IRS SEE Part 3

All of the following individuals are eligible to practice (on a limited basis) before the IRS EXCEPT A.A regular full-time employee of an individual may represent the employer. B.A limited partner in a partnership may represent the partnership. C.A bona fide officer of a corporation may represent the corporation. D.A trustee of a trust may represent the trust.

B.A limited partner in a partnership may represent the partnership. Answer B is Correct. Circular 230 states that attorneys, CPAs, enrolled agents, and other individuals who qualify under Sec. 10.7 for limited practice may practice before the IRS. The individuals who qualify are a taxpayer representing himself or herself; an individual representing a family member; a full-time employee of a company; a general partner; a bona fide officer of a corporation, an association, or an organized group that represents the corporation or association; and a trustee, an administrator, or an executor of a trust or an estate. A limited partner does not qualify; only general partners and full-time partnership employees may represent the partnership.

Which e-file provider option allows taxpayers to self-prepare returns by entering return data directly on software downloaded from an Internet site? A.Online provider. B.Electronic return originator (ERO). C.Software developer. D.Transmitter.

A.Online provider. Answer A is Correct. An online provider allows taxpayers to self-prepare returns by entering return data directly on commercially available software, software downloaded from an Internet site and prepared off-line, or through an online Internet site.

Which of the following statements with respect to the preparation of a case for appeal before an IRS appeals office is false? A.A written protest of disputed issues is required in a situation in which the proposed increase in tax determined by examination is $2,300. B.The appeals office is the only level of appeal within the Internal Revenue Service. C.A written protest must contain a statement stating the law or other authority on which the taxpayer is relying. D.An S corporation must submit a written protest.

A.A written protest of disputed issues is required in a situation in which the proposed increase in tax determined by examination is $2,300. Answer A is Correct. A written protest is required with the office named in the letter to the taxpayer if the total amount for any tax period is $25,000 or more. If the total amount for any tax period is not more than $25,000, a taxpayer may make a small case request instead of filing a formal written protest. The taxpayer must include a statement of facts supporting the taxpayer's position on all disputed issues.

Identify the individual below from whom an enrolled agent, in practice before the Internal Revenue Service, may knowingly accept assistance. A.An individual who has temporary recognition to practice before the IRS. B.An individual who is under suspension from practice before the Internal Revenue Service. C.A former government employee where any federal law would be violated. D.An individual who is under disbarment from practice before the Internal Revenue Service.

A.An individual who has temporary recognition to practice before the IRS. Answer A is Correct. Section 10.24 of Circular 230 states that no practitioner shall, in practice before the Internal Revenue Service, knowingly and directly or indirectly assist or accept assistance (related to matters constituting practice) from any person who is under disbarment or suspension from practice before the Internal Revenue Service or accept assistance from any former government employee where the provisions of any federal law would be violated.

A penalty may be assessed against an income tax return preparer who takes an unreasonable position that causes an understatement of liability on a return. For purposes of assessing the penalty, "understatement of liability" means A.Any understatement of tax liability greater than $100. B.Any understatement of the tax liability or overstatement of the amount to be refunded or credited. C.Any overstatement of the amount refundable that exceeds 10% of the amount refundable shown on the claim for refund. D.Any understatement that exceeds 10% of the tax liability shown on the return.

B.Any understatement of the tax liability or overstatement of the amount to be refunded or credited. Answer B is Correct. Section 6694(e) defines "understatement of liability" for purposes of assessing penalties against return preparers as any understatement of the net amount of tax payable under Title 26 or any overstatement of the net amount creditable or refundable under Title 26. Under Sec. 6694(d), penalties will not be assessed against tax return preparers unless there has been an understatement of liability.

Jackson Corp., a calendar-year corporation, mailed its Year 6 tax return to the IRS by certified mail on Friday, April 7, Year 7. The return, postmarked April 7, Year 7, was delivered to the IRS on April 19, Year 7. The required length of time to maintain sufficient records ends on A.December 31, Year 9. B.April 16, Year 10. C.April 7, Year 10. D.April 19, Year 10.

B.April 16, Year 10. Answer B is Correct. A calendar-year C corporation return is due on April 15 of the following year. Assuming delivery in due course, a postmarked date will be deemed the filing date. Returns filed early will be considered as filed on the last day prescribed for filing, which is April 15. Thus, the required length of time to maintain sufficient records ends on April 16, Year 10.

With regard to revenue rulings and revenue procedures, which of the following statements is false? A.A revenue ruling is a published official interpretation of tax law by the IRS that sets forth the conclusion of the IRS on how the tax law is applied to an entire set of facts. B.Revenue procedures are directive and not mandatory so that a taxpayer has no vested right to the benefit of the procedures when the IRS deviates from its internal rules. C.Revenue rulings have the force and effect of Treasury Regulations. D.A revenue procedure is a published official statement of procedure that either affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code and related statutes and regulations or, if not necessarily affecting the rights and duties of the public, should be a matter of public knowledge.

C.Revenue rulings have the force and effect of Treasury Regulations. Answer C is Correct. While regulations nearly have the same force and effect of law, revenue rulings are merely published to provide precedents.

Which of the following is NOT a taxpayer's responsibility when using the Electronic Federal Tax Payment System (EFTPS)? A.Making sure that the taxpayer's account contains sufficient funds to cover the payment. B.Recording the EFTPS Acknowledgment Number. C.Scheduling the transfer at least 3 days in advance of the tax due date. D.Ensuring that the tax payment is timely made.

C.Scheduling the transfer at least 3 days in advance of the tax due date. Answer C is Correct. The EFTPS may be used to make electronic tax payments either by phone or online. Both individual and business taxpayers may use this service. All taxpayers have certain responsibilities when using EFTPS. All taxpayers are responsible for ensuring that the tax payment is timely made, recording the EFTPS Acknowledgment Number, and making sure the account contains sufficient funds to cover the payment. Transfers must be scheduled at least 1 day, not 3 days, in advance of the tax due date.

If a power of attorney specifically authorizes the substitution of a recognized representative, which document need NOT be submitted to the IRS? A.A written declaration of representative executed by the new representative. B.A notice of substitution filed by the original representative. C.The original power of attorney. D.A notarized letter from the taxpayer advising the IRS that the authorization to substitute remains valid.

D.A notarized letter from the taxpayer advising the IRS that the authorization to substitute remains valid. Answer D is Correct. Unless otherwise provided in the power of attorney, a recognized representative may make a substitution or delegation without the consent of any other recognized representative appointed to represent the taxpayer in the same matter. A substitution or delegation is effected by filing the following items with the offices of the Internal Revenue Service where the power of attorney was filed: 1. Notice of substitution or delegation. 2. Declaration of representative 3. Power of attorney

Employee A works in the accounts payable department. A's job duties include making timely payments of any outstanding balances, company supplies, and any soon-to-be due bills. Payment is made once A's supervisor has approved the purpose of the payment. A is aware of a recently received bill for trust fund taxes due by the end of the week. However, the payment is never made, as A never received approval. Any trust fund recovery penalty would most likely be assessed upon A.The treasurer of the company. B.Employee A. C.The company's payable department. D.A's supervisor.

D.A's supervisor. Answer D is Correct. A's supervisor will most likely be assessed the penalty, as they had a responsibility of authorizing specific payments. Without authorization, A was never able to make the tax payment.

A notice of disbarment or suspension of a certified public accountant from practice before the Internal Revenue Service is issued to which of the following? A.State authorities. B.Interested departments and agencies of the federal government. C.IRS employees. D.All of the answers are correct.

D.All of the answers are correct. Answer D is Correct. Section 10.80 of Circular 230 outlines the parties that should receive notice of disbarment or suspension. The list includes IRS employees, interested departments and agencies of the federal government, as well as the appropriate state authorities.

Receipt of a Centralized Authorization File (CAF) number indicates which, if any, of the following with respect to the recipient? A.Certification that an enrolled agent is in an "active" status according to the IRS records. B.Receipt by the IRS of certification from a state that an attorney or a CPA has completed continuing professional education requirements and possesses a current license. C.Recognition or authorization to represent taxpayers before the IRS. D.None of the answers are correct.

D.None of the answers are correct. Answer D is Correct. A CAF number is the Centralized Authorization File number assigned by the IRS to each representative whose power of attorney, or to each designee whose tax information authorization, has been recorded onto the CAF. The CAF number does not indicate anything other than that a power of attorney or tax information authorization has been filed.

Which of the following situations describes a disclosure of tax return information by a tax return preparer that would subject the preparer to a penalty? A.After a client files for bankruptcy, the tax return preparer provides a copy of the last return filed to the court-appointed fiduciary without written permission. B.An employee of the tax return preparer makes corporate return information available to shareholders. C.A grandfather's tax information is made available to his granddaughter to inform her that she will be claimed as a dependent on the grandfather's return. D.None of the answers are correct.

D.None of the answers are correct. Answer D is Correct. Disclosing tax information to a granddaughter is permissible provided there has not been a specific prohibition by the grandfather. This rule also applies to a corporation and its shareholders and to a bankrupt and a trustee.

Below is a list of items which may or may not be included as trust fund taxes: I. Income taxes withheld II. The employer's portion of FICA taxes withheld III. The employee's portion of FICA taxes withheld IV. The additional Medicare tax withheld Which of the above are included as trust fund taxes? A.II and IV. B. I and III. C.I only. D.IV only.

B.I and III. Answer B is Correct. Trust fund taxes are composed of income taxes withheld plus the employee's portion of FICA taxes withheld.

Ms. B filed her Year 1 Form 1040 on April 15, Year 2, but did not pay her tax liability of $3,000. On June 15, Year 3, she paid the tax in full. In Year 4, Ms. B discovered additional deductions for Year 1 that will result in a refund of $1,000. To receive her refund, Ms. B must file an amended income tax return by (assuming no relevant days are Saturdays, Sundays, or holidays) A.April 15, Year 5. B.June 15, Year 5. C.June 15, Year 6. D.April 15, Year 6.

B.June 15, Year 5. Answer B is Correct.

Which of the following e-file provider options originates the electronic submission of certain returns for its clients and/or transmits the returns to the IRS and must submit Form 8655? A.Intermediate service provider. B.Software developer. C.Transmitter. D.Reporting agent.

D.Reporting agent. Answer D is Correct. A reporting agent originates the electronic submission of certain returns for its clients and/or transmits the returns to the IRS. A reporting agent must be an accounting service, franchiser, or bank. Form 8655, Reporting Agent Authorization, must be submitted before applying for e-file.

Which of the following authorizes specific IRS employees to perform certain tasks or make certain decisions? A.Delegation Order. B.Technical Advice Memo. C.Technical Memo. D.Private Letter Ruling.

A.Delegation Order. Answer A is Correct. Commissioner Delegation Orders formally delegate authority to perform certain tasks or make certain decisions to specified IRS employees. Delegation orders are identified by a number and are located in the Internal Revenue Manual.

On April 21, 2022, Vern, a calendar-year taxpayer, filed his 2017 through 2021 income tax returns. His tax was paid through withholding. The following was shown on the tax returns: 2017 amount owed $300 2018 refund $500 2019 refund $400 2020 refund $100 2021 amount owed $200 The taxpayer had not filed any extensions. What is the amount of refund due or tax owed by Vern? A.$0 B.$500 refund. C.$300 refund. D.$400 tax owed.

A.$0 Answer A is Correct. There is a 3-year statute of limitations on refunds of taxes paid. Any refunds for tax years with due dates before April 21, 2019, would be lost. Thus, the $500 refund for the 2018 return is lost. The refunds for the 2019 and 2020 tax years will exactly offset the amounts due for the 2017 and 2021 returns.

With regard to identity theft, which of the following statements is true? A.A letter from the IRS stating that the taxpayer has a refund offset from a tax year in which (s)he did not file a tax return may indicate identity theft. B.Taxpayers subject to identity theft need not file any additional forms with the IRS. C.A taxpayer will always be aware of potential identity theft prior to filing his or her return. D.The IRS may initiate contact with a taxpayer via email to discuss potential identity theft issues.

A.A letter from the IRS stating that the taxpayer has a refund offset from a tax year in which (s)he did not file a tax return may indicate identity theft. Answer A is Correct. A taxpayer should be alert to possible identity theft if (s)he receives an IRS notice or letter that states: More than one tax return for the taxpayer was filed; The taxpayer has a balance due, has a refund offset, or has had collection actions taken against him or her for a year (s)he did not file a tax return; or IRS records indicate that the taxpayer has received wages from an employer unknown to the taxpayer.

With regard to revenue rulings and revenue procedures, which of the following statements is false? A.A taxpayer cannot appeal adverse return examination decisions based on revenue rulings. B.Revenue rulings do not have the force and effect of regulations. C.A revenue procedure is an official statement of procedure published in the Internal Revenue Bulletin. D.Revenue rulings are published conclusions as to the application of the law.

A.A taxpayer cannot appeal adverse return examination decisions based on revenue rulings. Answer A is Correct. The purpose of revenue rulings is to promote a uniform application of the tax laws, and therefore IRS employees must follow the rulings. While taxpayers can rely on the rulings, they can also appeal adverse return examination decisions based on those rulings to the Tax Court or other federal courts.

Which of the following statements is true with respect to the limited practice of an unenrolled return preparer? A.An unenrolled return preparer may not represent the taxpayer before certain types of IRS personnel with respect to an examination regarding the return that he or she prepared unless they satisfy the Annual Filing Season Program requirements. B.If authorized by the taxpayer, an unenrolled return preparer who completed the IRS AFSP can sign consents to extend the statutory period for assessment or collection of tax. C.An unenrolled preparer who completed the IRS AFSP may negotiate a refund check on behalf of the taxpayer if permission has been granted to the unenrolled preparer with a Form 8821. D.An unenrolled return preparer who completed the IRS AFSP is permitted to appear as a taxpayer's representative before any function of the Internal Revenue Service as long as he or she prepared the return.

A.An unenrolled return preparer may not represent the taxpayer before certain types of Internal Revenue Service personnel with respect to an examination regarding the return that he or she prepared unless they satisfy the Annual Filing Season Program requirements. Answer A is Correct. An unenrolled return preparer, properly authorized by the taxpayer, who signed a return as having prepared it for the taxpayer or who prepares a return but is not required (by the instruction on the return or regulations) to sign the return, may represent the taxpayer with respect to tax liability for the period covered by the return only if they satisfy the Annual Filing Season Program requirements. This applies to representation by individuals other than attorneys, CPAs, and enrolled agents and before IRS revenue agents, customer service representatives, and similar IRS employees during an examination but not before appeals officers, revenue officers, or counsel. In addition, an unenrolled agent cannot receive refund checks.

Treasury Circular 230 A.Contains the rules regarding eligibility to become an enrolled agent and renewal of enrollment. B.Contains rules of conduct applicable to enrolled agents, enrolled retirement plan agents, and enrolled actuaries, but not attorneys or certified public accountants. C.Does not contain rules regarding disciplinary actions for tax return preparers who are not enrolled agents, CPAs, or attorneys. D.All of the answers are correct.

A.Contains the rules regarding eligibility to become an enrolled agent and renewal of enrollment. Answer A is Correct. Treasury Circular 230 governs the practice of attorneys, CPAs, enrolled agents, enrolled retirement plan agents, enrolled actuaries, and appraisers before the IRS, and includes the rules regarding eligibility to become an enrolled agent and rules for renewal of enrollment (see Circular 230).

In a court opinion, which of the following is irrelevant to an appeals court's decision on a tax case? A.Dicta. B.Internal Revenue Code. C.Questions of law decided by the lower court. D.Cited cases.

A.Dicta. Answer A is Correct. Dictum is a statement of opinion on a legal point that is not necessary for the decision of a case.

Which of the following is a situation in which records must be maintained indefinitely? A.Failure of the taxpayer to file a return. B.Overstatement of a credit on a return that equals 25% of gross income. C.De minimis mathematical error on a return. D.Waiver of restrictions.

A.Failure of the taxpayer to file a return. Answer A is Correct. There are several exceptions to the statute of limitations. If you do not file a tax return or you file a fraudulent return, then there is no statute of limitations.

Which of the following is NOT required to shift the burden of proof to the IRS if the taxpayer has introduced credible evidence? A.Having a net worth of $5 million or less if the tax return is for an individual. B.Cooperating with reasonable requests for information from the IRS. C.Complying with substantiation requirements in the Code. D.Having a net worth of $7 million or less if the tax return is for a corporation, partnership, or trust.

A.Having a net worth of $5 million or less if the tax return is for an individual. Answer A is Correct. In any court proceeding, the IRS has the burden of proof for any factual issue if the taxpayer has introduced credible evidence for the issue, provided that the taxpayer has complied with the substantiation and recordkeeping requirements in the Code, cooperated with all reasonable requests for information from the IRS, and had a net worth of $7 million or less if the taxpayer is a corporation, partnership, or trust. There is no net worth condition for individuals.

With respect to powers of attorney, which of the following statements is false? A.IRS Form 2848, Power of Attorney and Declaration of Representative, cannot be used by a taxpayer to appoint an Annual Filing Season Program participant to act as the taxpayer's representative before agents and examining officers of the Examination Division of the Internal Revenue Service. B.A taxpayer's signature on a power of attorney does not have to be notarized or witnessed. C.A taxpayer can execute a durable power of attorney, which specifies that the appointment of the attorney-in-fact will not end due to the incapacity or incompetency of the taxpayer. D.The IRS will accept a copy of a power of attorney.

A.IRS Form 2848, Power of Attorney and Declaration of Representative, cannot be used by a taxpayer to appoint an Annual Filing Season Program participant to act as the taxpayer's representative before agents and examining officers of the Examination Division of the Internal Revenue Service. Answer A is Correct. A recognized representative is defined in 26 CFR 601.502 as an individual who is appointed under a power of attorney, who files a declaration of representative, and who is a member of certain specified categories. One category is an enrolled agent. An example of another category is an AFSP participant, who has limited representation rights before the IRS. A properly completed Form 2848 satisfies the requirements of both a power of attorney and a declaration of representative [26 CFR 601.503(b)(1)]. A recognized representative is an individual who is recognized to practice before the IRS [26 CFR 601.501(b)(12)].

With regard to seizure of property in satisfaction of a tax liability, all of the following are true EXCEPT A.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. B.Before the sale of property, the IRS will compute a minimum bid price. If the minimum is not offered at the sale, the IRS may buy the property. C.Any real property used as a residence by the taxpayer may not be seized to satisfy a levy of $5,000 or less. D.The taxpayer's principal residence may not be seized without the written approval of a U.S. District Court judge or magistrate.

A.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. Answer A is Correct. A levy is one method the IRS uses to collect tax that has not been paid voluntarily. A levy is the seizure of property in order to satisfy a tax debt. If the proceeds from the sale of the property seized are less than the total tax bill, the taxpayer is required to pay the balance.

All of the following stmts w/ regard to interest & penalties on agreed cases are true EXCEPT A.Jane agreed to the proposed changes signed the agreement form on May 18 22 but did not pay the bill until Oct 3 22 will owe additional interest B.Jan agreed to the proposed changes signed the agreement form and paid the addtl tax will pay interest on the additional tax, figrd from the due date of the return to the date she pd the addtl tax C.Joseph agreed to the proposed changes signed the agreement form, but did not pay the addtl tax received a bill that included the interest pd the bill of $5500 11 days after the billing date will not have to pay more interest or penalties D.Jody agreed to the proposed changes signed the agreement form, but she did not pay the additional tax of $2700. On June 5 22, J received a bill dated June 2 22 that included the interest pd the bill on June 21 22 and will owe additional interest.

A.Jane agreed to the proposed changes. She signed the agreement form on May 18, 2022, but she did not pay the bill until October 3, 2022. Jane will owe additional interest. B.Jan agreed to the proposed changes. She signed the agreement form and paid the additional tax. Jan will pay interest on the additional tax. Interest is figured from the due date of the return to the date she paid the additional tax. C.Joseph agreed to the proposed changes. He signed the agreement form, but he did not pay the additional tax. Joseph received a bill that included the interest. He paid the bill of $5,500 11 days after the billing date. He will not have to pay more interest or penalties. D.Jody agreed to the proposed changes. She signed the agreement form, but she did not pay the additional tax of $2,700. On June 5, 2022, Jody received a bill dated June 2, 2022, that included the interest. She paid the bill on June 21, 2022. Jody will owe additional interest. Answer D is Correct. If the taxpayer does not pay the additional tax when (s)he signs the agreement, (s)he will receive a bill that includes interest. If the taxpayer pays the amount due within 10 business days of the billing date, (s)he will not have to pay more interest or penalties. This period is extended to 21 calendar days if the amount due is less than $100,000 (Publication 556). Jody paid the bill within 21 days of the date of notice and demand and thus will owe no additional interest.

John Bright recently passed the Special Enrollment Examination and is advertising for his business. Which of the following presentations will violate the Circular 230 rules for advertising? A.John Bright, Certified Enrolled Agent. B.John Bright, enrolled to represent taxpayers before the Internal Revenue Service. C.John Bright, admitted to practice before the Internal Revenue Service. D.John Bright, enrolled to practice before the Internal Revenue Service.

A.John Bright, Certified Enrolled Agent. Answer A is Correct. Circular 230 states the following regarding the advertising of enrolled agents: "Enrolled agents, . . . in describing their professional designation, may not utilize the term 'certified' or imply an employer/employee relationship with the Internal Revenue Service." Examples of acceptable descriptions are "enrolled to represent taxpayers before the Internal Revenue Service," "enrolled to practice before the Internal Revenue Service," and "admitted to practice before the Internal Revenue Service."

Mr. and Mrs. Johnson's 2020 individual tax return was selected for audit by the IRS in December 2021. The audit was completed on May 3, 2022, and the Johnsons agreed to an increase in tax of $4,500. The actual assessment was made on June 8, 2022. The IRS Collection Division has until what date to collect the tax due (disregarding weekends and holidays)? A.June 8, 2032. B.June 15, 2025. C.May 3, 2025. D.April 15, 2024.

A.June 8, 2032. Answer A is Correct. Unless the IRS and the taxpayer consent otherwise, the government has 10 years from the date an assessment is made to collect the taxes. The taxes may be collected either through a court proceeding or administratively by levy.

All of the following are types of offer in compromise payment terms, EXCEPT A.Lump sum cash payments must be paid within 24 months. B.Lump sum cash payments must be paid within 5 or fewer installments. C.Short-term periodic payments must be paid within 24 months. D.Periodic payments payable in 6 or more monthly installments.

A.Lump sum cash payments must be paid within 24 months. Answer A is Correct. The IRS may accept an offer in compromise to settle unpaid tax accounts for less than the full amount of the balance due. The amount offered must reflect the taxpayer's maximum ability to pay. There are two types of offer in compromise payment terms, as follows: (1) Lump sum cash payments must be paid within 5 or fewer installments within 5 or fewer months after the offer is accepted, and (2) periodic payments must be paid within 24 months in 6 or more monthly installments after the offer is accepted. Thus, lump sum cash payments being paid within 24 months is not a type of offer in compromise payment terms.

Sarah Smith wants her business associate, Ned Nelson, to be informed about her personal tax accounts. To have this information disclosed to Ned, Sarah files a complete Tax Information Authorization (TIA, Form 8821) with the IRS. Which of the following statements is true regarding the authority given to Ned by this TIA? A.Ned will have no power to represent Sarah before the IRS. B.Ned may represent Sarah before the IRS on limited matters. C.Ned may sign a closing agreement for Sarah. D.Ned may represent Sarah at a conference with the IRS.

A.Ned will have no power to represent Sarah before the IRS. Answer A is Correct. A TIA filed with the IRS allows a taxpayer's appointee to receive or inspect confidential tax information on behalf of the taxpayer. It is strictly a disclosure authorization form and cannot be used to designate an individual to represent the taxpayer. A TIA does not authorize an appointee to advocate the taxpayer's position with respect to federal tax laws; execute waivers, consents, or closing agreements; or otherwise represent the taxpayer before the IRS. Thus, Ned will not have any power to represent Sarah before the IRS, as a result of the filed TIA.

Scott, an individual taxpayer, is involved in a criminal tax proceeding with the IRS. Regarding this proceeding, from which party can Scott receive tax advice and invoke the confidentiality privilege? A.None of the answers are correct. B.Enrolled agent. C.Both a CPA and an enrolled agent. D.CPA.

A.None of the answers are correct. Answer A is Correct. The confidentiality privilege is extended to certain nonattorneys. In noncriminal tax proceedings before the IRS, a taxpayer is entitled to the same common-law protections of confidentiality, with respect to tax advice given by any "federally authorized tax practitioner," as a taxpayer would have if the advising individual were an attorney. A "federally authorized tax practitioner" includes any nonattorney who is authorized to practice before the IRS, such as an enrolled agent, an enrolled actuary, or a CPA. However, because Scott is involved in a criminal tax proceeding, Scott can receive tax advice from neither a CPA nor an enrolled agent and be able to invoke the confidentiality privilege.

Which of the following is false regarding the execution of a power of attorney? A.If a joint return is involved in which both the husband and wife are to be represented by the same representative(s), either the husband or the wife alone can execute the power of attorney. B.In the case of a partnership (that is not dissolved), the power of attorney must be executed by the partner or partners duly authorized to act for the partnership. The partner or partners must certify that they have such authority. C.If a dissolved partnership is involved, each of the former living partners must execute a power of attorney. D.If a corporation is involved, the power of attorney must be executed by an officer of the corporation having authority to legally bind the corporation. The officer must certify that (s)he has such authority.

A.Public hearings are always held on temporary regulations. Answer A is Correct. The Treasury Department issues regulations as interpretations of the Internal Revenue Code. Regulations are generally first issued to the public in proposed form. Practitioners and the public are invited to comment on the regulation and suggest changes before the regulation becomes final. The Treasury Department sometimes issues temporary regulations. These regulations give the public, practitioners, and IRS personnel guidance until appropriate final regulations are issued. Any temporary regulation issued after November 20, 1988, will expire within 3 years after the date of issuance and must also be issued as a proposed regulation [Sec. 7805(e)]. Because temporary regulations are also issued in proposed form, public hearings are not held on the temporary regulations. While in effect, temporary regulations have the same authority as final regulations.

Which of the following statements relating to Treasury Regulations is false? A.Public hearings are always held on temporary regulations. B.Temporary regulations are issued to provide guidance for the public and IRS employees until final regulations are issued. C.Proposed regulations are issued to solicit public written comments. D.Final regulations supersede temporary regulations.

A.Public hearings are always held on temporary regulations. Answer A is Correct. The Treasury Department issues regulations as interpretations of the Internal Revenue Code. Regulations are generally first issued to the public in proposed form. Practitioners and the public are invited to comment on the regulation and suggest changes before the regulation becomes final. The Treasury Department sometimes issues temporary regulations. These regulations give the public, practitioners, and IRS personnel guidance until appropriate final regulations are issued. Any temporary regulation issued after November 20, 1988, will expire within 3 years after the date of issuance and must also be issued as a proposed regulation [Sec. 7805(e)]. Because temporary regulations are also issued in proposed form, public hearings are not held on the temporary regulations. While in effect, temporary regulations have the same authority as final regulations.

Which of the following statements about the Freedom of Information Act (FOIA) is false? A.The FOIA requires the IRS to release all documents that are subject to FOIA requests. B.The IRS may withhold information pursuant to nine exemptions and three exclusions contained in the FOIA statute. C.All IRS records are subject to FOIA requests. D.Documents must be made available electronically by the IRS.

A.The FOIA requires the IRS to release all documents that are subject to FOIA requests. Answer A is Correct. All IRS records are subject to FOIA requests. However, FOIA does not require the IRS to release all documents that are subject to FOIA requests. The IRS may withhold information pursuant to nine exemptions and three exclusions contained in the FOIA statute. Documents must be made available electronically.

Which of the following is a false statement regarding court cases, revenue rulings, and revenue procedures? A.The denial of a writ of certiorari by the U.S. Supreme Court is the equivalent of a reversal or disagreement. B.U.S. Supreme Court decisions on federal tax matters are published in Internal Revenue Bulletins. C.Announcements concerning the Internal Revenue Service's acquiescence or nonacquiescence in Tax Court decisions (other than memorandum decisions) that are adverse to the government's position are published in Internal Revenue Bulletins. D.The Internal Revenue Service does not publish decisions by United States District Courts or the United States Court of Federal Claims. To find these decisions, one must look to publications issued by commercial printing houses.

A.The denial of a writ of certiorari by the U.S. Supreme Court is the equivalent of a reversal or disagreement. Answer A is Correct. The denial of a writ of certiorari by the U.S. Supreme Court is simply the Court's decision not to hear the case. The U.S. Supreme Court selects only those cases that it thinks are of sufficient public interest to warrant a U.S. Supreme Court hearing. The denial is neither a reversal nor a disagreement. Moreover, while the effect of the denial is to let the result in the court below stand, the denial does not signify agreement with the decision.

Which of the following statements is true with respect to a client's request for records of the client that are necessary for the client to comply with his or her federal tax obligations? A.The practitioner must, at the request of the client, promptly return the records of the client to the client unless applicable state law provides otherwise. B.The existence of a dispute over fees always relieves the practitioner of his or her responsibility to return records of the client to the client. C.The practitioner may never return records of the client to the client even if the client requests prompt return of the records. D.The practitioner must, at the request of the client, return the records of the client to the client within three months of receiving the request.

A.The practitioner must, at the request of the client, promptly return the records of the client to the client unless applicable state law provides otherwise. Answer A is Correct. A practitioner must return a client's records on request, regardless of any fee dispute. Records deemed returnable for purposes of this requirement are those records necessary for a client to comply with his or her federal tax obligations. Returns or other documents prepared by the practitioner that the practitioner is withholding pending payment of a fee are not includible.

Which statement is false concerning the small tax case procedure of the Tax Court? A.The tax must have been assessed and paid before the Tax Court proceedings. B.The decision is final. C.No appeal is available for cases decided under this procedure. D.The disputed tax must be $50,000 or less for any 1 year or period.

A.The tax must have been assessed and paid before the Tax Court proceedings. Answer A is Correct. The IRS Restructuring and Reform Act of 1998 increased the deficiency or overpayment limit for cases that may be heard by the Small Tax Case Division of the Tax Court. The limit is $50,000 [Sec. 7463(a)]. It is the taxpayer's option (subject to agreement by the Tax Court) for the case to be heard by the Small Tax Case Division. Generally, the Tax Court hears cases before any tax has been assessed or paid. In order to petition, the taxpayer must first receive a Notice of Deficiency. Any case decided in the Small Tax Case Division of the Tax Court will not be reviewed by any other court.

A taxpayer is provided a $300 per month mileage allowance for business travel from their employer. In order for this to be a non-taxable item, which of the following must be true? A.The taxpayer must adequately account for the expenses within 60 days after they were paid or incurred. B.The taxpayer must return any excess reimbursement within 180 days after the expense was paid or incurred. C.The taxpayer must receive the advance within 60 days of the time the taxpayer has the expense. D.The taxpayer must adequately account for the expenses within 120 days after they were paid or incurred.

A.The taxpayer must adequately account for the expenses within 60 days after they were paid or incurred. Answer A is Correct. Taxpayers must keep permanent books of account or records that are sufficient to support items shown on a return. Taxpayers are required to substantiate business deductions for travel and entertainment expenses. Substantiation of amount, time, place, business relationship, and business purpose is generally required. For an expense to be accounted for within a reasonable period of time, the taxpayer must account for expenses within 60 days after they were paid or incurred.

An Enrolled Agent 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 about this agreement is correct? A.The taxpayer must be in filing compliance. B.The taxpayer will not be charged a user fee to set up this installment agreement. C.The taxpayer will not be charged interest and penalties while making installment payments. D.Since the taxpayer owed more than $25,000, the taxpayer may not apply online.

A.The taxpayer must be in filing compliance. Answer A is Correct. In order to obtain an installment agreement, the taxpayer must file all of his or her tax returns and make the current estimated tax payment, if required.

Which of the following statements regarding a Notice of Federal Tax Lien is true? A.The IRS will issue a Release of the Notice of Federal Tax Lien within 10 days after acceptance of a bond guaranteeing payment of the liability. B.All fees charged by the state or other jurisdiction for both filing and releasing the lien will be added to the balance the taxpayer owes. C.It is a public notice to the taxpayer's creditors that the government has a claim against all of the taxpayer's property, not including property that is acquired after the lien came into existence. D.A taxpayer cannot sue the federal government for damages if the IRS negligently fails to release a Notice of Federal Tax Lien when a release is warranted.

B.All fees charged by the state or other jurisdiction for both filing and releasing the lien will be added to the balance the taxpayer owes. Answer B is Correct. The IRS will issue a Release of the Notice of Federal Tax Lien within 30 days after the tax due is satisfied. The tax due also includes all fees charged by the state or other jurisdiction for both filing and releasing the lien. The fees are added to the balance owed.

Concerning a matter related to a specific tax period, how many years after a power of attorney (POA) is received by the IRS are documents recorded on the Centralized Authorization File (CAF) system? A.6 years. B.3 years. C.7 years. D.2 years.

B.3 years. Answer B is Correct. The CAF system is a computer file containing information regarding the authority of individuals appointed under powers of attorney or designated under the tax information authorization system. Only documents concerning a tax period that ends no later than 3 years after the date a POA is received by the IRS will be recorded on the CAF system. Documents concerning any tax period that ended prior to the date on which a POA is received by the IRS will be recorded on the CAF system provided that matters concerning such years are under consideration by the IRS.

The IRS recently assessed a frivolous return penalty upon Taxpayer F. The taxpayer reviewed the claim and paid the penalty. However, after meeting with a tax professional, F decided to challenge the penalty. Taxpayer F may request A.An abatement and refund of $10,000. B.A penalty abatement. C.A penalty abatement but not a claim for refund. D.A review of the penalty.

B.A penalty abatement. Answer B is Correct. The taxpayer may request a penalty abatement after it is assessed and either before or after it is paid.

To meet due diligence requirements, which of the following is true regarding the Earned Income Credit Worksheet and Form 8867? A.A record of any questions the taxpayer may have asked the tax preparer about his or her eligibility for the credits should be retained. B.A record of how, when, and from whom the information used to prepare Form 8867 and the worksheets must be obtained. C.Form 8867 does not need to be filed with the return if all information used to complete the form was provided by the taxpayer in writing. D.Copies of documents provided by the taxpayer that the return preparer relied on to determine the eligibility for the credits do not need to be retained by the preparer.

B.A record of how, when, and from whom the information used to prepare Form 8867 and the worksheets must be obtained. Answer B is Correct. The due diligence checklist of Form 8867 requires the retention of the following five records: Form 8867, Paid Preparer's Due Diligence Checklist; the EIC worksheet(s) or the preparer's own worksheet(s); copies of any taxpayer documents relied on to determine eligibility for or amount of EIC; a record of how, when, and from whom the information used to prepare the form and worksheet(s) was obtained; and a record of any additional questions the preparer asked and the client's answers.

Which of the following statements applies to refund anticipation loans? A.A refund anticipation loan is money borrowed by the taxpayer from the U.S. Government. B.A refund anticipation loan indicator must be included in the electronic return data that is transmitted to the IRS. C.If the anticipated tax refund is not received after a refund anticipation loan is made, the loan is automatically subtracted from the subsequent years' refunds until paid. D.The Treasury Department is liable for any loss suffered by taxpayers, electronic return originators, and financial institutions resulting from reduced refunds or from direct deposits not being honored if documentation is provided that correct procedures were followed.

B.A refund anticipation loan indicator must be included in the electronic return data that is transmitted to the IRS. efund anticipation loans? Answer B is Correct. A refund anticipation loan (RAL) is money borrowed by a taxpayer that is based on a taxpayer's anticipated income tax refund. The IRS has no involvement in RALs. A RAL is a contract between the taxpayer and the lender. An indicator is included in the electronic return data transmitted to the IRS.

An Enrolled Agent's (EA's) client is an individual taxpayer who is requesting assistance with a proposed penalty. Which of the following is a method of contesting the penalty? A.Prior to a penalty's assessment, the EA can request binding arbitration to reconsider the penalty. B.After the penalty has been assessed and paid, the EA can file a claim for refund with the IRS. C.Prior to a penalty's assessment and before any request for relief has been denied or a 30-day letter has been issued, the EA can request a conference with the IRS Independent Office of Appeals. D.Before the penalty has been assessed, the EA can submit a written request for penalty abatement.

B.After the penalty has been assessed and paid, the EA can file a claim for refund with the IRS. Answer B is Correct. Taxpayers have the right to challenge the assertion or assessment of a penalty and generally may do so at any stage in the penalty process. A taxpayer may request an abatement and refund after the payment (claim for refund).

Which of the following statements with respect to court petitions and court appeals is true? A.If a taxpayer's claim for refund is denied by the IRS or if no decision is made by the IRS in 6 months, the taxpayer may petition either the U.S. Court of Federal Claims or the U.S. Circuit Court of appeals having jurisdiction over the taxpayer. B.Both the taxpayer and the government may appeal decisions of the Tax Court or District Court to the appropriate circuit court of appeals. C.A taxpayer may petition the United States Tax Court for a judicial determination of his or her tax liability within a specified period (generally 90 days) after receiving a notice of deficiency or paying the tax. D.Decisions of the courts of appeals and some decisions of other federal courts cannot be reviewed by the United States Supreme Court.

B.Both the taxpayer and the government may appeal decisions of the Tax Court or District Court to the appropriate circuit court of appeals. Answer B is Correct. If either the taxpayer or the IRS Commissioner disagrees with the decision of the Tax Court or District Court, (s)he may appeal the decision to the appropriate circuit court of appeals.

All of the following types of individuals may practice before the IRS EXCEPT A.Certified public accountants. B.Certified financial advisors. C.Enrolled agents. D.Attorneys.

B.Certified financial advisors. Answer B is Correct. Circular 230 states that attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and other individuals who qualify under Sec. 10.5(d) or 10.7 for limited practice may practice before the IRS. The individuals who qualify are a taxpayer representing himself or herself; an individual representing a family member without compensation; a full-time employee of a company on behalf of the company; a general partner on behalf of the partnership; a bona fide officer of a corporation, an association, or an organized group that represents the corporation or association; and a trustee, an administrator, or an executor of a trust or an estate. Any individual who has been convicted of any offense involving dishonesty or breach of trust cannot practice before the IRS. A certified financial advisor may not practice before the IRS unless (s)he meets one of the limited practice requirements.

The petition for the U.S. Supreme Court to issue a writ of certiorari is a formal request for review. The granting of a writ of certiorari is A.Not permitted after a decision by a U.S. court of appeals. B.Discretionary. C.Allowed in criminal cases only. D.Subsequent to an informal request for review.

B.Discretionary. Answer B is Correct. A party may file a petition for a writ of certiorari after a decision by a U.S. court of appeals in any civil or criminal case. The petition is circulated among the nine justices of the Supreme Court, of whom at least four must exercise their discretion to vote in favor of review. When a writ of certiorari is granted, the case is scheduled for a formal hearing.

Under Treasury Circular 230, which of the following actions of a CPA tax advisor is characteristic of a best practice in rendering tax advice? A.Requesting written evidence from a client that the fee proposal for tax advice has been approved by the board of directors. B.Establishing relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the law and facts in a tax memorandum. C.Requiring the client to supply a written representation, signed under penalties of perjury, concerning the facts and statements provided to the CPA for preparing a tax memorandum. D.Recommending to the client that the advisor's tax advice be made orally instead of in a written memorandum.

B.Establishing relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the law and facts in a tax memorandum. Answer B is Correct. Best practices include (1) establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts; (2) communicating clearly with the client about the terms of the engagement; (3) advising the client regarding the importance of the conclusions reached; and (4) acting fairly and with integrity in practice before the IRS.

Which of the following acts constitutes representation before the IRS? A.Furnishing information at the request of the IRS or any of its officers or employees. B.Executing a closing agreement on behalf of a corporate taxpayer. C.Preparing less than substantially all of a tax return. D.Appearing as a witness for a taxpayer before the IRS.

B.Executing a closing agreement on behalf of a corporate taxpayer. Answer B is Correct. Practicing before the IRS includes Communicating with the IRS for a taxpayer regarding the taxpayer's rights, privileges, or liabilities under laws and regulations administered by the IRS; Representing a taxpayer at conferences, hearings, or meetings with the IRS; Preparing necessary documents and files them with the IRS for a taxpayer; or Rendering written advice with respect to any entity, transaction, plan, or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion. Executing a closing agreement on behalf of a taxpayer is considered filing a necessary document with the IRS. Just preparing a tax return, furnishing information at the request of the IRS, or appearing as a witness for the taxpayer does not constitute practice before the IRS. These acts can be performed by anyone.

To maintain active enrollment to practice before the Internal Revenue Service, each individual enrolled is required to have his or her enrollment renewed. The IRS will notify the individual of his or her renewal of enrollment and will issue the individual a card to evidence enrollment. Which of the following statements about renewal of enrollment is true? A.The enrollment cycle is a 3-year period and all enrolled agents must renew at the same time, no matter when they first became enrolled agents. B.Failure by an individual to receive notification from the IRS of the renewal requirement will not be justification for the failure to timely renew enrollment. C.A reasonable refundable fee may be charged for each application for renewal of enrollment filed with the IRS. D.Forms required for renewal may only be obtained from the National Association of Enrolled Agents.

B.Failure by an individual to receive notification from the IRS of the renewal requirement will not be justification for the failure to timely renew enrollment. Answer B is Correct. An application for renewal is required to maintain active renewal status. Failure to receive notice of the renewal requirement from the IRS does not justify circumventing this requirement. A noncomplying enrolled agent will be given an opportunity to state the basis for the noncompliance with the possible consequence of being placed on the roster of inactive enrolled agents.

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

B.Politely advising the client that this meeting was not appropriate, and make sure that no further meetings occur unless both spouses are present. Answer B is Correct. An Enrolled Agent should not represent a client if they are made aware of conflicts of interest. Once aware, an EA should either withdraw or meet the three requirements to represent conflicting interests before the IRS. C.Informing both spouses of the potential ability to seek an innocent spouse determination as part of this examination as it moves forward. D.If the taxpayer-wife does not consent to the EA sharing her concerns with her husband, the EA cannot obtain informed consent from the husband to continue to represent both spouses without violating her confidences. To continue to represent the taxpayer-wife alone would also pit the EA against the taxpayer-husband, his former client. Thus, the EA should withdraw from representation of either spouse. B.Politely advising the client that this meeting was not appropriate, and make sure that no further meetings occur unless both spouses are present. Answer B is Correct. An Enrolled Agent should not represent a client if they are made aware of conflicts of interest. Once aware, an EA should either withdraw or meet the three requirements to represent conflicting interests before the IRS.

Which of the following types of regulations appear to be given the force and effect of law when describing obligations to file forms and information? A.None of the choices are correct. B.Procedural regulations. C.Legislative regulations. D.Interpretative regulations.

B.Procedural regulations. Answer B is Correct. Procedural regulations are promulgated by the Commissioner of the IRS and not the Secretary of the Treasury. Procedural regulations are binding on the IRS insofar as they affect a vital or personal interest of the taxpayer. Procedural regulations describing obligations to file forms and information appear to be given the force and effect of law.

Identify the appropriate action that a practitioner should take when (s)he becomes aware of an error or omission on a client's return. A.Inform the IRS of the noncompliance, error, or omission. B.Promptly advise the client of such noncompliance, error, or omission and the consequences thereof. C.Amend the return and provide it to the client. D.Do nothing.

B.Promptly advise the client of such noncompliance, error, or omission and the consequences thereof. Answer B is Correct. Section 10.21 of Treasury Department Circular 230 requires a practitioner who knows that a client has not complied with the revenue laws of the United States to promptly advise the client of the noncompliance, error, or omission and the consequences of the noncompliance, error, or omission as provided in the IRC and regulations.

All of the following e-file providers must clearly display the firm's "doing business as" name EXCEPT A.Electronic return originator (ERO). B.Reporting agent. C.Intermediate service provider. D.Online-provider.

B.Reporting agent. Answer B is Correct. EROs, intermediate service providers, and online-provider transmitters must clearly display the firm's "doing business as" name at all locations and sites, including websites at which the ERO or a third party obtains information from the taxpayers for electronic origination of returns by the ERO. A reporting agent does not have to meet this requirement.

Which of the following is considered a tax preparer under the tax preparer regulations? A.An individual who prepares a return for a friend, free of charge, and then receives a gift of gratitude from the friend. B.Someone who employs another person to prepare, for compensation, a substantial portion of any return of tax under the Code. C.An individual who prepares a return for his or her employer if (s)he is regularly and continuously employed by the employer. D.An individual who prepares, as a fiduciary, a return or claim for refund for any person.

B.Someone who employs another person to prepare, for compensation, a substantial portion of any return of tax under the Code. Answer B is Correct. Under Sec. 7701(a)(36), a tax return preparer is any person who prepares for compensation, or employs others to prepare for compensation, all or a substantial portion of any tax return or claim for refund under the IRC.

All of the following statements concerning the IRS's Centralized Authorization File (CAF) number are true EXCEPT A.The CAF allows IRS personnel to identify representatives and the scope of their authority and will automatically direct copies of notices and correspondence to the person authorized by the taxpayer. B.The CAF number entitles the person to whom it is assigned to practice before any office of the IRS except a regional appeals office. C.A CAF number is a unique number that will be assigned to any person who files with the IRS a tax information authorization. D.A CAF number is a unique number that will be assigned to any person who files with the IRS a power of attorney and a written declaration that (s)he is currently appointed under powers of attorney or designated under the tax information authorization system.

B.The CAF number entitles the person to whom it is assigned to practice before any office of the IRS except a regional appeals office. Answer B is Correct. The CAF number is the unique number that the Internal Revenue Service will assign to a representative after (s)he has filed a power of attorney or tax information authorization with an IRS office that is using the CAF system. The issuance of a CAF number does not indicate that a person is either recognized or authorized to practice before the IRS. That determination is made under the provisions of Circular 230 [26 CFR 601.506(d)].

Select the true statement regarding a person who employs one or more income tax return preparers. A.Each preparer's place of work does not have to be disclosed. B.The employer must prepare a return setting forth certain information. C.The employer must disclose the wage paid to each employee. D.Required records must be kept for 2 years.

B.The employer must prepare a return setting forth certain information. Answer B is Correct. A person who employs one or more income tax return preparers must make a return setting forth the name, identifying number, and place of work of each preparer and keep the records for up to 3 years.

Which of the following may be cited to sustain a position? A.Technical Advice Memoranda. B.Treasury Decisions. C.Private Letter Rulings. D.General Counsel Memoranda.

B.Treasury Decisions. Answer B is Correct. When a proposed regulation becomes final or an existing regulation is amended, the document that describes the finalization or amendment is referred to as a Treasury Decision (TD). The IRS is bound by the regulations, and therefore, TDs may be cited to sustain a position. TDs are published in the Internal Revenue Bulletin.

Charlie had income tax withheld from his wages during 2019 in the amount of $5,000. Charlie filed an automatic extension of time to file his tax return for that year to October 15, 2020, together with making an additional payment in the amount of $2,000 with the extension. Charlie filed his tax return on November 15, 2020, and paid the balance shown to be due on the return of $1,000 on that date. Charlie discovered an error in his return on November 1, 2023. On that same date, he filed a claim for refund in the amount of $6,000. Assuming the grounds set forth in the claim are proper, what refund can Charlie recover for 2019? A.$6,000 B.$2,000 C.$1,000 D.$0

C.$1,000 Answer C is Correct. Publication 556 states, "If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed the claim." The $5,000 withholding and the $2,000 paid with the extension do not fall within 3 years of a request for a refund. However, the $1,000 balance paid with the return was paid within the 3-year period for requesting a refund and is eligible for the refund.

Harold Thompson, a self-employed individual, had income transactions for 2018 (duly reported on his return filed in April 2019) as follows: Gross receipts $400,000 Less: Cost of goods sold and deductions (320,000) Net business income $ 80,000 Capital gains 36,000 Gross income $116,000 In March 2022, Thompson discovers that he had inadvertently omitted some income on his 2018 return. He retains Mann, EA, to determine his position under the statute of limitations. Mann should advise Thompson that the 6-year statute of limitations would apply to his 2018 return only if he omitted from gross income an amount in excess of A.$100,000 B.$20,000 C.$109,000 D.$29,000

C.$109,000 Answer C is Correct. The normal statute of limitations is 3 years after the later of the due date of the return or when the return was filed. A 6-year statute of limitations applies if gross income omitted from the return exceeds 25% of gross income reported on the return [Sec. 6501(e)(1)]. For a trade or business, gross income means the total of the amounts received from the sale of goods before deductions and cost of goods sold. The 6-year statute of limitations will apply if Thompson omitted from gross income an amount in excess of $109,000 [($400,000 + $36,000) × .25].

All of the following statements with respect to the IRS seizure and sale of a taxpayer's property to satisfy his or her tax bill are true except A.A taxpayer has the right to an administrative review of a seizure action when the IRS has taken personal property necessary to the maintenance of the taxpayer's business. B.After the sale, proceeds are applied first to the expenses of the levy and sale. C.A taxpayer does not have the right to redeem his or her property prior to sale by the IRS. D.A seizure may not be made on any property if the estimated cost of the seizure and sale exceeds the fair market value of the property to be seized.

C.A taxpayer does not have the right to redeem his or her property prior to sale by the IRS. Answer C is Correct. Section 6331(b) authorizes the seizure and sale of any property upon which the IRS may levy. Section 6337(a) provides a right of redemption by paying the amount due, together with expenses, at any time prior to sale of the property. For real property, the right of redemption continues until 180 days after the sale [Sec. 6337(b)]. D.A seizure may not be made on any property if the estimated cost of the seizure and sale exceeds the fair market value of the property to be seized.

For the current year, Mr. Dixon, a tax preparer, prepared for compensation an income tax return for Mr. Hatfield. Mr. Hatfield purchased furniture in the current year that required depreciation using the MACRS method. Mr. Dixon explained to Mr. Hatfield that the furniture should be depreciated using a certain class life. However, Mr. Hatfield insisted that a different class life be used for the depreciation calculation. At Mr. Hatfield's insistence, Mr. Dixon relented and used that class life. This position was not disclosed on the tax return, and it resulted in an understatement of tax. Since Mr. Dixon used the incorrect class life due to Mr. Hatfield's insistence, what is the amount of the return preparer penalty that may be imposed on Mr. Dixon? A.$1,000 or 50% of fee, whichever is greater. B.$0 C.$5,000 or 75% of fee, whichever is greater. D.$28,000

C.$5,000 or 75% of fee, whichever is greater. Answer C is Correct. Section 6694(b) imposes a penalty on a preparer if any part of any understatement of liability is due to reckless or intentional disregard of rules and regulations. The penalty is the greater of $5,000 or 75% of income derived by the preparer from the return. The penalty is applied if the understatement is due either to a willful attempt to understate the tax liability or to any reckless or intentional disregard of rules or regulations by the return preparer. The taxpayer's insistence that the return preparer use the incorrect class life is not reasonable cause for intentionally disregarding the rules and regulations concerning the MACRS method of depreciation. Thus, the penalty of the greater of $5,000 or 75% of Mr. Dixon's fee will be imposed on Mr. Dixon for Mr. Hatfield's return.

Concerning final regulations, which of the following statements is true? A.Final regulations remain effective for a maximum of 3 years. B.Adoption occurs after public comment on the proposed versions has been evaluated by the Treasury. C.All Code sections have final Treasury Regulations. D.The document describing the finalization is referred to as a Treasury Final.

C.A Final Notice of Intent to Levy is not enforceable unless this notice is given to the taxpayer in person. Answer C is Correct. Section 6331 authorizes the IRS to collect unpaid taxes by levying upon the taxpayer's property. A tax liability must be assessed. Within 60 days after making the assessment, the IRS is required to give a notice and demand for payment to the taxpayer. This notice must be left at the taxpayer's dwelling or usual place of business, or sent by mail to the taxpayer's last known address [Sec. 6303(a)]. If the taxpayer neglects or refuses to pay the tax within 10 days after notice and demand, a Final Notice (Notice of Intent to Levy) must be provided to the taxpayer at least 30 days in advance [Sec. 6331(d)]. This notice must be given in person, left at the taxpayer's dwelling or usual place of business, or sent by certified or registered mail to the taxpayer's last known address.

Which of the following statements with respect to a levy is false? A.The IRS must release a levy if the fair market value of the property exceeds the levy and its release would not hinder the collection of tax. B.A levy can be made on property in the hands of third parties or in the taxpayer's possession. C.A Final Notice of Intent to Levy is not enforceable unless this notice is given to the taxpayer in person. D.Generally, court authorization is not required before levy action is taken.

C.A Final Notice of Intent to Levy is not enforceable unless this notice is given to the taxpayer in person. Answer C is Correct. Section 6331 authorizes the IRS to collect unpaid taxes by levying upon the taxpayer's property. A tax liability must be assessed. Within 60 days after making the assessment, the IRS is required to give a notice and demand for payment to the taxpayer. This notice must be left at the taxpayer's dwelling or usual place of business, or sent by mail to the taxpayer's last known address [Sec. 6303(a)]. If the taxpayer neglects or refuses to pay the tax within 10 days after notice and demand, a Final Notice (Notice of Intent to Levy) must be provided to the taxpayer at least 30 days in advance [Sec. 6331(d)]. This notice must be given in person, left at the taxpayer's dwelling or usual place of business, or sent by certified or registered mail to the taxpayer's last known address.

All of the following are tax return preparers EXCEPT A.A person who prepares a substantial portion of the return for a fee. B.A person who prepares a United States return for a fee outside the United States. C.A person who gives an opinion about theoretical events that have not occurred. D.A person who prepares a claim for a refund for a fee.

C.A person who gives an opinion about theoretical events that have not occurred. Answer C is Correct. Under Sec. 7701(a)(36), a tax return preparer is any person who prepares for compensation, or employs others to prepare for compensation, any tax return or claim for refund under Title 26. A person who gives an opinion about events that have not happened is not a tax return preparer.

Circular 230, Sec. 10.34, discusses standards with respect to tax returns and documents, affidavits, and other papers. Which of the statements below is true? A.A practitioner advising a client to take a position on a tax return, or preparing or signing a tax return as a preparer, must inform the client of the penalties reasonably likely to apply to the client with respect to the position advised, prepared, or reported. B.A practitioner may not sign a tax return as a preparer if the practitioner determines that the tax return contains an unreasonable position.

C.A practitioner advising a client to take a position on a tax return, document, affidavit, or other paper submitted to the IRS, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete. D.All of the answers are correct. Answer D is Correct. Significant aspects of return preparation are making factual inquiries and taking a position relative to tax law. A tax return preparer may rely, if in good faith, upon information furnished by the taxpayer without having to obtain third-party verification. However, the preparer may not ignore the implications of the information furnished. The preparer must make reasonable inquiries if the information appears inaccurate or incomplete. The preparer should make appropriate inquiries of the taxpayer to determine the existence of facts and circumstances required by an IRC section or regulations incidental to a deduction, including, e.g., substantiating documentary evidence, even if for a minimal amount. A return preparer may not take a frivolous position on a return. In addition, the return preparer must inform the taxpayer of the penalties that may apply with the tax position that has been taken.

With regard to powers of attorney, which of the following statements is false? A.Form 2848, Power of Attorney and Declaration of Representative, can be used to appoint an Annual Filing Season Program participant as a taxpayer's representative before revenue agents and examining officers of the Examination Division of the IRS. B.A document other than Form 2848 can be used to appoint a power of attorney if it contains the information required by the IRS. C.A taxpayer's representative can receive and endorse the taxpayer's check related to income tax from the U.S. Treasury if so authorized on the taxpayer's power of attorney, Form 2848. D.A taxpayer can execute a durable power of attorney, which specifies that the appointment of the attorney-in-fact will not end due to the incapacity or incompetency of the taxpayer.

C.A taxpayer's representative can receive and endorse the taxpayer's check related to income tax from the U.S. Treasury if so authorized on the taxpayer's power of attorney, Form 2848. Answer C is Correct. According to 26 CFR 601.504(a)(5), a taxpayer must specifically authorize in IRS Form 2848, Power of Attorney and Declaration of Representative for the taxpayer's representative to receive a refund check. However, the representative is not authorized to endorse and cash the refund check.

Select the true statement about advertising standards for electronic return originators (EROs). A.An ERO may use "IRS" within the firm's name. B.Advertising for a cooperative electronic return filing project needs to state only one party's name. C.An ERO must comply with the advertising and solicitation provisions of Circular 230. D.No claims can be made regarding faster refunds by virtue of electronic filing.

C.An ERO must comply with the advertising and solicitation provisions of Circular 230. Answer C is Correct. An ERO must comply with the advertising and solicitation provisions of Circular 230. This circular prohibits the use or participation in the use of any form of public communication containing a false, fraudulent, misleading, deceptive, unduly influencing, coercive, or unfair statement or claim.

With regard to continuing education (CE) for enrolled agents, which of the following statements is false? A.All continuing education programs will be measured in terms of contact hours. A contact hour is 50 minutes of continuous participation in a program. B.An enrolled agent must complete a minimum of 72 hours of CE credit if enrolled for an entire enrollment cycle. C.An individual who receives initial enrollment during an enrollment cycle must complete 1 hour of CE credit for each month enrolled during the cycle, beginning with the month the individual is enrolled. D.CE credit may be awarded for publications on federal taxation or federal tax-related matters.

C.An individual who receives initial enrollment during an enrollment cycle must complete 1 hour of CE credit for each month enrolled during the cycle, beginning with the month the individual is enrolled. Answer C is Correct. In order to qualify for renewal, 72 hours of CE is normally required during the 3-year enrollment cycle. If initial enrollment is during an enrollment cycle, 2 hours of CE is required for each month enrolled during the enrollment cycle [Circular 230, Sec. 10.6(e)]. D.CE credit may be awarded for publications on federal taxation or federal tax-related matters.

Which of the following is NOT published in the Internal Revenue Bulletin? A.Treasury Decisions. B.Executive Orders. C.IRS Publications. D.Tax Conventions.

C.IRS Publications. Answer C is Correct. The Internal Revenue Bulletin (IRB) is the authoritative instrument of the Commissioner of the Internal Revenue for announcing official IRS rulings and procedures and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, and court decisions. IRS Publications are stand-alone documents and are not published in the IRB.

Regarding taxpayers' recordkeeping requirements, which of the following is true? A.Taxpayers must keep original documents in addition to electronic documents. B.Taxpayers who store their documents electronically require written IRS approval in order to destroy original documents. C.If a taxpayer is missing documents due to events beyond their control, they can claim a deduction by reconstructing the records. D.If a taxpayer does not have complete records, then deductions are not allowed.

C.If a taxpayer is missing documents due to events beyond their control, they can claim a deduction by reconstructing the records. Answer C is Correct. If a taxpayer cannot produce a receipt because of reasons beyond the taxpayer's control (floods, fires, etc.), then the taxpayer can prove a deduction by reconstructing his or her records.

With respect to a penalty proposed pursuant to Sec. 6694 of the Internal Revenue Code, which of the following statements is true? A.After the IRS sends the tax return preparer a letter, that preparer has 10 days to request further consideration. B.The preparer cannot bring suit in District Court to determine liability for the penalty if the claim for refund is denied. C.If the IRS assesses either the Sec. 6694(a) or Sec. 6694(b) penalty, the preparer can, within 30 days, either pay the entire amount and then file for refund or pay at least 15% of the entire amount and then file a claim for the amount paid. D.The IRS must send a letter to the tax return preparer at least 30 days before the statute of limitations expires.

C.If the IRS assesses either the Sec. 6694(a) or Sec. 6694(b) penalty, the preparer can, within 30 days, either pay the entire amount and then file for refund or pay at least 15% of the entire amount and then file a claim for the amount paid. Answer C is Correct. The claim, which is made on Form 6118, Claim for Refund of Income Tax Return Preparer Penalties, must be filed with the service center that issued the statement of notice and demand to the preparer. Only a minimum of 15% need be paid.

Maude, an attorney, has been charged by the IRS with acts of misconduct. Which of the following forms of evidence is Maude NOT permitted to introduce at the hearing? A.Exhibits. B.Depositions. C.Letters. D.All of the answers are correct.

C.Letters. Answer C is Correct. Section 10.73 of Circular 230 allows for the introduction of depositions, proof of documents, exhibits, and objections. No permission is given for letters, however.

Jane is a Certified Public Accountant who specializes in preparing federal tax returns. Which of the following returns would NOT qualify Jane as a tax return preparer? A.Withholding tax returns. B.Excise tax returns. C.None of the answers are correct. D.Estate or gift tax returns.

C.None of the answers are correct. Answer C is Correct. A tax return preparer is any person who prepares for compensation any return of tax or claim for refund under the IRC. Estate returns, gift tax returns, excise tax returns, and withholding returns are covered by the IRC.

Which of the following is NOT an example of disreputable conduct for which an enrolled agent may be disbarred or suspended from practice before the Internal Revenue Service? A.Maintaining a partnership for the practice of tax law and accounting with a person who is under disbarment from practice before the Internal Revenue Service. B.Being convicted of any offense involving dishonesty or breach of trust. C.Soliciting new business in matters relating to the Internal Revenue Service through the publishing of a range of fees for particular services. D.Circulating or publishing malicious or libelous matter in connection with practice before the Internal Revenue Service.

C.Soliciting new business in matters relating to the Internal Revenue Service through the publishing of a range of fees for particular services. Answer C is Correct. The Secretary of the Treasury may suspend or disbar from practice before the IRS any practitioner who is shown to be incompetent or disreputable; who refuses to comply with the rules and regulations relating to practice before the IRS; or who, with intent to defraud, willfully and knowingly deceives, misleads, or threatens a client or prospective client (Sec. 10.50 of Circular 230). Soliciting new business by publishing a range of fees for particular services is an acceptable practice for an enrolled agent.

Which of the following is known to be helpful in tracing the history and rationale behind a regulation or regulation proposal? A.Technical Advice Memo. B.Delegation Order. C.Technical Memo. D.Private Letter Ruling.

C.Technical Memo. Answer C is Correct. Technical Memoranda (TMs) function as transmittal documents for Treasury Decisions or Notices of Proposed Rule Making (NPRMs). They generally summarize or explain proposed or adopted regulations, provide background information, state the issues involved, and identify any controversial legal or policy questions. TMs are helpful in tracing the history and rationale behind a regulation or regulation proposal.

Steve, an enrolled agent, is hired to represent a client in Tax Court over what the IRS argues is a groundless tax position. Steve argues that his client's position in the matter is supported by a relevant IRS publication. The IRS agent assigned to the case argues that the position is groundless under a specific determination letter. Assuming both sources equally support the views of the respective parties, which party will likely prevail on the tax position in question? A.Neither, as both sources support the views of each respective party. B.The taxpayer. C.The IRS. D.The IRS, because IRS publications cannot be used as the sole authority.

C.The IRS. Answer C is Correct. The IRS will likely prevail in litigation, as it is using a primary authority, while the taxpayer is using a secondary authority to argue his position.

Which of the following statements is true regarding Form 8879? A.Taxpayers may not sign the form using an electronic signature pad. B.A copy of the form must be sent to the IRS. C.The form is completed when the Practitioner PIN method is used. D.This form must accompany specific documentation mailed to the IRS.

C.The form is completed when the Practitioner PIN method is used. Answer C is Correct. Form 8879, IRS e-file Signature Authorization, is the declaration document and signature authorization for a return e-filed by an electronic return originator (ERO). This form is completed when the Practitioner PIN method is used or when the taxpayer authorizes the ERO to enter or generate the taxpayer's PIN on the e-filed individual income tax return.

The authority of an agency such as the IRS to make law is typically determined by A.The executive branch. B.The Administrative Procedure Act (APA). C.The statute that created the agency. D.The agency itself.

C.The statute that created the agency. Answer C is Correct. Because an agency such as the IRS is bound by the procedural rules it adopts, IRS personnel must comply with Manual procedures (the statute that created the agency).

Which of the following is NOT an acceptable reason to transfer an IRS examination from one IRS district office to another? A.Taxpayer B has moved to a new home in a new district. B.Taxpayer X, an executor, has moved to another district. C.The taxpayer requests a transfer for his or her convenience. D.The taxpayer's books and records are kept in another district.

C.The taxpayer requests a transfer for his or her convenience. Answer C is Correct. When a request is received to transfer a return to another district for examination, the district director having jurisdiction may transfer the case to the district director of such other district. The IRS will determine the time and place of the examination. In determining whether a transfer should be made, circumstances considered include 1. The change of the taxpayer's domicile, 2. Discovery that the taxpayer's books and records are kept in another district, 3. Change of domicile of an executor or administrator to another district, and 4. The effective administration of the tax laws. No such rule exists that permits the transfer of an IRS examination for the sole purpose of the taxpayer's convenience.

Stuart Light, Enrolled Agent, received a complaint from the IRS for disreputable conduct. Which one of the following items was NOT required to be listed in the complaint? A.A demand for an answer to the charges. B.The charges against Stuart. C.The unit and employee of the Internal Revenue Service that recommended the action against Stuart. D.The specific sanctions that are recommended against Stuart.

C.The unit and employee of the Internal Revenue Service that recommended the action against Stuart. Answer C is Correct. If the IRS has reason to believe an agent has violated a law or regulation governing practice before the IRS, the IRS may reprimand the agent or institute a proceeding for suspension or disbarment. This complaint should contain a clear and concise statement of one of the allegations that constitute the basis of the proceeding. It is not required to include the unit and employee of the Internal Revenue Service who recommended the action against Stuart.

The Internal Revenue Bulletin (IRB) is the authoritative instrument of the Commissioner of Internal Revenue. It is published by the Government Printing Office on a A.Monthly basis. B.Daily basis. C.Weekly basis. D.Annual basis.

C.Weekly basis. Answer C is Correct. The IRB is the authoritative instrument of the Commissioner of Internal Revenue for announcing official IRS rulings and procedures and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published on a weekly basis by the Government Printing Office.

Which of the following statements concerning continuing education (CE) requirements for enrolled agents is false? A.An enrolled agent must complete a minimum of 72 hours of CE credits if enrolled for the entire enrollment cycle with the minimum being 16 hours per year. B.An individual who becomes enrolled during an enrollment cycle must complete 2 hours of CE for each month enrolled during the cycle, beginning with the month enrolled. C.The current enrollment cycle, the period during which enrolled agents must meet their minimum continuing education requirements, is determined by the enrolled agent's Social Security number. D.An enrolled agent who does not meet the renewal requirements for one enrollment cycle will be required to take and pass all three parts of the Special Enrollment Examination in order to retain enrolled agent status.

D.An enrolled agent who does not meet the renewal requirements for one enrollment cycle will be required to take and pass all three parts of the Special Enrollment Examination in order to retain enrolled agent status. Answer D is Correct. Although a noncomplying enrolled agent will not be required to take an examination, (s)he will be given an opportunity to state the basis for the noncompliance with the possible consequence of being placed on the roster of inactive enrolled agents for a 3-year period.

A tax advisor with what responsibility should take reasonable steps to ensure that the firm's procedures for all members, associates, and employees are consistent with the best practices? A.Overseeing a firm's practice of providing advice concerning federal tax issues. B.Neither overseeing a firm's practice of providing advice concerning federal tax issues nor preparing or assisting in the preparation of submissions to the IRS. C.Preparing or assisting in the preparation of submissions to the IRS. D.Both overseeing a firm's practice of providing advice concerning federal tax issues and preparing or assisting in the preparation of submissions to the IRS.

D.Both overseeing a firm's practice of providing advice concerning federal tax issues and preparing or assisting in the preparation of submissions to the IRS. Answer D is Correct. Tax advisors with responsibility for overseeing a firm's practice of providing advice concerning federal tax issues or of preparing or assisting in the preparation of submissions to the Internal Revenue Service should take reasonable steps to ensure that the firm's procedures for all members, associates, and employees are consistent with the best practices.

Which of the following promulgates procedural regulations? A.Director of the Office of Professional Responsibility. B.Secretary of the Treasury. C.Chief Counsel. D.Commissioner of the IRS.

D.Commissioner of the IRS. Answer D is Correct. Procedural regulations are promulgated under the procedural and administrative provisions of the Code. Procedural regulations are promulgated by the Commissioner of the IRS and not the Secretary of the Treasury.

Which of the following claims regarding professional designation is specifically mentioned in the advertising and solicitation section of Circular 230 as being acceptable? A.Approved by the Internal Revenue Service based on passing a rigid tax law examination and a background check. B.Licensed by the Treasury to represent taxpayers before the IRS. C.Certified by the Treasury Department as an enrolled agent. D.Enrolled to practice before the IRS.

D.Enrolled to practice before the IRS. Answer D is Correct. Section 10.30(a)(1) of Circular 230 specifically permits an enrolled agent to use the phrase "enrolled to practice before the Internal Revenue Service" when advertising.

Return transcripts are available for all of the following EXCEPT A.Form 1040. B.Form 1065. C.Form 1120-S. D.Form 1099.

D.Form 1099. Answer D is Correct. Tax returns can be printed as transcripts to show most of the numbers reported on the return and those from accompanying schedules or forms. In many cases, transcripts are used instead of making copies of tax returns. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120-A, Form 1120-H, Form 1120-L, and Form 1120-S. Form 1099 is not available as a return transcript.

When filing an Offer in Compromise, all of the following forms may be used EXCEPT Calculator Select only one option. A.Form 433-B. B.Form 656. C.Form 433-A. D.Form 872-A.

D.Form 872-A. Answer D is Correct. Form 872-A, Special Consent to Extend the Time to Assess Tax, does not relate to Offers in Compromise.

The IRS 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? A.Being indicted for any criminal offense under the revenue laws of the United States. B.Being indicted of any felony under federal or state law for which the conduct involved renders the practitioner unfit to practice before the Internal Revenue Service. C.Having your motor vehicle license suspended as a result of numerous traffic violations. D.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.

D.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. Answer D is Correct. Circular 230 lists conduct that may result in suspension or disbarment. Only the violation that would be considered disreputable conduct would be the one that involves dishonest behavior, or 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.

Which of the following explains tax law in plain language for taxpayers and their advisors? A.Technical memo. B.Committee report. C.Dictum. D.IRS Publication.

D.IRS Publication. Answer D is Correct. IRS Publications explain the law in plain language for taxpayers and their advisors. They typically highlight changes in the law, provide examples illustrating IRS positions, and include worksheets. Publications are nonbinding on the IRS and do not necessarily cover all positions for a given issue.

Which of the following documents is only acceptable for foreign status requests of dependents under the age of 6? A.Divorce decree. B.Civil birth certificate. C.National identification card. D.Medical record.

D.Medical record. Answer D is Correct. Publication 1915 lists documentation requirements for foreign status and for identification: Passport; U.S. citizenship and immigration services photo ID; visa from the U.S. Department of State; U.S. driver's license; U.S. military ID card; foreign driver's license; foreign military ID card; national ID card; U.S. state ID card; foreign voter's registration card; civil birth certificate; medical records (only valid for dependents under 6 years of age); school records (only valid for dependents under 18 years of age).

Which one of the following would result in a penalty against the preparer for failure to sign a tax return? A.N, an individual, has an arrangement with C, a corporation, to prepare tax returns for compensation. C does not provide office space, supplies, etc. N used forms provided by C, which N sent back to C to be reviewed by E, C's employee, for math and proper application of tax law. N signed the return instead of C or E. B.L, a law firm, employs A, an attorney, to prepare tax returns. A obtained information from X, L's client, and determined X's tax liability. A signed the tax return instead of his employer. C.D, who is not an enrolled agent, an attorney, or a CPA, prepares and signs income tax returns for compensation. D.P, an unenrolled preparer, prepares income tax returns for compensation and gives the client the unsigned copy while retaining a photocopy for documentation.

D.P, an unenrolled preparer, prepares income tax returns for compensation and gives the client the unsigned copy while retaining a photocopy for documentation. Answer D is Correct. A paid preparer subject to the signature requirement need not be an enrolled agent, an attorney, or a CPA. Unenrolled preparers are still required to sign tax returns.

A tax information authorization (TIA) or power of attorney (POA) is not required of a representative who A.Receives, but does not endorse or cash, a refund check. B.Is appointed by the court as a trustee for the taxpayer as a creditor. C.Represents a taxpayer at a conference not attended by the taxpayer. D.Represents an administrator at a conference on an estate tax case and is the administrator's attorney of record before the court where the estate is administered.

D.Represents an administrator at a conference on an estate tax case and is the administrator's attorney of record before the court where the estate is administered. Answer D is Correct. A representative must file a TIA to receive or inspect confidential tax information on behalf of the taxpayer unless the representative has filed a POA to perform those specific acts. However, with respect to disclosure, a TIA or POA is not required of a representative in certain situations. A TIA or POA is not required of a representative who represents an executor or administrator at a conference on an estate tax case if the representative presents evidence that (s)he (1) prepared the estate tax return on behalf of the executor or administrator, (2) is recognized to practice before the IRS, and (3) is the attorney of record for the executor or administrator before the court where the will is probated or the estate is administered.

Which of the following does NOT describe one of the five major categories of reportable transactions? A.Transactions offered under conditions of confidentiality. B.Transactions for which taxpayers claim losses in excess of certain thresholds. C.Potential tax avoidance or evasion transactions identified by the IRS that lack sufficient information to determine if they should be identified as tax avoidance transactions. D.Tax evasion transactions identified by the IRS that are expected to obtain the same or substantially similar tax consequences.

D.Tax evasion transactions identified by the IRS that are expected to obtain the same or substantially similar tax consequences. Answer D is Correct. One of the five major categories of reportable transactions is listed transactions. However, listed transactions are described as tax avoidance, not evasion, transactions identified by the IRS that are expected to obtain the same or substantially similar types of tax consequences.

Sally chooses to represent herself in Tax Court over what the IRS believes to be a frivolous tax position. When looking for sources to substantiate her position, she finds multiple sources that relate to her situation. She believes a specific tax newsletter would provide a 70% chance of sustaining her position. The other relevant source is a temporary regulation that she believes would provide the IRS with only a 55% chance of winning. Which party is most likely to win their respective argument in court? A.The IRS, as the temporary regulation is a stronger secondary authority than the newsletter. B.The taxpayer. C.The taxpayer, as tax newsletters hold higher authority than a temporary regulation. D.The IRS.

D.The IRS. Answer D is Correct. The temporary regulation is a primary source of authority; therefore, it is more likely that the IRS will prevail in court.

Which title of the U.S. Code contains the Internal Revenue Code? A.Title 18 (crimes and criminal procedure). B.Title 11 (bankruptcy). C.Title 15 (commerce and trade). D.Title 26 (IRC). Back Next

D.Title 26 (IRC). Answer D is Correct. The IRC of 1986 is the primary source of federal tax law. It imposes income, estate, gift, employment, miscellaneous excise taxes, and provisions controlling the administration of federal taxation. The IRC is found at Title 26 of the 50 titles of the U.S. Code.

Which of the following statements with respect to resolving tax problems involving the collection process is false? A.A taxpayer may be entitled to a reimbursement for fees charged by his or her bank if the IRS has erroneously levied his or her account. B.A taxpayer should first request assistance from IRS collection employees or their managers before seeking assistance from the problem resolution officer. C.If a taxpayer suffers a significant hardship because of the collection of the tax liability, (s)he may request assistance from the IRS on Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order). D.While a taxpayer is making installment payments, interest will continue to accrue only on the tax liability due.

D.While a taxpayer is making installment payments, interest will continue to accrue only on the tax liability due. Answer D is Correct. If a taxpayer cannot pay the entire bill immediately, the IRS may set up an installment plan for payment. However, interest will continue to accrue on the unpaid balance of taxes owed, and on the unpaid balance of penalties and interest owed.