the total amount of gifts that must be reported on Mary's gift tax return for the current tax year?
$0, Mary does not need to File Form 709 for the current tax year
Bill is Single and uses the maximum percentage to determine his Credit for Qualified Retirement Savings Contributions. His contributions total $8,000. What is the amount of his credit?
$1,000
Frank borrowed money in 2017 for a new boat but stopped making payments in 2018. He voluntarily returned the boat, which the lender sold and applied the money to the debt. However, Frank still owed more on the loan. The lender sued Frank and was awarded a court judgment. In 2019, Frank paid the lender $10,000 from his IRA account. Frank was age 35 at the end of 2019. His adjusted gross income for 2019 is $35,000. What is Frank's penalty on early distributions for 2019?
$1,000
Joe is single and qualifies for the Credit for Qualified Retirement Savings Contributions (Form 8880). What is the maximum amount of credit that he may claim?
$1,000
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?
$1,000
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?
$1,000 or 50% of the preparer's fee, whichever is greater
Mr. and Mrs. Ryan Bowling have three small children. During the current tax year, they had to pay cash of $7,000 so that these children would be cared for allowing the parents to be employed. They had adjusted gross income of $56,000. What is the amount that they can claim as a child care credit on their joint tax return?
$1,200
During the year, Mark paid his first quarter real estate taxes of $1,400 on his personal home. Mark also paid real estate taxes on his unemployed brother-in-law's home of $800. During the year, Mark was assessed a tax for trash pick-up of $165. He also paid a tax of $250 for improvements made by the town in his development, which increased the value of his property. Mark also withdrew the entire amount of $10,400 from his traditional IRA of which $2,400 was interest earned. Mark, in previous years, had taken deductions for his IRA contributions. Mark is 48 years old. What is deductible on his Form 1040 for real estate taxes and what is the tax penalty, if any, on the early withdrawal from his IRA? Deductible real estate tax on Schedule A / Tax on IRA
$1,400 / $1,040
Ivan is age 73. The balance at the beginning of the year of his traditional IRA was $41,000. All of his IRA contributions had been tax-deductible. The required minimum distribution for the year was $4,000. If Ivan only took a distribution of $1,000, what is the amount of excise tax that Ivan would have to pay on the excess accumulation?
$1,500
Marc and Mandy's dependent children, ages 3 and 4, attend daycare where the total expense for the year was $6,200, $3,100 per child. Marc earned $20,000 and Mandy earned $15,000. How much child and dependent care credit can they claim?
$1,500
Mike is 68 years old, single and legally blind. Which of the following is the standard deduction Mike may claim in 2019?
$15,500
Stu has qualified business income and qualified business losses from the following: S&J $100,000 loss carryover from 2018, of which $50,000 is allowed in 2019 S&J $250,000 qualified business income from 2019 L&C $50,000 qualified business loss from 2019 What is Stu's qualified business income or loss for 2019?
$150,000 qualified business income
Arthur Heyman borrows $320,000 on a loan that carries a 10 percent annual interest rate. He invests that money in stocks and bonds. During the current year, he generates net investment income of $29,000. In addition, he earns another $7,000 in interest from state of New Hampshire bonds. What amount can Heyman include as interest expense in determining his itemized deductions for the current year?
$29,000
Jan Livingston passed away on February 1, Year One. In her will, she left securities and her investments that had cost her $11,000 to her nephew Ron. The fair value of these securities at the date of death was $15,000. However, the securities were only worth $14,000 when conveyed to Ron on June 9, Year One. The executor to the estate chose the alternative valuation date. The value of the securities on August 1, Year One, was $13,000. Ron held the securities until March 3, Year Two, and sold them for $17,000. What gain should Ron report in Year Two as a result of this sale?
$3,000
Mary earns $18,000 as a hostess at a local steakhouse. Her husband Bill was a full-time student for 6 months of the year and did not have any income. They have 2 children, ages 3 and 5, who attend daycare so Mary can work and Bill can attend college. Total daycare expenses for the year are $4,500. How much of the expenses can Mary and Bill use to figure the child and dependent care credit?
$3,000
Michael had to pay $4,000 alternative minimum tax last year caused by deferral items. This year his regular income tax is $60,000 and his tentative minimum tax is $57,000, so he will pay only regular income tax. How much credit for prior year minimum tax can he take this year?
$3,000
Becky began receiving $10,000 annual distributions from her qualified retirement plan in 20X1 when she was 45. These amounts are exempt from the penalty tax on early distributions because they are equal payments based upon Becky's lifetime. In 20X3, Becky received an additional $5,000 from the retirement plan that she used to pay off her credit card debt. Therefore, Becky's total 20X3 distribution was $15,000. How much is the penalty on early distributions?
$3,500
In September 20X1, Charlie, a self-employed lawyer, performed legal services for a client that has a men's clothing store. In payment for his services, Charlie received store credit of $3,500 in 20X1. Charlie uses $1,500 of his store credit in 20X1 and the balance in 20X2. How should Charlie include the income? 20X1 / 20X2
$3,500 / $0
The following are preference items for purposes of the Alternative Minimum Tax, EXCEPT:
Amount claimed for interest deduction on an eligible mortgage.
In 2019, Janice volunteered at her local non-profit art museum where she conducted art-education seminars. She was required to wear a blazer that the museum provided, but she paid the dry cleaning costs of $200 for the year. The blazer was not suitable for everyday use. Her travel to and from the museum was 1,000 miles for the year. She estimates the value of the time she contributed during the year at $2,000 ($20/hour × 100 hours). Her Schedule A deduction for charitable contributions is which of the following?
$340
Which of the following details prevents a nonresident taxpayer from filing Form 1040NR-EZ?
Another taxpayer claims him as a dependent.
Billy and Kathy, a married couple, paid $5,500 in child care expenses for their 3-year-old daughter to allow them to work. Billy earned wages of $88,500 and Kathy earned wages of $2,000 during the tax year. If their tax before credits is $7,500 how much is their child and dependent care expenses credit using the 0.20 decimal amount?
$400
John made the following transfers during 2019: To his neighbor in the amount of $20,000 To his nephew in the amount of $18,000 To his uncle in the amount $16,000 All of the transfers are gifts that qualify for the annual gift tax exclusion. John files one Form 709 for the tax year 2019. What is the total annual gift tax exclusion amount for gifts listed on John's 2019 Form 709 filing?
$45,000
A taxpayer is a cash basis taxpayer. In 2019, he incurred the following medical expenses for himself and his daughter, Terry, whom he claims as a dependent on his tax return. $250 for glasses for Terry and $200 for glasses for himself; $800 for dental work for himself; $900 for hospital emergency services, of which $700 was paid by insurance; $1,250 for Terry's braces which he charged to his credit card in December 2019 and paid in January 2020; $300 for prescriptions for allergies; $1,500 medical insurance The taxpayer's 2019 medical expense deduction before limitations is?
$450glasses $800dentist $200hospital ($900 - $700 reimbursement) $1,250braces (placing on credit card is payment) $1,500Medical Insurance$300prescriptions $4,500Total Medical Expenses
Isaac's income tax return was examined. This resulted in an income tax deficiency in the amount of $50,000 from two $25,000 adjustments. The Revenue Agent determined that Isaac was negligent involving the first adjustment and proposed an accuracy-related penalty. The second adjustment was discovered by the Revenue Agent based upon a disclosure statement in the tax return and did not relate to a tax shelter. While the agent disagrees with the position, he did not find it unreasonable. What is the amount of the accuracy-related penalty that the Revenue Agent can propose due to negligence?
$5,000
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?
$5,000
Mr. Cedar broke his hip and must now use a wheelchair. He modified his home to accommodate the wheelchair. He had his home appraised for refinancing just before the improvements to his home. The value of his home was $200,000. After he made the modifications and improvements listed below, the value was $202,000. Mr. Cedar incurred the following expenses during the year. Without consideration of adjusted gross income limitations, compute the amount Mr. Cedar may claim on his tax return as a medical expense: $3,000 to construct a ramp in the entrance of his home to accommodate his wheelchair $4,000 for installation of a lift to transport the wheelchair from the first to the second floor of his house $1,000 for adding handrails around his tub $200 to repair his chimney
$6,000
Zach and Myra have four children ranging in age from two to ten. Zach has wages of $80,000 and Myra $25,000. Two of the children went to Child Nursery School, Inc. at a total cost of $8,000. The two older children attended a qualified afterschool program that costs $2,500. What amount of childcare expenses can be used to determine the credit on their tax return?
$6,000
Joan files as head of household and has four children who reside in her home, her own children who are ages 15, 16 and 17 and her friend's child, age 10, whose parents have been living overseas for two years. Joan adopted and provides for all the support of her friend's child and receives no support from his parents. Joan and all the children are U. S. citizens. Her AGI is $85,700. Her tax is $15,748. How much child tax credit (including any credit for other dependents) is she allowed in 2020?
$6,500
Sam Waterduck's father died at the first of the current year. However, because of interest and royalties, the estate made enough taxable income over the next few months that an estate income tax return had to be filed by Sam. What amount can be deducted on this estate income tax return as an exemption?
$600
Tina had wages of $34,000 and her husband Albert's wages were $27,000. They have three children ages 11, 14 and 16. They paid a total of $6,000 to Kinder Care for after school care for the 11 year old. Assuming a 20% credit rate, what is their credit for child and dependent care expenses?
$600.
For 2019, taxpayers filing jointly are not entitled to the saver's credit (formerly retirement savings contributions credit) if AGI exceeds what amount?
$64,000
Michael and Anna both work and their daughter attends daycare. They file a joint return. The cost of daycare is $350 per month. Michael's earned income for the year was $15,000; Anna's earned income was $25,000. They had no other income or adjustments. What amount of child care credit can they claim for 2019?
$660
A 2019 AMT liability exists if taxable income for regular tax purposes, combined with certain adjustments and tax preference items, is more than:
$71,700 if filing status is single or HH
For 2019, the IRS requires the executor of an estate to file the following tax returns (provided return filing thresholds are met): The final income tax return (Form 1040) for the decedent Fiduciary income tax returns (Form 1041) for the estate during administration Estate Tax Return (Form 706), if the fair market value of the assets of the estate exceeds $11.4 million
1, 2 and 3
Lois, a cash basis taxpayer, died on September 30, 20X1. Assume the following details regarding the assets of her estate: Lois home was appraised for $500,000 at the date of her death and sold on March 15, 20X2, for $450,000. Lois had a time certificate in the amount of $100,000. The certificate was redeemed for funeral expenses on October 1, 20X1 (ignore interest for purposes of this question). Lois had common stock valued at $350,000 at the date of death. On the alternate valuation date, the stock was valued at $250,000. Lois had personal and household furnishings that were appraised at $25,000 as of the date of death. The executor gave all of the items to a charity on November 1, 20X1. If the alternate valuation date is elected, what is the gross value that must be reported?
$825,000
Joe is contemplating retirement and decided to simplify his financial situation by disposing of some assets. He had the following transactions during the current tax year: Sold his business to his son for $100,000. The fair market value of the business at the time of the sale was $175,000. Paid college tuition directly to NC State University of $15,000 for his brother's child. Gave stock valued at $12,000 to his alma mater. The school qualifies for an exemption from tax under 501(c)(3). Paid the hospital $20,000 relating to medical expenses for his sister who had no insurance. What is the total amount of gifts (before exclusion) that should be reported on his gift tax return?
$87,000
Earl had a part-time job for which he received a W-2 reporting $10,000 of wages. He also performed some contract work for which he received a Form 1099-MISC reporting non-employee compensation of $6,000. In addition, Earl was in a partnership with his brother. Earl's half of the partnership's ordinary business income was $3,000. How much of Earl's income is subject to self-employment tax?
$9,000
Joe, a cash method taxpayer, died on August 22 and he received the following: July rental income received August 1 $3,500 August rental income received September 1 $2,500 September rental income received August 15 $1,500 Dividend declared on August 10 and received on August 20 $4,000 Dividend declared on August 20 and received on August 30 $3,000 Dividend declared on August 30 and received on September 10 $2,000 What amount of income should Joe include on his final tax return
$9,000
Joe, a cash method taxpayer, died on August 22 and he received the following: July rental income received August 1 $3,500 August rental income received September 1 $2,500 September rental income received August 15 $1,500 Dividend declared on August 10 and received on August 20 $4,000 Dividend declared on August 20 and received on August 30 $3,000 Dividend declared on August 30 and received on September 10 $2,000 What amount of income should Joe include on his final tax return?
$9,000
Earl took out a mortgage for $250,000 to purchase his home in 2007. In the current year, when the home had a fair market value of $430,000, Earl took out a home equity loan for $140,000. He used the proceeds as follows: $90,000 for home improvements $30,000 for payment of credit card debt, and $20,000 for the purchase of securities which produce tax-free income. He files as single on his tax return. How much of the $140,000 loan would produce deductible mortgage interest?
$90,000
John, a single taxpayer, died on March 3, 20X2. Based on the following information, determine the value of John's gross estate. FMV on John's date of death$250,000Life insurance on John's life (payable to John's estate)$700,000John's revocable grantor trust$50,000Stock given to John's son in 20X1 (no gift tax was paid)
$950,000
Mike has qualified business income and qualified business losses from the following: ABC $100,000 loss carryover from 2018 allowed in 2019 ABC $250,000 qualified business income from 2019 XYZ $50,000 qualified business loss from 2019 What is Mike's qualified business income or loss for 2019?
($100,000)ABC loss carryover from 2018 allowed in 2019 $250,000ABC qualified business income from 2019 ($50,000)XYZ qualified business loss from 2019 $100,000Qualified business income for 2019<<<<
A practitioner represented both a taxpayer and a former business partner of the taxpayer before the Internal Revenue Service with regard to a specific tax matter. Due to the potential conflict of interest, the practitioner obtained a written consent from each of the clients waiving the conflict of interest and giving informed consent. How long must the practitioner keep those written consents after the conclusion of representation?
36 Months
In the event that all affected clients waive a conflict of interest to allow a practitioner to represent them, how long must copies of the clients' written consent be retained by the practitioner after the conclusion of the representation?
36 months
Michael earns $110,000, and his tax liability for the current year is $8,000, double what it was the previous year. To avoid penalties, how much do his combined payments (withholding and credits) have to be?
4,000
In 20X0 Jerry signed a 5-year lease to rent space to the MacBee restaurant. MacBee paid Jerry $24,000 for the first year's rent and $24,000 in advance rent for the final year of the lease. Jerry reports his income using the accrual method of accounting. How much of the $48,000 is included in Jerry's 20X0 income?
48,000
Who is eligible to take the Section 199A qualified business income deduction? 1 C corporation on Form 1120 2 S corporation on Form 1120S 3 Partnership on Form 1065 4 Sole proprietorship on Schedule C 5 Individual taxpayer on Form 1040
5
In order for the IRS to grant a guaranteed installment agreement, a taxpayer must have not failed to file any income tax returns or pay any tax shown on such returns during any of the preceding
5 taxable years
A practitioner who is disbarred by the Office of Professional Responsibility may seek reinstatement after:
5 years.
An RMD is a required minimum distribution. Failure to take the proper amount of RMD results in what percentage penalty on the amount required but not taken?
50%
If distributions from your traditional IRA are less than the minimum required distribution for the year, you may have to pay an excise tax for that year on the amount not distributed as required. The excise tax is how much?
50%
What is the AGI limit for the deduction of noncash charitable contributions to most churches, educational organizations, hospitals, and publicly supported charities?
50%
A taxpayer who takes an early distribution from a qualified retirement plan may be subject to a 10% penalty. One exception to this penalty is when the taxpayer is separated from service with the employer and has attained the age of?
55
At what age can a taxpayer begin taking distributions without being subject to the 10% early distribution tax?
59.5
What is the earliest age at which a taxpayer may receive distributions from a traditional IRA without incurring an additional tax (without regard to any exceptions)?
59.5
Tax on early distribution from retirement plans happens prior to what age and in what amount (without considering exceptions)?
59.5 / 10%
What is the tax rate on excess contributions not withdrawn from an IRA account by the due date of the return?
6%
Jonathan uses Form 5329 to calculate additional taxes. Which of the following taxes is reported on Form 5329?
6% additional tax for excess contributions made to Coverdell education savings accounts 10% additional tax on an early distribution from an IRA 50% additional tax on excess accumulation in Qualified Retirement Plans All of the above<<<
A taxpayer calculates Alternative Minimum Tax by completing which IRS form?
6251
How many continuing education hours must enrolled agents obtain?
72 hours of continuing education every three years.
How many months does a taxpayer have to complete making installment payments?
72 months
For which of the following mortgages is mortgage interest not fully deductible?
A mortgage for $1,200,000 taken out to buy a new home, after October 13, 1987.
The Statutory Notice of Deficiency is also known as:
A 90-day letter because the taxpayer generally has 90 days from the date of the letter to file a petition with the Tax Court.
Which of the following people is a tax preparer?
A British citizen who is compensated for preparing U.S. tax returns in England for Americans who live in England.
What does the provider need to include on an IRS E-File Application?
A Responsible Official who is an individual with authority over the Provider's IRS e-file operation. All Principals who are authorized to act for the entity in legal and/or tax matters. Firm name and business type. All of these are requirements.
Joseph Argentino died early with an estate that had a considerable value. The executor of his estate is currently determining the value of his estate for taxation purposes. Which of the following cannot be deducted in arriving at the estate value?
A bequest made to his only son
Which of the following statements is NOT true regarding documentation requirements for charitable contributions?
A contribution charged to a credit card is a non cash contribution for purposes of documentation requirements.
To satisfy the earned income credit due diligence requirements, a preparer must retain all of the following EXCEPT:
A copy of the social security cards for the taxpayer and each qualifying child.
Which of the following carries the same authority as the Internal Revenue Code (26 USC)?
A decision of the Supreme Court
Which of the following are included in a consent to use taxpayer information?
A description of the particular use authorized Identification of the product or service for which the information will be used Details of the data to be used All of the above<<<
All of the following are criteria which qualify a distribution for avoidance of the early withdrawal penalty, EXCEPT:
A distribution is made from an IRA after the taxpayer reaches 50
Which of the following constitutes a tax return for the purposes of Circular 230?
A filed 1040 A filed 1040X A filed claim for a refund All of the above<<<
Which of the following current-year and timely completed tax returns can be e-filed?
A joint return where both taxpayers have SSNs. A joint return where one spouse has an SSN and one spouse has an ITIN. 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. All of these returns may be e-filed.<<<
Which of the following best describes a levy when it relates to a tax debt?
A levy on salary or wages will end when the time expires for legally collecting the tax
What is it called when the IRS claims an interest in a taxpayer's vacation house as security to pay a tax debt?
A lien.
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 monetary penalty can be assessed against the tax return preparer.
Under which situation below is a deduction allowable for an office in your home?
A. Your home is the only fixed location of your business of selling mechanics' tools at retail. You regularly use your walk-in closet for storage of inventory and product samples. You also use this area occasionally for personal purposes
Peter filed a claim for refund but his claim was disallowed. Peter thought his tax paid was incorrect but does not want to appeal within the IRS. What can he do?
A> Nothing, his only course is to appeal within the IRS. B> He can file suit in the District Court. C> He can file suit in the Court of Federal Claims. B or C.<<<<<
Which of the following taxpayers must file Form 1040NR?
Abigail, an Irish citizen who spends one month in the United States each year to check on her highly lucrative business selling t-shirts outside of Celtics games.
Frank Maple, a Certified Public Accountant, represents his brother Joe Maple and Joe's business partner Bill Smith. Joe Maple and Bill Smith are equal shareholders in the Joe & Bill Corporation. The Internal Revenue Service examined the corporation and determined that one of the shareholders committed fraud, but could not determine which shareholder it was. Frank has made an appointment with the Internal Revenue Service to determine which partner was guilty. Which of the following statements reflects what Frank should do in accordance with Circular 230?
Advise Joe & Bill that he cannot represent them because there is a conflict of interest.
Mike is a tax preparer. Widget, Inc. is an accrual basis taxpayer. While preparing Widget's 20X2 return, Mike discovered that Widget failed to include income on its 20X1 return that Widget received in 20X2, but that should have been included in income in 20X1 under the accrual method of accounting. What must Mike do?
Advise Widget of the error and the consequences of the error.
In a conversation with Jill Peachtree, a longtime client and personal friend, you discover that she won $5,000 on a trip to Las Vegas. She does not receive a W-2G and insists on not reporting it. She has no other, gambling income or expenses for the year. She did not tell you about this income prior to preparing her return. What should you do before you file the return?
Advise her that the income is taxable, and the consequences not reporting it properly. If not corrected, you cannot sign the return.
If a taxpayer has both an outstanding tax liability and a pending bankruptcy case what should he do?
Advise the IRS of the bankruptcy case.
If a tax preparer discovers an error on an already-filed tax return, what must he do?
Advise the client promptly about the error and about the consequences of not correcting the error.
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?
After the ERO and taxpayer complete and sign Form 8879
If a child being adopted is eligible to be claimed as a dependent by the adoptive parents, an identifying number must be obtained for the child. You can file Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS to get an ATIN. Which of the following statement is incorrect regarding the ATIN:
After the adoption is final, you can continue using the ATIN.
Which of the following conditions would NOT prevent an individual from claiming the earned income credit for the year 2020?
Age 25
Which of the following would constitute incompetence and disreputable conduct in practice before the IRS?
Agreeing to attempt to influence an officer of the IRS by threat or coercion
Following the death of her husband, the executrix of his estate paid the following: 1. Medical expenses of the decedent paid within six months of the date of death and not claimed on the decedent's final income tax return 2. Funeral expenses of her husband 3. State inheritance taxes 4. Qualified charitable contributions, as a bequest dictated by the Will of her husband Which of the preceding generally would be allowable deductions in determining the taxable estate on the Federal Estate Tax Return (Form 706)?
All Are Allowable
Which of the following are acceptable methods for paying additional taxes owed on a tax return?
All of the above
John Jones prepared a return for a client that contained a frivolous position that could not be defended under any circumstances. The examiner who conducted the examination referred Mr. Jones to the Office of Professional Responsibility. After all procedural requirements had been met, the Office of Professional Responsibility filed a complaint against John Jones. Which statement below is correct with respect to the hearing that will take place for the complaint filed against Mr. Jones?
An Administrative Law Judge will preside at the hearing on a complaint filed for the censure, suspension, or disbarment of a practitioner or disqualification of an appraiser.
What is the threshold for correction of a taxpayer's e-filed and rejected return by an ERO without a new signature?
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.
What does an Electronic Return Originator (ERO) do?
An ERO electronically submits returns it collects from, or prepares for, taxpayers.
Dave operates a retail business as a sole proprietorship with stores in several locations in the Toledo, Ohio area. The books and records for all of the stores are maintained at the main store near his residence. Dave's tax returns have always been prepared by his long time accountant in Toledo. Dave has been notified that his 1040 has been selected for an examination. Dave's brother-in-law in Detroit, Michigan, a district away, has just passed the Enrolled Agent's examination and Dave's wife would like him to handle the examination. Which of the following statements is true regarding the examination?
An active enrolled agent located in any state may represent Dave at the examination.
The following statements are true with respect to the IRS e-file program, EXCEPT:
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.
E-file providers are subject to preparer penalties for violation of applicable laws. Which of the following is a tax preparer?
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. An e-file provider who photocopies attachments to IRS forms and assembles them for mailing by numbering the pages. An e-file provider who electronically corrects transposed numbers on a completed tax return. None of the above.<<<
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?
An electronic copy of Form 8879, in accordance with IRS recordkeeping guidelines
Which of the following statements is true regarding the advance premium tax credit?
An eligible taxpayer can take the advance premium tax credit in advance to lower his monthly health insurance payment.
Which of the following is incorrect regarding receiving assistance from or assisting a person who is disbarred or suspended from practice before the IRS?
An enrolled agent can receive payment from a suspended person in return for temporarily handling audits for that person's clients until the suspension is lifted.
What is an enrolled agent?
An enrolled agent is a tax professional, who has demonstrated special competence in tax matters, applied for enrollment, and has been issued an enrollment card.
Who is permitted to perform all of the following activities: prepare a tax return on behalf of a taxpayer, furnish information at the request of the IRS, appear as a witness for the taxpayer
An enrolled agent. An unenrolled tax return preparer. The taxpayer. All of the above.<<<
With respect to unenrolled tax return preparers, which of the following statements is correct?
An unenrolled return preparer is an individual other than an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary who prepares and signs a taxpayer's return as the preparer, or who prepares a return but is not required (by the instructions to the return or regulations) to sign the return.
Which of the following professionals does not have unlimited authority to practice before the IRS?
An unenrolled tax return preparer
Andrea, an 18-year-old who qualifies as a dependent on her parents' return, has income from the following sources during the tax year: $1,500 in interest from multiple accounts $4,650 in dividends $3,000 in cash payments for babysitting for neighbors Which of the following statements is true?
Andrea's parents cannot include her income on their tax return because the babysitting money is earned income.
Annie Holt, an enrolled agent, was issued findings of fact, conclusions of law, and a decision ruling that she committed acts of misconduct, which were violations pursuant to Circular 230, and, therefore, a decision was entered ruling that she should be disbarred. What's next?
Annie Holt has a right to appeal the decision to the Secretary of the Treasury.
A taxpayer may not claim the retirement savings contribution credit if _________?
Another taxpayer claims him as a dependent
William Hitchcock is 76 years old but still files an income tax return because he works part-time at the local library. Which of the following is true?
Because of his age, he receives an additional amount for his standard deduction.
Casey filed a joint return with his wife, Lexie. However, Casey failed to claim the proper amount of deductions. Casey and Lexie are each legally responsible for the tax, interest, or penalties. Why?
Because they each provided a signature on the joint return (Joint and Several Liability)
Jack Biggerstaff files his 20X1 federal income tax return on March 9, 20X2. Sometime later, he realizes that he accidentally omitted a large charitable contribution and he wants to file an amended return to increase his itemized deductions. When must he file this return in order for it to be acceptable?
Before April 16, 20X5
Bob is married filing a married-separate return, cannot be claimed as a dependent by any other taxpayer, and has income that falls below the threshold for the health insurance premium tax credit. He is not able to get affordable coverage through an eligible employer plan providing minimum value and is not eligible for coverage through a government program. Bob obtains insurance through the Marketplace exchange. In this case
Bob is not eligible for the health insurance premium tax credit because he files a married-separate return
The Holiday Season is a time where Mr. Apollo Creed loves to give gifts. The gifts are usually cash or automobiles. Apollo's friends love to receive his gifts. Apollo is no longer accepting new friends. The annual gift tax exclusion amount is allowed on which of the following gifts:
Both $20,000 cash to his friend, Mr. Lang and $75,000 car to his friend, Mr. Gunn
In which of the following situations can an injured spouse claim be filed? 1 Rob and Marie, a married couple timely filed their joint tax return for 20X1. In June of 20X2, they received an IRS notice stating that their entire 20X1 refund was applied to delinquent child support Rob owed to the state. 2 Stu and Cecilia, a married couple, have prepared their joint tax return for 20X1 but have not filed it because it shows a substantial refund which they fear will be applied to a delinquent student loan that Cecilia owes.
Both 1 and 2
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?
Both Andrew and the tax preparer
Marcus is a tax return preparer working for a tax preparation firm. He is found to have misrepresented information to one of his clients, but as a result of following the firm's policy. Which of the following are subject to monetary penalty if the conduct is found to violate regulations?
Both Marcus and his firm
Both Dave and Kathy were laid off from their jobs on June 1st. They began looking for work immediately, but were unable to find new jobs by the end of the year. Their daughter Cindy attends day care at a cost of $250 per month. How much of the day care expenses can Dave and Kathy use to figure the child and dependent care credit?
Both the expenses paid so they can work and the expenses paid so they could look for work
What is the responsibility to prove entries, deductions, and statements made on tax returns known as?
Burden of Proof
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?
By March 6th, (within three (3) business days after the return is acknowledged as accepted by the IRS).
An unenrolled tax return preparer requires a valid preparer tax identification number for which of the following?
Preparing a tax return Signing a tax return Preparing or signing a claim for refund All of the above<<<
How long must each practitioner maintain records of their completed CPE credits?
CPE credit information must be retained for a period of four (4) years following the date of renewal of enrollment
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:
Can appeal the penalty before it is imposed.
A tax return preparer can avoid the understatement penalty that resulted from having taken an unreasonable position if the preparer:
Can show that he acted in good faith and can show that there was reasonable cause for the understatement.
Mr. and Mrs. Alan Gonzales filed a joint tax return. Within the required monetary limits, which of the following cannot be taken as an adjustment in arriving at their adjusted gross income?
Casualty loss on flooding of garage
Which of the following individuals qualify as a practitioner under Circular 230?
Certified public accountant Enrolled actuary Attorney All of the above<<<
For purposes of claiming the Child Tax Credit, which of the following is a requirement for a qualifying child:
Child must be claimed as a dependent.
Which one of the following is a qualifying person for purposes of the child and dependent care credit?
Child who was age 12 and lived with you all year but your ex-spouse is claiming the child as a dependent
Some contributions may be limited to 50% of the taxpayer's adjusted gross income. Deductions to which of the following nonprofit organizations are subject to the 50% (60% for cash donations) limitation on deductible contributions?
Churches and Hospitals
Contribution deductions may be limited to 20%, 30%, or 50% (60% for cash donations) of your adjusted gross income. Nonprofit organizations that qualify for the 50% limit include:
Churches and conventions of organizations of churches. Educational organizations with regular faculty and curriculum and regularly enrolled students. Hospitals and certain medical research organizations associated with these hospitals. Publicly supported charities All of the above organizations.
Which of the following taxpayers may claim the earned income credit for 2019?
Cinnamon, 42 years old, who was divorced the entire year. She had investment income of $2,500 and had W-2 wages of $7,000.
What publication sets forth the procedural rules for the conduct of proceedings on complaints filed by the Office of Professional Responsibility?
Circular 230
Which document should a practitioner with principal authority over a firm's practice consult to maintain compliance with tax regulations?
Circular 230
The following statements regarding Circular 230 are correct, EXCEPT:
Circular 230 only affects CPAs.
Money or property given to the following is deductible as a charitable contribution, EXCEPT:
Civic leagues and chambers of commerce.
Sal owes AMT. How can he lower his total tax?
Claiming itemized deductions on Form 1040
Mary Sue Weatherburn filed her tax return for Year One and took the standard deduction. Within the required monetary limits, which of the following is not a deduction that reduces her taxable income?
Costs paid for child care so that taxpayer could be employed
Daniel and Lindsey have recently adopted a little boy from Ethiopia. They incurred various expenses throughout this adoption process. Which of the following costs is not a qualified adoption expense?
Costs relating to the formal adoption of Daniel's step-son from Lindsey's previous marriage.
Who reports completed continuing education to the IRS?
Courses taken through an IRS-approved CE Provider are reported to the IRS by the Provider.
A tax preparer may be disbarred or suspended from IRS practice for which of the following conduct:
Criminal conviction of an offense under the Internal Revenue Code. Misappropriation of funds received from a client for the purpose of tax payments. Disbarment or suspension from the practice as an attorney, CPA, accountant or actuary. All of the above.<<<
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:
Criminal penalties, including imprisonment
How many years in the future can an authorization on a Form 2848 be recorded to the Centralized Authentication File (CAF)?
Current year + 3
Which of the following returns may be electronically filed?
Current year Form 1040 with APO address.
IRS personnel who access the Centralized Authorization File (CAF) system will be able to take which of the following actions?
Determine whether a recognized representative or appointee is authorized to discuss specific confidential tax information. Send copies of notices and other IRS communications to the individual or other entity designated. Determine the extent to which a recognized representative or appointee has been authorized to represent a taxpayer. 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?
Determining eligibility for HH status Verifying accuracy of taxpayer information Meeting record-keeping requirements All of the above<<<
What is the main requirement of the FTC safeguards rule for a tax return preparer?
Develop, implement and maintain an Information Security Program
Jose Domingez received a CP 2000 notice and quickly contacts you, his tax representative. The notice claims that he owes an additional $500 in taxes. He does not agree with some of the changes in the notice. You explain to him that he may:
Disagree, partially agree, or agree with the proposed changes.
Bertrand has been found to have willfully misrepresented information to a client for the purpose of defrauding that client. He has received a sanction in which he is prohibited from practice before the IRS unless and until the IRS reauthorizes him to do so. Which of the following best describes his sanction?
Disbarment
An unenrolled tax return preparer with an AFSP Record of completion has limited representation rights before the IRS. In which of the following circumstances can an unenrolled return preparer represent a taxpayer?
Discuss a 2018 tax return he prepared and signed with a revenue agent
Which of the following is practice before the IRS?
Discussing a clients tax return with an IRS revenue officer.
The Internal Revenue Service may accept an Offer in Compromise to settle unpaid tax accounts for less than the full amount due. A Collection Information Statement (financial statement) is not required with the offer when the reason for the offer is:
Doubt as to liability
On November 1, Year One, Dr. I.M. Rich donates 1,000 shares of Company X to a qualified charity. The stock had been bought on March 1, Year One for only $11 per share. Mr. Rich is now attempting to figure out the tax consequences of this gift. Which of the following statements is true?
Dr. Rich can deduct the lower of the fair value of these shares or the cost of these shares.
Which of the following refers to the authorization of a representative to act on a taxpayer's behalf even if the taxpayer becomes incapacitated or incompetent?
Durable power of attorney
When a taxpayer withdraws a sum from a traditional IRA before they are age 59.5, it is called a(n):
Early distribution
Under what circumstances would the standard deduction generally be appropriate?
The standard deduction exceeds the taxpayer's itemized deductions
The return for a child who cannot sign the return themselves should be signed by _________?
Either parent.
A taxpayer who itemizes deductions may deduct:
Either state income tax or general sales tax
The phrase records of the client means _________?
Electronic financial material created by the client before the engagement
What method does the IRS use to initiate contact with taxpayers to request personal or financial information?
Email Text message Social media None of the above.<<<
What action can a taxpayer's representative who is enrolled to practice before the Internal Revenue Service not do?
Endorse a refund check without authorization from the taxpayer.
For how long must an ERO retain Form 8879, IRS e-file Signature Authorization?
For 3 years from the return due date or the date the IRS received the return, whichever is later.
Generally, each individual who applies for renewal to practice before the Internal Revenue Service must retain the information required with regard to qualifying Continuing Professional Education hours: How long must verification of CPE taken be retained?
For a period of four years following the date of renewal of enrollment
For which clients must an ERO file Form 8453?
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.
The IRS has the authority to collect outstanding federal taxes for how long from the date the tax was assessed?
For ten years.
Qualified adoption expenses include expenses for all the following, EXCEPT:
For the adoption of spouse's child
A tax preparer retains copies of client returns or a list of returns prepared. For how long must the preparer retain this documentation?
For three years following the end of the return period
For how long must an ERO retain Form 8879?
For three years from the later of the return due date or the date the IRS received it.
Which of the following is NOT an exception to FBAR filing?
Foreign Investment Income
George has only passive income from a foreign country. When paid, the foreign country withholds income tax. When filing his US tax return, George may qualify for which credit?
Foreign tax credit
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?
Form 1040 returns
Which of the following forms appoints a representative to act on the taxpayer's behalf?
Form 2848
How is Form 2848 Power of Attorney and Declaration of Representative different from Form 8821 Tax Information Authorization?
Form 2848 includes all the tax information authorizations of Form 8821 and includes additional representation authorization
If Tom Hunter wants to appoint his aunt to represent him before the IRS on a tax matter, which form should he use?
Form 2848, if his aunt is recognized to practice before the IRS.
Ashleigh and Dino expect a $7,000 refund on their jointly-filed return. However, Dino has $45,000 in past-due taxes that he accrued before he and Ashleigh were married. Which form should they file in order to prevent Ashleigh's share of the refund from being collected?
Form 8379
When must a taxpayer sign Form 8453?
Form 8453 does not require anyone's signature.
Marty timely filed his Federal income tax return for 2013. It was selected for examination. During the course of the examination, the Revenue Agent first assigned to the case retired. A second Revenue Agent proposed adjustments to the tax return which Marty believed were erroneous. The second Revenue Agent was assigned to an extended training assignment. Before going on training, Marty and the second Revenue Agent orally agreed that the statute of limitations could be extended to December 31, 2017. Which of the following statements is applicable in order for the IRS to protect its rights?
Form 872, Consent to Extend the Time to Assess Tax must be signed by Marty and the second Revenue Agent on or before April 15, 2017.
John Bitter wants his associate, Bill Sweet, to be informed about his business tax account. John wants to disclose only this information, and grant no other authority. Which form should John Bitter use?
Form 8821
Which of the following forms provides questions for a tax preparer completing an Earned Income Tax Credit (EITC) claim?
Form 8867
Julie has authorized her ERO to enter the PIN on her behalf. What form does Julie need to complete and sign?
Form 8879
What form must a taxpayer appropriately sign if they use a Practitioner PIN?
Form 8879
When a taxpayer e-files his 1040, and the ERO enters the taxpayer PIN, what documents must the ERO sign?
Form 8879 only.
Martin is due a tax refund, and chooses to receive his refund through direct deposit. He wants to have the refund amount deposited into two separate accounts. Which form should Martin complete for this request?
Form 8888
Mark Bates is a tax preparer. He applied for a job at a private tax preparation office in his hometown and after his interview was promised an associate position that would involve practice before the IRS. What are the due diligence requirements that he must fulfill before taking this position?
He must ascertain whether any of the principals of the firm are presently under disbarment or suspension from practice before the IRS.
Jason is a doctor who provides humanitarian services for the Red Cross. He is required to file a US tax return, but on the due date for his return, he is in Afghanistan performing duties for the Red Cross. He arrived in Afghanistan (a qualified combat zone) on December 1, 20X1, and returned home on August 20, 20X4. When is the latest date that Jason can file and pay his 20X3 taxes?
He must file within 180 days of leaving the combat zone, plus an additional 3 1/2 months
Larry, age 35, made an excess contribution to his traditional IRA of $1,000, which he withdrew before the April 15 filing deadline. At the same time, he withdrew the $50 income that was earned on the $1,000. Which of the following statements are true?
He must include the $50 in his gross income for the year of the contribution and pay the 10% additional tax on the $50 as an early distribution.
Tiki is a nonresident alien. Which of the following is NOT a requirement for Tiki to elect taxation as a U.S. resident for the entire tax year?
He must not include worldwide income on his return.
Victor Marsh appointed his enrolled agent to be his representative by filing Form 2848. But the following year, Victor moved across the country and decided to appoint a new representative. Victor filed Form 8821 and identified a different enrolled agent. What has Victor done?
He only authorized an enrolled agent to receive his confidential tax information.
Travis did not make his estimated tax payments on time due to a disability. He would like to request a waiver of the penalty for underpayment of estimated tax from the IRS. What should he do in this situation?
He should file Form 2210 with his tax return and include documentation that shows his date of disability.
How long should a taxpayer keep his copy of his W-2?
He should keep it for as long as it may be needed for the administration of any provision of the tax code.
What consequences does a taxpayer face if he agrees with changes made during an audit and signs an agreement but fails to promptly pay the taxes due?
He will be charged interest on the additional taxes from the due date of the return until the payment date.
The tax shown on Janet's 20X1 return was $11,000. Her expected tax liability for 20X2 is $12,000. Tax expected to be withheld in 20X2 is $10,900. Which of the following statements is true?
Janet is not subject to the estimated tax penalty because her withholding is more than 90% of her 20X2 tax liability.
The following statements are true regarding the penalty for understatement of liability under §6694, EXCEPT:
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 client fails to pay his enrolled practitioner for tax preparation services and demands the return of his paperwork so that he can timely file his return on his own. What must the enrolled practitioner do?
If state law permits, hold all but those records that must be attached to the taxpayer's return.
Which of the following statements concerning the alternate valuation election is correct?
If the alternate valuation election is made, it is possible for some but not all of the assets to be included in the decedent's estate at a higher FMV than on the date of death.
A new client visits your office. The taxpayer believes that the U S tax system is purely voluntary and filed a return showing no income tax, requesting all withholding be refunded. The IRS assessed a $5,000 frivolous return penalty.The taxpayer has received a Notice of Intent to Levy and Right to Collection Due Process (CDP) Hearing concerning the $5,000 penalty. The taxpayer wants you to present the previous arguments about the tax system.Which of the following is a correct statement regarding the CDP hearing request raising arguments previously deemed frivolous?
If the appeal is deemed frivolous, the taxpayer will be given 30 days to withdraw or amend the CDP appeal.
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?
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 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. 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 All of the above<<<
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?
If the position is not frivolous and is adequately disclosed on the return.
With regard to seizure of property in satisfaction of a tax liability all of the following are true EXCEPT:
If the proceeds of a sale by the IRS are less than the total of the tax bill and the expenses of the levy and sale, the taxpayer will not have to pay the balance.
An unenrolled preparer can represent the taxpayer before any function of the IRS _________
If the taxpayer appoints the preparer by filing Form 2848. To discuss a tax return that was prepared by that preparer. If the taxpayer is present at all times of representation. None of the above.<<<
Which of the following is true regarding estimated tax payments:
If the taxpayer files Form 1040 by January 31 and pays the rest of the tax due, they do not need to make the estimated tax payment that would have been due on January 15.
Which of the following acts constitute negligence with regard to a preparer's obligation to properly complete a tax return?
Transposing the numbers in an entry on a Schedule C.
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:
Imprisonment for no more than 3 years
A practitioner must exercise due diligence __________
In determining the correctness of oral or written representations made by the practitioner to clients with reference to any matter administered by the IRS.
A tax practitioner must exercise due diligence in which of the following?
In preparing tax returns In filing tax returns In determining the correctness of oral or written statements concerning IRS or Treasury Department matters All of the above<<<
What income is a resident alien required to report on his U.S. income tax return?
Income from all sources both within and outside the United States.
Troy has income from several sources: He was a shareholder in an S corporation He received guaranteed payments for services he provided to business in which he is a limited partner He was paid sales commissions and received fringe benefits while working as an insurance agent Which of the income sources is NOT considered earnings from self-employment?
Income from the S Corporation
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?
Indefinitely
Jacob Marley went to a third-party tax office to get his taxes done. His tax preparer informed him that he is subject to the alternative minimum tax. Jacob must include the following adjustments or tax preference items for computing alternative minimum tax, EXCEPT:
Interest income
Which of the following would be deducted by an individual taxpayer on Schedule A of the Form 1040 as an itemized deduction?
Investment interest
What is the Taxpayer Advocate Service?
It is an independent organization within the IRS whose employees assist certain taxpayers.
Costs associated with providing volunteer services to a qualified charitable organization may be deductible. Which of the following is NOT a condition for such an expense to qualify for a deduction:
It must be a personal expense
Caramel Corp was unsuccessful in the appeal of their tax case in a conference with the IRS. Caramel was represented during the appeal by Jackson, an enrolled agent, who also regularly prepares Caramel's tax returns. He advises Caramel to take the case to United States Tax Court. Jackson is not an attorney. What statement is true regarding Jackson's role?
Jackson may only appear as a witness for the taxpayer.
All of the following statements with regard to interest and penalties on agreed cases are correct EXCEPT:
Jody agreed to the proposed changes, she signed the agreement form, but she did not pay the additional tax of $2,700. On June 2, 2017, Jody received a bill that included the interest. She paid the bill on June 21, 2017. Jody will owe additional interest.
Josephine Jones, an Enrolled Agent, received a complaint from the Office of Professional Responsibility. Select the statement below that is correct with respect to the contents of the answer that Josephine will file in rebuttal to the complaint.
Josephine must specifically admit or deny each allegation set forth in the complaint, except that she may state that she is without sufficient information to admit or deny a specific allegation.
Susan, a single filer, started a home-based dress business on March 1, 20X2. She was an employee and paid income taxes of $6,000 for 20X1. Susan's business had net income of $0, $9,000, $11,000, and $15,000 respectively for each of the quarters in 20X2. Susan's total tax liability for 20X2 was $5,500. Her first payment of estimated taxes is due:
June 15, 20X2
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?
June 29, 2023
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?
June 30th
Karen, filing as head of household, and her son, James, and her daughter, Julia, are all in graduate school. James and Julia are not dependents on Karen's return, although they live with her and she pays all of their education expenses. Karen paid $6,000 in qualified tuition expenses for herself in January 2019 for the term starting in January 2019. She also paid $2,500 in qualified tuition expenses for James and another $2,500 for Julia in July 2019 for the term starting in July 2019. Her modified adjusted gross income is $90,000. Which of the following is correct for the tax year 2019?
Karen may claim neither the American Opportunity credit nor the Lifetime Learning Credit
Larry Smith passed all parts of the Special Enrollment Examination in October of 2018. Larry submitted the required forms to become an Enrolled Agent. Larry failed the suitability test performed by the Internal Revenue Service and the Office of Professional Responsibility informed Larry that he was denied participation and provided him with the reasons for the denial. Larry received the notice dated January 20, 2019. What action should Larry take to appeal the denial received from the Office of Professional Responsibility?
Larry must file a written appeal no later than the 19th of February with the Secretary of the Treasury or his delegate.
In which of the following situations may the IRS impose penalties on a taxpayer?
Late filing Late payment of tax Frivolous return All of the above<<
Donald is a tax return preparer. His client, Jody Black, told him that she had made several gifts during 2019 and asked if she should file a gift tax return, and if so, how much tax she would owe. Jody has never given a taxable gift before. Donald reviewed Jody's gift transactions as follows: Paid her parents' medical bills, $11,000 for her father and $8,000 for her mother Bought a sports car for her son, the cost was $37,000 Gave $16,000 cash to her church Prepared her will leaving her vacation cabin, valued at $75,000, to her sister Sent a wedding gift of $1,000 to her niece What is Donald's best answer to Jody's questions?
Must file gift tax return but no tax will be owed because of the unified credit
Lorena prepares her US tax return and only owes $300 in tax. Before filing, Lorena remembers the dividends received from a French company had $500 withheld for tax by the French authorities. Lorena meets all the requirements to use the Foreign Tax Credit. Which of the following statements is correct?
Lorena can use the credit to reduce her tax liability to zero, but the remainder is non-refundable.
The standard of authority required to avoid penalties with respect to a disclosed position relative to an undisclosed position is:
Lower.
If a tax practitioner preparing a return for a client notices seemingly contradictory information supplied by that client, the practitioner must:
Make reasonable inquiries to verify the suspect information.
Bill McCoy completed the SEE and was enrolled in December. What month does his enrollment expire?
March 31
Margaret does sewing and embroidery in her spare time and sometimes sells her creations to friends and neighbors. Last year, she made $635. Margaret is 74 and is receiving Medicare benefits. Which of the following best describes Margaret's situation?
Margaret is self-employed and must complete Schedule SE.
A taxpayer with which filing status generally may not qualify for the child and dependent care credit?
Married filing separately
Which filing status does not qualify for the Child and Dependent Care Credit?
Married filing separately
Fedor is a nonresident alien. Which filing status can he use on his Form 1040NR-EZ?
Married nonresident alien
Mary's husband is deceased. Prior to his death, he was a partner in a Law firm. Mary is still receiving payments from the law firm from which he retired several years ago. Which of the following statements is true?
Mary should not report the income as self-employment income.
Which of the following does not need to file Schedule SE, Self-Employment Tax?
Mary, who earned $1,000 as an employee at a local grocery store.
Leroy is an enrolled agent. His records show that he had the following hours of qualified CPE in 2019:January: 8 hoursMay: 12 hoursDecember: 4 hoursNone of the courses related to ethics. Based on these records, Leroy ______
Needs an additional two hours of ethics to satisfy his 2019 requirements.
Which of the following reasons for an understatement might NOT constitute reckless conduct on the part of the tax preparer?
Transposing.
Nancy, a calendar year taxpayer, filed her Federal Income Tax return for tax year 2017, which was due on April 15, 2018, on May 1, 2018. Nancy did not request, and therefore did not receive, an extension of time to file her 2017 Federal Income Tax return. Nancy paid the amount due as shown on the 2017 return on June 30, 2018. Based on these facts, the last day for the IRS to assess additional tax with respect to Nancy's 2017 return is:
May 1, 2021
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?
May 1, 2023
If a taxpayer has already executed a power of attorney form that is not Form 2848 but that authorizes an eligible individual to represent him before the IRS, that taxpayer __________.
May be able to use the already-executed power of attorney if the IRS approves.
A lien is a legal claim to property as security or payment for a tax debt. Select the best answer regarding the filing of a Notice of Federal Tax Lien.
May be filed after a tax liability is assessed, billed and the debt is not paid within 10 days of notification
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:
May not prepare the return as instructed because the clients position constitutes a frivolous argument.
Martin Taylor's 20X1 and 20X2 returns were examined for the same tax item. In 20X3 the IRS proposed no change to his tax liability but again selected his return for examination of that same item and provided him with notice. Can Martin prevent a third audit?
Maybe. He can request that the examination be discontinued under the repeat examination rule.
Taxpayers with more deductions than the standard deduction amount may wish to itemize on Schedule A (Form 1040). What items are includible on Schedule A?
Medical and dental expenses
Which of the following is deductible as medical insurance:
Medicare Part B
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?
Meet a recordkeeping requirement.
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:
Meet the knowledge requirement 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. Submit Form 8867 in the manner required. All of the above<<<
Melissa is a responsible, single adult. She rents a home for which she pays all the expenses. An unrelated 9-year-old child, Ella, has been living with Melissa since April. Melissa is raising Ella as her own and receives no financial assistance. Ella was not placed by an authorized adoption agency, but Melissa has filed for adoption although it is not yet final. Melissa has no other dependents. Which of the following statements is true?
Melissa can claim qualified adoption expenses the following year, even if the adoption is not final.
A practitioner with principal authority over a firm's tax practice is obliged to take reasonable steps to ensure compliance procedures are in place. Which of the following types of relationships with the firm are subject to these procedures and fall under the responsibility of the practitioner in authority?
Members Associates Employees All of the above<<
A Form 9465 (Installment Agreement Request) is used to make installment payments of tax liabilities. Installment payments are made in equal _________ payments?
Monthly
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?
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.
Which amount of 2019 self-employment income is subject to Social Security tax, reported on Schedule SE?
Net earnings up to $132,900
How long does a taxpayer have to petition the Tax Court after the IRS sends a Notice of Deficiency?
Ninety days from the day the IRS sends the Notice.
Kevin, a paid tax preparer, has not received his PTIN. Can Kevin use his Social Security number instead?
No
For the calendar year 20X1, if a gift tax return is required to be filed and the donor is NOT deceased, what is the due date of the return excluding extensions?
No earlier than January 1, 20X2 and no later than April 15, 20X2
When should you submit your application to become an Authorized IRS E-File Provider?
No later than 45 days prior to the date you intend to begin filing returns electronically.
By what time must a preparer furnish a completed copy of a return to a taxpayer in order avoid a penalty under §6695(a)?
No later than the time it is presented for the taxpayer's signature.
When does a tax preparer have to furnish a complete copy of the return or claim to the taxpayer?
No later than the time it is presented for the taxpayer's signature.
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?
No limit
When a prepared return claims the earned income credit, which of the following is NOT true?
No special requirements apply to returns claiming earned income credit.
Ned's individual income tax return was under IRS examination. Five months before the expiration of the statute of limitations, the Revenue Agent asked Ned to agree to extend the statute of limitations. Does Ned have to agree?
No, and the IRS is required to inform him of his right to disagree.
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?
No, because Bucky is going to use his own PIN.
Stephen Jones intends to file his 2018 amended income tax return on March 31, 2020. Can he use e-file?
No, because efile is not available for amended form 1040 returns.
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?
No, because there is substantial authority for the position
Must a tax preparer review and verify each document that supports the items a taxpayer claims on his tax return?
No, but the tax preparer should advise the taxpayer that the IRS can review and examine each document.
Tom Johnston owned a small store in Massachusetts. In 20X3 he closed his business, sold his house, packed up everything, and retired to Florida. Shortly after he moved, he received a notice that his 20X1 and 20X2 business tax returns were going to be examined by the IRS in Massachusetts. Does he have to provide the requested records to the Massachusetts office?
No, he can request that the audit be held near his new residence in Florida.
Is a tax preparer permitted to use the IRS insignia on his advertising material or on letterhead?
No, he may not use it on either.
Can a taxpayer amend an e-filed return to change his direct deposit selection or election?
No, it is not permitted.
Can a taxpayer appeal the decision of the Tax Court for a case resolved pursuant to the small tax case procedures?
No.
Claudia is single and hires a nanny through a placement agency. Claudia's daughter is dropped off at the nanny's home while Claudia works. The nanny is paid $1,000 cash per week. How much should Claudia withhold from the nanny's weekly wages for Social Security and Medicare taxes?
None because Claudia's nanny is not a household employee since she works out of her own home.
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?
Not more than $1,000 or imprisoned not more than one year, or both, for each violation.
A Collection Due Process (CDP) hearing is not available if a taxpayer receives which of the following notices:
Notice of Termination of an Installment Agreement.
Alan Huffman prepares a lot of individual tax returns. A new client came to his office on March 4, 20X3 asking Huffman to do the 20X2 tax return. Huffman gathers the necessary information and several days later begins to work on the tax return. At that time, Huffman discovers that the client had taken a very large charitable contribution on his 20X1 return but the gift was not deductible because the charity did not qualify. What is the appropriate action for Huffman to take?
Notify the new client that the deduction was not appropriate and that an amended return for 20X1 needs to be filed.
If a practitioner receives an IRS request for information regarding a client, but is not in possession or control of such information, the practitioner must do which of the following?
Notify the requesting officer that the practitioner is not in possession or control of the information. Supply information about the identity of anyone the practitioner believes may have possession or control of the information. Make inquiry of the client concerning anyone who may have possession or control of the information. All of the above.<<<
The value of an estate for estate tax purposes was determined to be $23.3 million, the fair market value of the property at the date of death (the alternate valuation date was not used). In determining the taxable amount of the estate, which of the following cannot be deducted?
Personal exemption
Which of the following can be taken as an itemized deduction in the tax year that it is paid?
Points paid on a home equity loan used to add a swimming pool to main home
James A. Artwall died on April 1, Year One. Because of the size of the estate, no distributions were made until after July 1, Year Two. For valuation purposes, the executor of the estate selected the alternative valuation date. On what date must the estate assets be valued?
October 1, Year One
For most taxpayers, the automatic extension granted by Form 4868 extends Form 1040 income tax return due date to:
October 15
Jamie is filing for an extension on her individual taxes, but needs to additionally file a Form 114. To which date can Jamie extend her FBAR filing?
October 15
If a taxpayer suffers a casualty loss from a federally declared disaster area, when may the taxpayer choose to deduct that loss?
On the current year return or on an amended return for the tax year immediately preceding the tax year of the disaster
What is the minimum number of courses that must be taken to be eligible for the Lifetime Learning Credit?
One
A tax preparer is prohibited from giving a false opinion, whether such a false opinion is given knowingly or recklessly or through gross incompetence. A false opinion is:
One that results from a knowing misstatement of fact. One that results from a knowing misstatement of law. One that results from inadequate preparation under the circumstances. All of the above.<<
In general, for what period of time is a written consent to disclose taxpayer information effective?
One year from the date the taxpayer signs the consent.
Which of the following statements is false regarding tax return preparers?
Only a person who signs a return as the preparer may be considered the preparer of the return.
Which statement is NOT correct with regard to Form 2848?
Only an attorney, certified public accountant, or enrolled agent can be appointed via Form 2848.
Paid tax preparers should sign the returns they prepare and provide their _________?
PTIN.
Mr. and Mrs. Pine both work full time. They have three children ages 18, 6, and 3. For purposes of claiming the Child and Dependent Care Credit, which of the following expenses qualify?
Payments to the taxpayer's mother who lives with them but does not qualify as their dependent
The Director of the Office of Professional Responsibility is _____________ to notify appropriate officers and employees of the IRS, interested departments and agencies of the Federal government and the State where a practitioner is licensed, that a practitioner has been disbarred or suspended from practice before the IRS.
Permitted.
As a tax preparer, which of the following is required on the Third Party Designee (Other than paid preparer) portion of the return?
Personal Identification Number (PIN)
Which of the following is considered practice before the IRS?
Preparation of a protest letter.
Debbie's tax preparer will file her tax return electronically. There are two methods to sign individual income tax returns electronically. What are the two methods?
Self-select PIN and Practitioner PIN
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?
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
Roberta is in the Army, stationed in Hamburg, Germany on the due date for her return. She is a US citizen and is required to file a US tax return. She reported to duty in Hamburg on March 15, 20X1, and has been there ever since. What is the latest deadline for Roberta to pay her 20X2 taxes?
She can file and pay by June 15, 20X3 under an automatic 2-month extension as she is out of the country on active military duty.
Jill has 6 hours of ethics in the current year. How can Jill use these hours to satisfy her continuing education requirements.
She can only use 2 hours of ethics for the current year. Excess hours in ethics cannot count towards other categories.
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?
She must keep a copy of each return. She must keep an accurate list, either on paper or in a database, of the information in the returns prepared. She must keep a card file of her returns. Any one of the above methods is sufficient.<<<
Britney is a pet sitter who watches her neighbors' pets while they are away. Last year, she made $875 pet sitting. Which of the following is true?
She must pay SE tax.
How long should a taxpayer keep copies of her sales slips and expense receipts?
She should keep each document for as long as it may be needed for the administration of any provision of the tax code.
Margaret Michelson began the process of adopting Sahara in 20X1. She incurred over $20,000 in qualified expenses, including airfare to Sahara's native country of Kenya. Margaret did not finalize the adoption until 20X2. She did not incur any expenses in 20X2. When can Margaret claim the credit for her qualified adoption expenses?
Since Sahara was not a U.S. citizen, Margaret cannot claim the credit until the adoption becomes final in 20X2
Which filing status is available on form 1040NR for a nonresident alien that is not a resident of Canada, Mexico, South Korea, or a U.S. national?
Single
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?
Six Years
Jeremiah Wilson died on January 11, 20X1. The value of several large pieces of estate property fell sharply shortly after his death. Consequently, the executor of his estate chose the alternative valuation date for estate and other tax purposes. The property was all conveyed to the proper recipients on February 9, 20X2. On what date was the property valued?
Six months after death
Self-employment tax is comprised of which of the following two taxes?
Social Security and Medicare
A tax preparer must transcribe all TINs correctly. The term TIN includes which of the following numbers?
Social security number Employer identification number Individual taxpayer identification number All of the above<<<
Which of the following actions is subject to sanction under the authority of the Secretary of the Treasury or delegate?
Solicitation of employment by prohibited means Being convicted of a criminal offense involving breach of trust Providing false or misleading information to the Department of the Treasury All of the above<<<
For the burden of proof to shift to the IRS on a factual issue in tax court, the taxpayer must
The burden of proof is on the IRS if all of these circumstances are met.
Which of the following is NOT a requirement for a qualifying child for purposes of the Child Tax Credit?
The child was under age 19 at the end of the year or under age 24 at the end of the year and was a student
Garland, a single man, was injured in an accident in December 20X1. As a result, he was confined to a wheelchair for 3 months and unable to return to work until November 20X2. During the time he was disabled, Garland took a distribution from a qualified retirement plan he had from a previous employer in order to pay medical expenses. Garland turned 49 on October 23, 20X2 and was unable to deduct any of his medical expenses as they did not exceed the threshold. Based on this information, which of the following statements is true with regards to tax on early distributions?
The entire distribution is subject to the 10% tax on early distributions.
All of the following are true with regards to education credits, EXCEPT:
The fees must be paid directly to the educational institute to qualify for the credit
Leo, a single, calendar year taxpayer, died on February 23, 20X1. What is the due date of his final income tax return?
The final income tax return is due at the same time Leo's return would have been due if he hadn't died.
Ms. Polly Atkini collects $1,000 in dividends from a company located in Italy. A foreign tax of $93 was withheld on this income by the local authorities. Ms. Atkini is attempting to determine the impact of this foreign tax when she is filing her United States income tax return for this year. Which of the following is correct?
The foreign tax can be taken as a tax credit or as an itemized deduction.
What is the limit of a monetary penalty issued for incompetence or disreputable conduct?
The full amount of the income derived or expected from the action resulting in the penalty
What is the preparer penalty for understatement of tax liability due to an unreasonable position taken on a tax return?
The greater of $1,000 or 50% of the preparer's fee
What is the maximum civil penalty for a willful failure to disclose income with Form 114?
The greater of $100,000 or 50% of the amount in the account at the time of the violation.
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:
The greater of $1000 or one-half of the tax payers fee for preparing the return
Which of the following is an administrative interpretation of the Internal Revenue Code?
Treasury Regulations Revenue Rulings Revenue Procedures All of these are administrative interpretations<<<
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:
The negligence penalty.
If a taxpayer files a Form 2848 for tax matters regarding his Form 1040 for years 2014-2016, and then six months later files a second Form 2848 for the same tax matters and years (without attaching the first power of attorney), what is the status of the second representative appointed with regard to the first?
The new appointment automatically revokes the previously filed appointment.
Scott is filing for an extension to file his tax return, for which he owes additional taxes. He must pay the amount owed by which of the following to avoid interest and penalties?
The original due date of the return
To qualify for a medical expense deduction as your dependent, a person must be your dependent either at the time the medical services were provided or at the time you paid the expenses. A person generally qualifies as your dependent for purposes of the medical expense deduction if:
The person would qualify as a dependent except for the amount of gross income.
A tax practitioner must inform a client of any penalties likely to apply to the client for a position taken on a tax return or other document submitted to the IRS if:
The practitioner advised the client on the position. The practitioner prepared or signed the tax return. Both A and B.
Which of the following statements is accurate regarding preparer retention of records?
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. 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. 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 Commissioner. All of these statements are accurate.<<<
A tax practitioner may not advise a client to take a position on a document submitted to the IRS under which of the following conditions?
The purpose of the position is to delay or impede the administration of federal tax laws.
What does the issuance of a CAF number mean?
The recipient has been granted authority to receive a taxpayer's confidential tax information.
For taxpayers that want someone to represent them in their absence at an examination or at an appeal within the IRS, all of the following statements are correct EXCEPT:
The representative can be anyone who helped the taxpayer prepare the return.
Select the statement below that is correct with respect to the contents of an answer that is filed in rebuttal to a complaint filed by the Office of Professional Responsibility.
The respondent may not deny a material allegation in the complaint that the respondent knows to be true, or state that the respondent is without sufficient information to form a belief, when the respondent possesses the required information.
Under what circumstances does the three year statute of limitation not apply to a filed tax return?
The return contains fraudulent tax items. The return substantially underreports income. The return was prepared by the IRS. All of the above.<<<
A tax practitioner may not sign a return or claim for refund if it meets which of the following descriptions?
The return or claim lacks a reasonable basis. The return or claim is in an unreasonable position according to the Internal Revenue Code. The return or claim is a willful attempt to understate tax liability. 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?
The return preparer had a reasonable basis for the position being sustained on the merits. The position on the return had at least a 50% chance of being sustained on its merits. There is substantial authority to sustain the position taken on the return. Any of the above.<<<
If the taxpayer cannot pay the full amount owed as shown on the tax return _________?
The return should be filed even without the full payment.
Which of the following is NOT a factor in determining the amount of deductible home mortgage interest?
The size of the home which secures the mortgage
The Central Authorization File does not reflect which of the following authorizations?
Third party designee
If the IRS decides to assess a preparer penalty, a report of the examination must be furnished to the preparer. How many days is the preparer given to respond before the penalty is assessed and billed.
Thirty days.
Zachary filed his 20X1 tax return on March 12, 20X2 and paid a small tax due for the prior year. What is the statute of limitations for this return?
Three years from the due date for the return
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.
Three years from the due date of the return.
Taxpayers should keep supporting documents for items shown on a return, generally:
Three years from the latest of the due date of the return or the date the return was filed
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:
Timely filed
Which of the following is NOT part of Federal Treasury Regulations?
Title 26, United States Code
The goal of the Foreign Account Tax Compliance Act (FATCA) is ________________.
To address tax non-compliance by U.S. taxpayers with foreign accounts by focusing on reporting by U.S. taxpayers and foreign financial institutions
With respect to a refund of tax, when is a Form 8888 (Allocation of Refund) filed?
To buy savings bonds To deposit a refund into more than one account Both of the above<< None of the above
A Summons issued by the IRS pursuant to the Collections process is issued for what purpose?
To compel production of taxpayer records.
Form 8821, Tax Information Authorization, can be used to grant all of the following actions EXCEPT:
To discuss a taxpayer's tax return with an IRS customer service representative
What is the goal of the FTC safeguards rule?
To ensure the security and confidentiality of customer records and information.
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?
Total Tax Federal Income Tax Withheld Amount You Owe Any of the above<<<
A contingent fee is one that is based on whether or not a position taken on a return avoids challenge by the IRS.
True
George Thompson moved from Michigan to Florida. Shortly after he moved, the IRS selected his tax return for examination. The IRS sent a letter, which stated that his return had been selected, to his Michigan address and the post office forwarded the letter to his Florida address. Upon his receipt, he responded with a request that the examination be transferred to the area office closest to his new residence. It took some time but in the end, the IRS approved his request. After the examination was conducted, Thompson was liable for additional taxes and interest. If he requests, will the IRS abate the interest?
Yes, if a portion of the interest accrued due to an unreasonable delay in transferring the case.
A revenue agent is examining Susanna Birken's tax return. During the middle of the examination, the agent is sent to an extended training course. The agent's supervisor decides not to reassign Ms. Birken's case, so the work is not completed until the agent returns. As a result, interest accrued on Ms. Birken's tax liability while the agent was away. Does Ms. Birken have any rights with regard to this interest?
Yes, if a portion of the interest accrued due to an unreasonable delay.
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?
Yes, if all qualifications are met.
Can a tax preparer fulfill his obligation to exercise due diligence if he did not prepare the client's return himself?
Yes, if he used reasonable care in engaging, supervising, training, and evaluating the person.
During February 20X3, Arnold's tax return for 20X1 was selected for an IRS examination in Los Angeles, California. This is where Arnold lived, maintained his business in 20X1 and had his accountant prepare his tax return. But late in 20X2, Arnold moved to Biloxi, Mississippi and took his books and records with him. Can Arnold's case be transferred to Biloxi?
Yes, if it's more convenient for Arnold.
Is an enrolled practitioner permitted to represent a partnership and all of the individual partners in an IRS examination of the partnership return?
Yes, if the partners waive any conflict of interest in writing and if permitted by state law in the state where the partnership is established and if the practitioner believes he can fairly represent each client.
Must a preparer provide the taxpayer with a copy of the return the preparer made and filed?
Yes, or the preparer could be subject to a $50 penalty.
Harold, a tax preparer, advises prospective clients that he is able to obtain approval of qualified retirement plans with unique vesting provisions because of his close relationship with the IRS territory manager of the Tax Exempt Government Entities operating unit in his locality. Does this type of solicitation constitute disreputable conduct?
Yes, regardless if he is telling the truth.
Jim and Tammy, husband and wife, were both employed and filed a joint return which showed they were entitled to a refund of $1,000. Rather than receiving the refund of $1,000, they received a notice advising them that the entire refund was applied to an amount due that Jim owed from a prior year, which was before they were married. Can Tammy do anything to collect her portion of the refund?
Yes, she could be considered an injured spouse and should file Form 8379.
Samuel made $525 after all expenses mowing lawns last summer while he was home from college. Does he have to report the income as self-employment income?
Yes, that amount is over the filing threshold for self-employment income.
John, who was not married, died on October 12. He did not leave any of his assets to charity. Given the following information, may the executor of the estate make the alternate valuation election, and if so, what is the value of the gross estate on the alternate valuation date? FMV FMV Date of Death. Alternate Valuation Residence. $6,000,000. $6,010,000 Installment note. $5,000. $500* Stock. $600,000. $350,000 Expenses. ($450,000). ($300,000) *The decrease in value of the installment note is due to payments.
Yes, the election can be made. The alternate value of the gross estate is $6,365,000.
For court proceedings resulting from examinations started after July 1998, the IRS has the burden of proof for any factual issue. As a result, do taxpayers need to maintain records to substantiate items claimed on tax returns?
Yes, the records retention rules have not been affected by this court procedural rule.
Can a person who is not admitted to practice before the IRS ever represent a taxpayer in a limited capacity?
Yes, the tax return preparer who signs the tax return and has an Annual Filing Season Record of Completion for that year can represent that taxpayer before an IRS revenue agent regarding that return.
Michael Smith is a tax preparer and works in an office that employs four other tax preparers. Kimberly Wilson is a CPA who was suspended from practice for one year by the IRS. Kimberly knows Michael and asks him for employment during the one-year period of suspension. Michael employs Kimberly for the sole purpose of corresponding and communicating with the IRS on issues arising for Michael's clients. Has Michael done anything wrong?
Yes, this relationship is prohibited.
Paul is a barber who prepares Federal tax returns during the tax-filing season. Paul charges $25 for each return. Is Paul a tax return preparer?
Yes.
There are three ways to request an automatic extension of time to file a U.S. individual income tax return. Which is not an acceptable method?
You can send a written request to the IRS notifying them you are out of the country.
Medical expenses for a decedent paid before death:
can be claimed on decedent's final return
The Net Investment Income Tax does NOT apply to certain net investment income, which includes:
tax-exempt interest
Jack received $3,000 in educational assistance benefits from his employer during 2019 to reimburse him for the cost of course tuition and fees for him to earn a degree. The benefits were paid under an accountable plan and were not included in Jack's W-2. He has a modified adjusted gross income of $20,000 and he files single. A list of Jack's 2019 expenses follows. What is Jack's deductible tuition and fees expense? $500 for a bowling class not required for his degree $2,000 for accounting courses required for his degree $1,000 for room and board $500 for textbooks paid to the school as a condition of enrollment $500 for lab fees for courses required for his degree
$0
Brenda, age 52, participates in a high deductible health plan at work and contributes 3% of her salary to a health savings account (HSA). Her employer matches her 3% contribution. During the tax year, Brenda pays $1,200 for doctor appointments, $400 for prescriptions, and another $375 in over-the-counter nutritional supplements from funds in her health savings account. She also pays for a $600 membership to a health club. What amount of Brenda's expenses may be excluded from gross income as qualified medical expenses?
$1,600
Tony and Janet are married filing jointly. In 2019, Tony's taxable compensation is only $2,000; and Janet's compensation is $58,500. Tony contributed all $2,000 of his earnings to a Roth IRA account. Neither Tony nor Janet is covered by a retirement plan. They want to receive the maximum deduction for contributions to their traditional IRA accounts. What is the maximum amount they may deduct for 2019 if they contribute the maximum amount to each account?
$10,000
Mr. West must pay his former spouse $20,000 annually under a 2018 divorce decree in the following amounts: $1,000 a month for mortgage payments (total mortgage payment including principal and interest) on their jointly owned home $250 a month for tuition fees paid to a private school until their son attains the age of 18 or leaves the school prior to age 18 $5,000 a year cash payment to former Mrs. West In addition to the above amounts, the former Mrs. West also received a lump-sum amount of $150,000 from the sale of their other marital assets. Assume the parties did not file a joint return and were not members of the same household. Also, assume that there were no written statements between the parties as to how the amounts should be treated. What is the amount of Mr. West's alimony deduction?
$11,000
Hahn Company, a calendar year taxpayer operating as a sole proprietorship, reports Federal income taxes employing the accrual method of accounting. Hahn Company shows the following items of income and expense for 20X1: Sales $230,000 Cost of Sales $70,000 Operating Expenses (excluding insurance) $40,000 Insurance Expenses:Self-employed health insurance premium $4,000Self-insurance reserve $2,000Business liability insurance premium for a 3-year policy (from July 1, 20X1 to June 30, 20X4) $15,000 For the 20X1 year tax, what is the amount of Hahn Company's net income reportable on Schedule C, Profit or Loss from Business (Sole Proprietorship)?
$117,500
Brad makes the following payments to his ex-wife Jen in 2018. Which payment can he claim as alimony?
$2,000 paid under a written separation agreement to the Actor's Studio for Jen to take acting lessons.
The following items are reported on Mr. and Mrs. Spice's joint return: Net profit on Mrs. Spice's Schedule C of $40,000 Mr. Spice paid court-ordered alimony of $5,000 (under the terms of a divorce decree finalized before 2019 and with no modifications) Self-employment tax of $5,652 on Mrs. Spice's Schedule C profit Compute their adjusted gross income (AGI).
$32,174
Mr. Jones is a high school counselor and Mrs. Jones is an elementary school aide who works 1,000 hours per year. Mr. Jones spent $200 of his own money for educational software that was common and accepted in his field. Mrs. Jones spent $320 of her own money for books that were also ordinary and necessary for her job. If a joint return is filed, how much of a deduction can they take in arriving at their adjusted gross income for the tax year?
$450
When must a taxpayer, who turns 70.5 in 2019, take a distribution from his traditional IRA?
By April 1 of the year after which he turns 70.5
A distribution from a traditional IRA that changes the characteristics of the account to a Roth IRA is best described as a:
Conversion
Eleanor Donohue put $1,000 into a traditional individual retirement account (IRA) when she was 47 years old. When she turned 63, she took the entire balance of $2,600 out. The extra $1,600 had been earned over the years. Which of the following statements is true?
Donohue gets a deduction for adjusted gross income of $1,000 when the money was put into the traditional IRA.
Bob Slate Jr.'s mother passed away and he inherited half of her traditional IRA account. What can he do?
He can treat himself as the beneficiary of the IRA
A health savings account is a tax-favored savings account used in conjunction with a high deductible health insurance plan. Which of the following statements about health savings accounts is FALSE?
Health savings accounts allow for employer contributions only; employees may not contribute
Which of the following is the correct fact for Dusty to understand about traditional individual retirement arrangements (IRAs) for the 2019 tax year?
If his wife is covered by a retirement plan, and Dusty is not, his traditional IRA deduction is not limited if his modified AGI on a joint return is $193,000 or less for 2019.
When figuring compensation for a self-employed individual for purposes of determining the amount of an allowable contribution to a traditional IRA, which of the following statements is NOT true?
If you have a net loss from self-employment, you must subtract the loss from any salary or wages received when figuring total compensation.
Dean's 2018 divorce decree requires him to pay $2,000 per month to his ex-wife Cathy until their son reaches his twenty-first birthday. Does Cathy include these payments she receives in her 2020 income?
No, because the payments cease when their son reaches his twenty-first birthday.
Mike is 28 years old and single. In 2019, he was covered by a retirement plan at work. His salary was $57,312. His modified AGI was $80,000. Mike made a $6,000 IRA contribution for 2019. Can he deduct his entire contribution?
No, but he does not need to withdraw the money.
Jose and Rosemary have agreed to live separately but no legal divorce proceedings have commenced. Under their agreement, Jose paid Rosemary $5,000 each month during 2019. Their 10-year-old child lived with Rosemary all year. How much of the payments that Rosemary received are income for her in 2019?
None because the payments are not required by a divorce or separation instrument.
Roger doesn't want to incur any tax or penalty for prohibited transactions in his IRA account. He therefore must avoid all of the following EXCEPT:
Rolling over an IRA inherited from his spouse to his own IRA account.
Non-spouse beneficiaries must take distributions from inherited IRAs in one of the following manners. Which of the following is NOT an approved method?
Rollover into own account
Charles, age 65, Kathleen, age 63 are married and file a joint return. Charles is covered by a retirement plan at work and his salary is $106,000. Kathleen's income was $10,800 of social security. Their joint return for year 2019 had MAGI of $130,000. They both have IRAs and would like to contribute to both. Which of the following will provide them the greatest allowable tax benefit?
They may contribute $7,000 to each IRA, but only take a deduction for the $7,000 to Kathleen's IRA
The balance in Tony's traditional IRA at the beginning of the year was $40,000. All of his contributions were tax-deductible and he is 45 years old. On July 1, Tony borrowed $20,000 from the IRA account, which he repaid in December. Which of the following is true about this transaction?
Tony reports $40,000 as a distribution.
Luis is an ordained minister and common-law employee of a church. His earnings and parsonage allowance are treated as self-employment income on which he pays self-employment tax. The church has no retirement plan covering Luis. Which of the following is Luis permitted to establish for himself?
Traditional IRA
Donovan established a Roth IRA at age 57 and has contributed $3,000 each year up through 2019. In 2019, at age 61, Donovan received a distribution of his entire account balance from the Roth IRA account. Is any of Donovan's distribution included in his gross income for 2019?
Yes, if the distribution exceeded his basis.
