PART 3 SAMPLE TEST 2
45. Which of the following actions is not considered practice before the IRS? A. Appearing as a taxpayer's witness before the IRS. B. Corresponding with the IRS on behalf of a taxpayer. C. Communicating with the IRS for a taxpayer regarding the taxpayer's rights. D. Representing the taxpayer at an examination.
A
49. What is the dollar limit for the U.S. Tax Court small case division? A. $50,000 or less B. $50,000 or more C. $15,000 or less D. $100,000 or less
A
59. Who is allowed to determine the time and place for an audit of a taxpayer? A. The IRS. B. The taxpayer. C. The taxpayer's representative and the IRS have an equal say in the determination of the time and location of an audit. D. The IRS, the taxpayer, and the taxpayer's representative have an equal say in determining the time and location of an audit.
A
64. A rejected electronic individual income tax return can be corrected and retransmitted without new signatures if changes do not differ from the amounts on the original electronic return by more than: A. $50 of total income or AGI B. $100 of tax due C. $50 of tax due D. A rejected e-file return cannot be retransmitted without new signatures.
A
65. Cherie has a 21-year-old daughter named Abby. Abby's tax return was chosen for examination by the IRS. Cherie is not an enrolled agent, attorney, or CPA. Which of the following statements is correct? A. Cherie may represent her daughter before all levels of the I RS if Abby signs a Form 2848. B. Cherie may not represent her daughter before the IRS because Abby is no longer a minor and Cherie is not enrolled to practice before the IRS. C. Cherie may not represent her daughter because she is not a trained tax accountant. D. A parent may not represent a child because of privacy regulations.
A
7. In evaluating a taxpayer's ability to pay his tax liability, which of the following expenses is the IRS least likely to challenge (because it is not indicative of a lifestyle choice)? A. $10,000 a year for court-ordered child support. B. $10,000 a year for restaurant meals. C. $10,000 a year for tuition. D. $10,000 a year for rent.
A
76. Penny has an installment agreement in place with the IRS. In March 2015, she gets into a bad car accident and misses a payment. The IRS sends her a notice 30 days later and terminates her installment agreement. Which of the following statements is incorrect? A. Penny has no appeal rights once the installment agreement is in default. B. The IRS cannot levy until 30 days after the termination of an installment agreement. C. If Penny appeals within a 30-day period after the termination, the IRS will be prohibited from levying until her appeal is completed. D. Penny may call the telephone number shown on the notice and explain that she wants to appeal the termination.
A
78. Which of the following statements is incorrect? A. A taxpayer is prohibited from recording his meeting with an IRS auditor unless the taxpayer is represented by an enrolled agent, CPA, or tax attorney. B. A taxpayer may record the examination interview with the IRS. C. The request to record the examination meeting must be made in writing. D. A taxpayer must notify the IRS ten days in advance in order to record an examination.
A
87. Under Orcular 230, the definition of a "tax return" includes: A. A claim for a refund, an original return, and an amended return. B. Only an original return or an amended return. C. A Tax Court petition. D. A request for a Private Letter Ruling.
A
9. Which IRS insignia may a practitioner use in his advertising? A. The official IRS e-file logo. B. The U.S. Treasury seal. C. The IRS eagle insignia. D. The FMS insignia.
A
96. Conner is in charge of his firm's tax practice. He does not directly supervise all of the members of his firm. Can he be subject to discipline if one of the members of his firm violates Circular 230? A. Yes. B. No. He would not be subject to discipline for any other members of his firm, whether he supervised them or not. C. No. He would be subject to discipline only for members of his firm whom he supervised. D. Circular 230 does not address this issue.
A
11. Trent decided to represent himself in an IRS audit. When he arrived at the IRS office, he became agitated during the initial examination interview and requested to speak to a representative. Which of the following statements is correct? A. The taxpayer may leave the examination and finish the audit through correspondence. B. An IRS interview must be suspended when the taxpayer clearly requests the right to consult with a representative. C. If the taxpayer chooses to suspend the interview, he must return in person with his representative. D. The IRS is not required to cease an examination when the taxpayer requests a representative.
B
16. Clarence is an enrolled agent. His client wants to know if their discussions during normal tax preparation are privileged. Which statement is correct? A. Under Circular 230, discussions surrounding the preparation of a tax return are considered privileged communications if the preparer is a practitioner. B. Discussions surrounding the preparation of a tax return are not privileged, regardless of whether the preparer is a practitioner. C. Discussions surrounding the preparation of a tax return are always privileged, even if the practitioner is an unenrolled tax return preparer. D. None of the above is correct.
B
173 53. The IRS will waive or abate penalties assessed to a taxpayer under certain circumstances. Which of the following is not an instance in which that will happen? A. When the penalty is incurred due to a major disaster affecting a large number of taxpayers in a given geographical area. B. When the penalty is incurred as a result of tax preparer advice provided on a Form 1040 tax issue. C. When there is "reasonable cause" due to circumstances beyond the taxpayer's control. D. When the penalty is due to an IRS computation error.
B
177 .------ 73. If a practitioner uses radio, television, Internet, signage, or other advertising methods, which of the following statements is correct? A. The practitioner must keep a copy of the advertising for a minimum of 30 days after the last transmission or use. B. The practitioner must keep a copy of the advertising until the end of the calendar year following the last transmission or use. C. The practitioner must keep a copy of the advertising for at least three years following the last transmission or use. D. The practitioner is not required to keep a copy of the advertising.
B
180 86. What is the penalty a taxpayer faces if he fails to pay his taxes on time? A. 5% of the unpaid taxes for each month or part of a month after the due date that the taxes are not paid. B. % of 1% (0.5%} of unpaid taxes for each month or part of a month after the due date that the taxes are not paid, up to a maximum amount of 25% of the unpaid taxes. C. A minimum of $500. D. A minimum of $1,000.
B
183 100. Alexa is an enrolled agent, and she fifes approximately 300 individual tax returns every year. This year, she has a new client named Iker. Iker is distrustful of modern technology and he does not wish toe-file his tax return. What must Alexa do in this case? A. Iker may file his tax return on paper, and no additional forms are necessary. B. Form 8948 must be mailed along with lker's paper return. C. Form 2848 must be submitted with lker's paper return, along with a reason for each return that is notefiled. There is no penalty. D. If her client refuses toe-file, Alexa must decline the engagement. Please review your answer choices with the correct answers in the back.
B
2. Under Circular 230, an employer of other tax preparers must: A. Furnish the IRS a record of all tax return preparers employed. B. Keep a record of all tax return preparers employed and make it available for IRS inspection upon request. C. Document each tax preparer's performance and keep a record that must be made available for IRS inspection upon request. D. All of the above.
B
28. Under Circular 230, in which of the following cases may the IRS suspend a certified public accountant from practice before the IRS? A. If a CPA moves outside the U.S. and attempts to represent overseas taxpayers. B. If a CPA is suspended from practice by a state board of accountancy for a matter unrelated to taxation. C. If a CPA takes an aggressive position on a tax return. D. If a CPA hires unenrolled preparers to work in his office.
B
31. In serving a complaint against a practitioner, the Office of Professional Responsibility may use all of the methods listed below except: A. Private delivery service. B. E-mail. C. First class mail. D. In person.
B
34. Which of the following statements is correct? A. The IRS is not required to notify the taxpayer of an audit. B. In certain circumstances, the IRS may audit tax returns for up to six years after the filing date. C. Tax returns can only be audited for up to two years after they are filed. D. An original tax return that is filed late does not extend the statute of limitations for an audit on the return.
B
36. Which of the following is an example of an individual filing a frivolous tax return? A. A taxpayer who incorrectly claims the Earned Income Credit when he is not eligible for it because he did not read the instructions. B. A taxpayer who files a tax return and strikes out the jurat. C. A preparer who files a delinquent tax return because the taxpayer refused to file. D. A fiduciary who files an incorrect tax return and later amends it.
B
41. Which one of the following tax preparers is required toe-file his clients' returns? A. A paid preparer who anticipates filing 11 or more Forms 1120. B. A paid preparer who anticipates filing 11 or more Forms 1040. C. A paid preparer who anticipates filing 11 or more Forms 1065. D. All of the preparers listed above are subject to the e-file mandate.
B
56. Isabel is an enrolled agent, and Javier is her client. Isabel did a review of Javier's past tax returns, and noticed that Javier missed a big deduction on his 2012 tax return, was filed on time on March 10, 2013. Javier wants to amend his 2012 return, because the amendment will result in a refund. What is the deadline for Javier to amend his return and obtain a refund? A. It is too late for him to amend his 2012 return and obtain a refund. B. April 18, 2016 C. March 10, 2016 D. April 15, 2017
B
60. A taxpayer would like assistance from the Taxpayer Advocate Service. All of the following are considerations in determining whether a request will be granted, except situations in which: A. The taxpayer will suffer irreparable injury or a long-term adverse impact if relief is not granted. B. The taxpayer is facing a significant and unexpected tax liability. C. The taxpayer is experiencing economic harm or is about to suffer economic harm. D. The taxpayer is facing an immediate threat of adverse action.
B
67. Before a tax preparer is formally assessed a penalty under IRC section 6694, how many days does he have to file an appeal before the penalty is assessed? A. 10 days. B. 30 days. C. 45 days. D. The penalty is assessed immediately, and must be appealed retroactively.
B
75. What penalty does a taxpayer who files a "frivolous" return face? A. $1,000 8. $5,000 C. $10,000 D. $100,000
B
8. During the examination of a taxpayer's Form 1040, the IRS examiner found numerous errors resulting in additional tax. One of the adjustments was a large amount of unreported income discovered in a concealed bank account. Some deductions were supported with altered or defaced documents. The taxpayer gave false information and misrepresented the facts throughout the examination. All of the acts of the taxpayer, when seen as a whole, indicate: A. Negligence. B. Fraud. C. Noncompliance. D. A tax protester argument.
B
80. Which of the following statements is correct regarding practitioners? A. A practitioner is prohibited from charging contingent fees in all cases. B. A practitioner may not notarize documents for the clients that he represents before the IRS. C. A practitioner may not represent two clients when there is a conflict of interest. D. A practitioner is forbidden from discussing tax shelters with a client.
B
81. A paid preparer is required by law to: A. Charge a fee for e-filing. B. Sign a tax return and fill in the preparer areas of the form. C. Include his Social Security number on the tax return. D. Charge a contingency fee.
B
83. Sophie is a taxpayer who receives a notice of deficiency in the mail. She fails to respond to the letter within 90 days. What is Sophie's option if she wants to contest her tax deficiency? A. She can request an extension to the period of time for petitioning the Tax Court. B. She cannot contest her tax deficiency in the Tax Court. She must pay the amount owed and sue the IRS for a refund in a U.S. district court or Court of Federal Claims. C. She cannot contest her tax in the Tax Court. She must sue the IRS for a refund in a U.S. district court or Court of Federal Claims. She does not have to pay the amount owed first. D. She has no more appeals rights and must pay her tax deficiency.
B
85. Which of the following statements regarding revenue rulings is incorrect? A. Revenue rulings can be used to avoid IRS penalties. 8. Revenue rulings cannot be used to avoid IRS penalties. C. A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code. D. A revenue ruling can be challenged in court.
B
93. Don is an enrolled agent. He mailed an advertisement announcing a flat rate of $100 for preparation of a single tax return. Don later changes his mind and wants to increase the price. Don is bound by this advertised rate for a minimum of days after the last date on which the fee schedule was published: A. 20 days. B. 30 days. C. 45 days. D. 60 days.
B
97. Which of the following persons may represent a taxpayer at an IRS appeals conference? A. An unenrolled tax preparer who prepared the tax return in question. B. An enrolled agent. C. A friend of the taxpayer. D. A disbarred practitioner with a current PTIN.
B
99. In the licensing of enrolled agents, an enrollment cycle refers to: A. The enrollment year preceding the effective date of renewal. B. The three successive enrollment years preceding the effective date of renewal. C. The year in which the enrolled agent receives his initial enrollment. D. The amount of continuing professional education required each year of enrollment.
B
He may not represent a client. 55. A third party designee has the right to do which of the following tasks? A. Sign a binding agreement for the taxpayer. B. Respond to IRS notices about math errors, offsets, and return preparation. C. Represent the taxpayer before the IRS. D. Receive refund checks.
B
176 6B. All of the following are options for how a taxpayer may direct his tax refund except to: A. Receive the refund as a paper check. . B. Split the refund, with a portion applied to next year's estimated tax and the remainder received as direct deposit or a paper check. C. Use the refund to purchase municipal bonds. D. Use the refund (or part of it) to purchase U.S. Series I Savings Bonds.
C
61. Preparers are required to exercise greater due diligence in preparing Earned Income Credit claims for their clients. Which of the following is not a due diligence requirement? A. Submitting Form 8867 to the IRS with every EITC claim. B. Personally answering the due diligence questions on Form 8867. C. Submitting the EITC worksheet to the IRS with every EITC claim. D. Retaining documentation of the questions asked a client during an EITC interview.
C
69. Which of the following disputes may not be resolved by a proceeding in the U.S. Tax Court? A. Gift tax. B. Income tax. C. Employment taxes. D. Innocent spouse relief.
C
71. If there is substantial unreported gross income (over 25%), the IRS may audit tax returns for up to ____ after the filing date. A. Three years. B. Five years. C. Six years. D. Ten years.
C
92. Which of the following statements is incorrect regarding an IRS power of attorney? A. A newly-filed power of attorney concerning the same matter will revoke a previously-filed power of attorney. B. The filing of Form 2848 will not revoke any Form 8821, Taxpayer Information Authorization, which is in already in effect. C. A signed Form 8821 is sufficient for a practitioner to represent a taxpayer before the IRS. D. A power of attorney held by a student volunteering at a Low Income Tax Clinic is valid for only 130 days from the received date and will automatically be revoked.
C
39. Suzanne is an enrolled agent who is interviewing a new client who wants to claim the Earned Income Credit. The information the client offers seems incorrect to Suzanne. Under her due diligence requirements, what should she do? A. Refuse to accept the engagement. B. Report the client to the IRS fraud hotline. C. Take note of the woman's inconsistent answers and go ahead and submit the EITC claim anyway. D. Ask additional questions if the information furnished seems incorrect or incomplete.
D
40. An enrolled agent becomes official on the date: A. He passes the final Special Enrollment Exam. B. He receives his enrollment card in the mail. C. He completes Form 23. D. The IRS's Return Preparer Office issues his enrollment card.
D
1. How often must enrolled agents renew their enrollment? A. Every three years. B. Every five years. C. Every year. D. None of the above.
A
13. Which of the following taxpayer numbers is valid for claiming the Earned Income Tax Credit? A. Social Security number. B. Adoption taxpayer identification number. C. Individual tax identification number. D. All of the above.
A
167 24. Which type of practitioner fee is prohibited by Circular 230? A. Charging a fee for direct deposit. B. Fixed fees for bookkeeping services. C. Hourly fee rates for tax consulting. D. Charging a fee fore-filing a return.
A
170 38. Taxpayers must sign their returns: A. Under penalty of perjury. B. With a physical signature. C. Before the return has been prepared. D. Before paying their tax preparer.
A
171 43. Rachel is a CPA. She is taking an aggressive position on a tax return, which requires disclosure. Which form is used to disclose a position on a tax return? A. Form 8275. B. Form 8823. C. Form 656. D. Form 1040X.
A
178 77. Under IRS regulations, which of the following does not constitute an "understatement of liability"? A. Taking a tax protester position on a return. B. Overstating the net amount creditable or refundable. C. Taking a position with no realistic possibility of success. D. Answers choices A and Care correct
A
181 91. Rajeev is a tax preparer. He would like to become an electronic return originator (ERO)so he cane-file his clients' returns. What is the first step he should take in this application process? A. Create an IRS e-Services account by supplying certain required personal information to the IRS. B. Undergo a thorough background check of his tax compliance history. C. Apply for a PTI N. D. Apply for an electronic filing identification number.
A
182 95. Omar is an enrolled agent. His client, Fatima, has a large tax deficiency. Fatima tells Omar she has no intention of paying her tax liability, no matter what. Knowing that his client is not compliant, Omar advises Fatima to submit a request for a collections due process hearing in order to stop collection activity. Is Omar in violation of Circular 230? A. Yes, he is in violation of Circular 230 standards. B. No. This gives Omar's client additional time to pay her tax liability. C. No. Omar cannot control his client's actions and is simply advising his client to contest her tax liability. D. Insufficient information to determine the answer.
A
22. What practice rights do all enrolled agents have? A. Unlimited practice rights before the IRS. B. Unlimited practice rights before the IRS and the U.S. Tax Court. C. Limited practice rights. D. All of the above.
A
25. Which would have the highest degree of substantial authority for all taxpayers, assuming each was addressing the same tax issue? A. A revenue ruling issued in the year 2015. B. A private letter ruling issued in the year 2000. C. A revenue ruling issued in the year 2000. D. All have the same degree weight of substantial authority.
A
27. What is a reportable transaction? A. A transaction of a type that the IRS has determined as having the potential for abusive tax avoidance or evasion. B. A court decision to which the IRS has officially nonacquiesced. C. Another name for a private letter ruling. D. A transaction of a type that the IRS has determined will benefit the public interest.
A
12. A practitioner who has been disciplined by the IRS can do which of the following? A. Represent a taxpayer before the IRS. B. Accompany a taxpayer to a conference or meeting with the IRS and argue the merits of any issue raised in the taxpayer's case. C. Accompany a taxpayer to a conference or meeting with the IRS and respond to questions and provide facts and/or documents. D. None of the above.
C
168 29. As part of the application to become an authorized IRS e-services provider, which of the following categories of tax professionals is required to be fingerprinted? A. Enrolled agents and unenrolled tax return preparers. B. All e-services applicants must be fingerprinted by the IRS. C. Unenrolled tax return preparers. D. Only CPAs and tax attorneys must be fingerprinted, because they are licensed by the state, not the federal government.
C
175 63. Which of the following is considered an authoritative source material for federal tax law? A. IRS publications. B. IRS tax forms and instructions. C. Congressional committee reports. D. Internal Revenue Manual.
C
179 82. Luther is an enrolled agent who was subject to a disbarment proceeding. The administrative law judge upheld the OPR's decision to disbar him from practice. Does Luther have any appeal rights at this point? A. Within 60 days after the administrative law judge makes a decision on a disciplinary action, the practitioner may appeal the decision to the Return Preparer Office. 8. Within 60 days after the administrative law judge makes a decision on a disciplinary action, the practitioner may appeal the decision to the Treasury Appellate Authority. C. Within 30 days after the administrative law judge makes a decision on a disciplinary action, the practitioner may appeal the decision to the Treasury Appellate Authority. D. No, Luther does not have any appeal rights after the administrative law judge makes his decision.
C
18. Asher is a tax return preparer who accepts electronic signatures. He has a client who lives in a different state. How is Asher required to authenticate the identity of the taxpayer? A. The taxpayer must mail or fax a copy of his Social Security card to Asher for review. B. The taxpayer must mail or fax a copy of his driver's license, with a picture ID, to Asher for review. C. Asher must verify that the name, Social Security number, address, date of birth, and other personal information provided by the taxpayer are consistent with information obtained through record checks with applicable agencies or institutions, or through credit bureaus or similar databases. D. No special verification procedures are required.
C
20. In 2015, the IRS instituted stricter procedures for ITINs. ITINs will now automatically expire after __ years of non-use. A.One. B. Two. C. Three. D. Five.
C
21. Lloyd is an enrolled agent. He has a new client, Kelly, who has self-prepared her own returns in the past. Lloyd notices that Kelly has been claiming head of household status on her tax returns. However, she does not qualify for this status, because she does not have a qualifying person. What is Lloyd required to do? A. Amend the incorrect returns. B. Refuse any future engagement with Kelly unless she corrects the prior year returns. C. Notify Kelly of the error and tell her the consequences of not correcting the error. D. Notify Kelly of the error and correct the error by amending her prior year returns.
C
23. Erin files jointly with her husband, who has delinquent student loans. Their tax refund check is applied against his past due student loans. Erin would like to claim her portion of their tax refund, so she files for ---------relief. A. Innocent spouse. B. Equitable. C. Injured spouse. D. Separation of liability.
C
26. A tax preparer must complete the paid preparer section of the tax return in which of the following scenarios? A. An employee preparer who completes employment tax returns for his employer. B. An enrolled agent who prepares her own tax return. C. A CPA who prepares a return for her brother and charges him only $30. D. An enrolled agent who prepares his neighbor's return for free.
C
37. Which of the following statements is not correct regarding a practitioner's fees for his services? A. He is allowed to publish a written schedule of fees. B. He is allowed to charge a fee for an initial consultation with a client. C. He is allowed to charge an unconscionable fee for services in connection with any matter before the IRS. D. He is allowed to charge a contingent fee based on an IRS examination of an original tax return.
C
4. A single financial account is limited to _____ electronically-deposited tax refunds per tax year. A.One. B. Two. C. Three. D. No limit.
C
42. Which of the following actions is not considered "disreputable conduct" by the IRS? A. Willfully failing toe-file returns electronically if they fall under thee-filing mandate. B. Failing to include a valid PTIN on tax returns. C. Performance as a notary by a practitioner. D. Willfully failing to file a tax return.
C
46. A preparer is required to provide a copy of the tax return to a client. Which of the following statements is not correct? A. The preparer must provide a complete copy of the tax return to the taxpayer. B. A scanned copy of the tax return is sufficient to meet this requirement. C. The IRS requires the client receive a paper copy of the tax return. D. The client copy does not need to contain the Social Security number of the paid preparer.
C
47. What is a private letter ruling? A. A private letter that a taxpayer writes to the IRS and that becomes public once Tax Court litigation begins. B. A private letter issued by the U.S. Tax Court. C. A communication from the Internal Revenue Service in response to a taxpayer's written request for guidance on a particular tax issue. D. A response from Congress to the IRS to clarify Congressional action on a specific tax issue.
C
5. Which of the following is not a reason for the IRS to abate interest on a taxpayer's tax liability? A. Managerial act. B. Ministerial act. C. Reasonable cause. D. When the interest was incurred while the taxpayer was in a combat zone or declared disaster area.
C
50. Which of the following is not a type of Treasury regulation? A. Legislative regulation. B. Interpretative regulation. C. Congressional regulation. D. Procedural regulation.
C
51. Amanda is an enrolled agent, and she prepares approximately 300 returns for compensation during the year. Which of the following numbers is required in order for her to prepare tax returns for compensation? A. Electronic filing identification number (EFIN). B. Preparer tax identification number (PTIN). C. Both A and B. D. Employer identification number (EIN).
C
52. Under Circular 230, employers of other tax practitioners are prohibited from taking certain actions. These include all of the following except: A. To not employ or accept assistance from a practitioner who has been disbarred. B. To not employ or accept assistance from a practitioner who has been suspended from practice. C. To not employ or accept assistance from a practitioner who has received a reprimand from the IRS. D. To not accept assistance from a former government employee, such as an individual who worked for the IRS, when that employee personally and substantially participated in the matter while employed by the government.
C
57. Circular 230 explicitly defines all of the following except _____ as practice before the IRS: A. Filing documents with the IRS. B. Representing a client at a hearing before the IRS. C. Rendering legal advice on a tax issue. D. Rendering written advice concerning a plan with the potential for tax evasion.
C
14. The IRS has the authority to issue a summons in all of the following instances except: A. To prepare a substitute return when a taxpayer has not filed one. B. To determine the liability of a taxpayer. C. To collect any internal revenue tax liability. D. To require a taxpayer to create a tax return when he has not filed one.
D
163 6. Stacy is an enrolled agent with two clients who are both parties in the potential sale of a business. The sale is not prohibited by law. Stacy believes she can provide competent and diligent representation to each client. Which statement best describes the action Stacy must take to fulfill the requirements of Circular 230 before representing both clients? A. Since she has already researched the situation and determined she is competent to handle the matter, Stacy is not required to take further action. B. Stacy must obtain either oral or written permission from both clients, stating they have been made aware of the potential for conflict of interest. C. Stacy must meet with both clients at the same time to inform them of the potential for conflict of interest. D. Stacy must inform each client of the potential for conflict of interest and then obtain written waivers of the conflict from both clients.
D
164 10. Which of the following accurately describes an IRS levy? A. A levy is not a legal seizure of property. B. A levy on salary or wages will end when the time expires for legally collecting the tax. C. A levy can only be released by the filing of a lien. D. A levy does not apply to the taxpayer's clothing and undelivered mail.
D
165 15. Louie is a tax preparer. His new client, Minerva, wants to claim the Earned Income Tax Credit. Which of the following issues would automatically disqualify Minerva from claiming the Earned Income Tax Credit for the 2015 tax year? A. Investment income of $3,450. B. Minerva files as Married Filing Separately. C. Minerva files her tax return using a valid ITIN. D. All of the above would disqualify her from claiming the credit.
D
166 19. The IRS may accept an offer in compromise based on three grounds. Which of the following is not a valid basis for submitting an offer in compromise to the IRS? A. Doubt as to collectability. B. Effective tax administration. C. Doubt as to liability. D. Legitimate hardship argument.
D
169 33. Under Internal Revenue Code §6695, a tax preparer who violates EITC due diligence requirements faces what penalty for tax year 2015? A. A $505 fine for each violation. B. A $1,000 fine for each violation. C. A $SO fine for each violation. D. A $1,000 fine for each violation and imprisonment up to one year.
D
17. In which of the following situations is an IRS power of attorney required? A. Allowing the IRS to discuss return information with a third party designee. B. Allowing a tax matters partner to perform acts for the partnership. C. Allowing the IRS to discuss return information with a fiduciary. D. Allowing the tax practitioner to receive, but not cash, taxpayer refund checks.
D
172 48. Circular 230 states a practitioner may not willfully, recklessly, or through gross incompetence sign a tax return or claim for refund that the practitioner knows, or reasonably should have known, contains a position that: A. Understates the liability for tax. B. Is reckless or has intentional disregard of rules or regulations. C. Lacks a reasonable basis. D. All of the above.
D
174 58. What is the purpose of a Centralized Authorization File (CAF) number? A. It is an IRS file designed to prevent the theft of taxpayer identification numbers. B. It is an IRS file containing the PTINs of all paid tax preparers. C. It is an IRS file containing information from Forms 2848 only. D. It is an IRS file containing authorization information from both Forms 2848 and Forms 8821.
D
3. In which of the following situations must a tax return preparer obtain client consent to disclose or receive sensitive tax return information? A. The preparer receives a grand jury subpoena requesting client records. B. The preparer reports a possible crime to authorities involving one of his clients. C. For purposes of peer reviews. D. None of the above requires permission from a client.
D
30. Which of the following is not a requirement when a taxpayer requests innocent spouse relief? A. The taxpayer filed a joint return that has an understatement of tax (deficiency) that is solely attributable to a spouse's erroneous item. B. When the taxpayer signed the joint return, he or she did not know, and had no reason to know, that there was an understatement of tax on the return. C. Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer liable for the understatement of tax. D. The taxpayer must have already filed for divorce or legal separation when innocent spouse relief is requested.
D
32. When it comes to possible preparer penalties, the reasonable cause and good faith exceptions do not apply to an understatement of income that is a result of: A. A taxpayer who misrepresents information to the preparer. B. An unreasonable position. C. A preparer's mathematical error. D. None of the above.
D
35. How long is an IRS power of attorney authorization valid? A. Until the taxpayer's retirement. B. For three years. C. Until the close of the taxable year for which it was filed. D. Until revoked.
D
44. Judith, an enrolled agent, prepares William's income tax return. William gives Judith power of attorney, including the authorization to receive his federal income tax refund check. Accordingly, the IRS sends William's $1,000 refund check to Judith's office. William is very slow in paying his bills and owes Judith $500 for tax services. Judith should: A. Use William's check as collateral for a loan to tide her over until William pays her. B. Refuse to give William the check until he pays her the $500. C. Get William's written authorization to endorse the check, cash the check, and reduce the amount William owes her. D. Turn the check directly over to William.
D
54. If a disbarred practitioner seeks reinstatement, he may still practice before the IRS: A. While the reinstatement proceedings are pending. B. While the appeals process takes place. C. After an appeals petition is filed with the Office of Professional Responsibility. D. None of the above. A disbarred practitioner may not practice before the IRS, except to represent himself.
D
62. Renata is an enrolled agent. A client wants to use direct deposit. Which of the following statements is incorrect? A. Renata must accept any direct deposit election to any eligible financial institution designated by the client. B. The client may designate refunds for direct deposit to up to three qualified accounts. C. A taxpayer should not request a deposit of his refund to an account that is not in his own name. D. The taxpayer may designate refunds for direct deposit to credit card accounts.
D
66. Natalie became a new enrolled agent two years ago. For renewal purposes, which of the following statements is incorrect? A. She is required to take a minimum of 16 hours of CPE each year. B. She is required to take a minimum of two hours of ethics CPE per year. C. She must still fulfill the overall CPE requirement of 72 hours, even though she has only been an EA for two years of the enrollment cycle. D. For renewal purposes, the annual CPE requirements only apply for the years in which she was an enrolled agent.
D
70. An IRS power of attorney must contain all of the following information except: A. The type of tax involved. B. The name and address of the representative. C. The name and taxpayer identification number of the taxpayer. D. The specific date the tax return was filed, if delinquent.
D
72. The IRS must give a taxpayer reasonable notice before contacting third parties in connection with examinations or collecting tax liability. However, the IRS is not required to give notice in which of the following instances? A. Any pending criminal matter. B. When providing notice would jeopardize collection of any tax liability. C. When providing notice may result in reprisal against any person. D. All of the above.
D
74. Which of the following sanctions will the Office of Professional Responsibility not impose on a practitioner? A. Disbarment. B. Censure. C. Formal reprimand. D. Criminal penalties.
D
79. Which of the following individuals is not under the jurisdiction of Circular 230? A. An unlicensed tax return preparer who files Form 2848 for a client he is representing in an examination. B. A state licensed attorney who prepares tax returns for clients. C. An enrolled agent who does representation work for clients before the IRS, but does not prepare tax returns. D. An employee of a tax preparation firm who collects receipts, organizes records, and gathers information for a practitioner.
D
84. Sterling is an enrolled agent. A long-time client starts a new business in an industry with numerous specialized tax regulations and incentives. Sterling begins working on the client's tax return, but finds he does not understand most of the elections and credits. Can Sterling prepare and sign this tax return? A. Yes. It is not unusual for a tax preparer to lack understanding in certain complex areas of tax law. 8. Yes, but only if Sterling has another member of his firm review the return before Sterling signs it. C. Yes, but only if Sterling accepts a reduced fee for the work from his client. D. No. Sterling cannot prepare or sign a tax return if he lacks sufficient competence.
D
88. Can multiple preparers in one office share a single PTIN? A. Yes. B. Yes, but only at the same office location. C. Yes, but only if the principal preparer continues to sign the tax returns. D. No, each preparer must obtain his own PTIN.
D
89. Enrolled agents are allowed a limited confidentiality privilege with their clients. Confidential communications do not extend to: A. Noncriminal tax matters before the IRS. B. Noncriminal tax proceedings brought in court. C. Correspondence audits. D. Tax shelter opinions.
D
90. The Freedom of Information Act (FOIA} does not require the IRS to release all documents that are subject to FOIA requests. The IRS may withhold information: A. Due to budget cuts. B. Due to the statute of limitations for FOIA requests. C. If the requester fails to provide notarized identification along with the request. D. For an IRS record that falls under one of the FOIA's nine statutory exemptions, or by one of three exclusions under the Act.
D
94. If the IRS declares a taxpayer to be in currently not collectible status (known as status 53), which of the following will happen? A. All collection actions, including levies, will be stopped for two years. B. Penalties and interest will be suspended and will not be added to the tax debt while the taxpayer remains in this status. C. The IRS will issue a criminal warrant. D. The taxpayer will be guaranteed this status for at least one year.
D
98. Which of the following professional designations is not always required to obtain a PTIN? A. CPAs. B. Attorneys. C. Enrolled agents. D. Both A and B.
D
