Circular 230
How long does a preparer have to hold onto a copy of their client's tax return?
3 years
Which of the following statements presumes that a practitioner has exercised due diligence as to accuracy?
Both items 1 and 2
Which of the following tax returns can be filed electronically?
A - Current-year tax returns only
B - Fiscal-year tax returns
C - Amended tax returns for periods prior to 2019
D - Current-year tax returns and 2 previous years' tax returns
D - Current-year tax returns and 2 previous years' tax returns
What is the first-tier penalty for which a compensated preparer may be liable for each tax return or claim for refund that understates the taxpayer’s liability due to an unreasonable position?
The greater of $1,000 or 50% of income derived by the tax return preparer with respect to the return or claim
If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability:
you should call the IRS as soon as possible to see if the examination should be discontinued.
When preparing a return which of the following will not lead to a penalty?
a. Ghost preparing
b. No valid PTIN
c. Influencing an IRS employee by coercion
d. None of the above
None of the above
(T/F)
A CPA has both a duty to a taxpayer and the tax system.
True (SSTS 1.1.9)
What is the purpose of the Centralized Authorization File (CAF) number?
Use of the CAF number allows the IRS to verify an individual's authority to represent the taxpayer before the IRS.
What is the penalty if a taxpayer fails to pay the tax as shown due on the tax return?
A penalty of 0.5% per month (up to a maximum of 25%)
How long should you keep Copy C of your W-2 after you have filed your return?
Until the taxpayer begins receiving Social Security benefits
Circular 230 is a regulation issued by what major section of the US government?
Treasury Dept.
No, except when required by law. (SSTS 1.2.8.)
Frank sold his Ranier Corporation stock to his sister Bernie for $8,000. Frank's cost basis in the stock was $15,000. Bernie later sold this stock to Wendy, an unrelated party, for $15,500. What is Bernie's recognized gain or loss?
$500
Bernie's realized gain of $7,500 ($15,500 − $8,000) is reduced by Frank's disallowed loss of $7,000 ($8,000 − $15,000) to net a recognized gain of $500 ($7,500 − $7,000).
This is an often-asked question and it is tricky. In this case, the recognized gain is $500 but sometimes a question asks for the realized gain (which is $7,500 in this question). So carefully read the question being asked.
What penalty may be assessed an income tax return preparer that fails to be diligent in determining eligibility for a taxpayer claiming the earned income credit for 2022 (return filed in 2023)?
$560 per return
After assessment, as a general rule, the Internal Revenue Service has the authority to collect outstanding federal taxes for:
10 years.
The act of preparing a return and instructing a client to sign as "self prepared" is known as:
Ghost Preparers
The Tax Court has generally held that taxpayers who rely on software to justify errors on self-prepared returns are:
liable for the 6662 accuracy-related penalty.
Who was one of the key figures to help the treasury dept?
Alexander Hamilton
What is the second-tier penalty if a tax preparer willfully or recklessly understated a taxpayer’s liability?
The greater of $5,000 or 75% of the liability
Which fee arrangement below is permissible for an Electronic Return Originator (ERO)?
A - Fees based on AGI from the tax return
B - Fees based on percentage of refund
C - Fees based on taxable income from the tax return
D - None of the answer choices are correct.
D - None of the answer choices are correct.
Which fees are a tax preparer NOT allowed to charge a client?
Contingent
Best tool to keep data secure?
1password :)
Circular 230 was implemented after the ending of which war?
Civil War
What is the penalty for a taxpayer who fails to timely file a tax return (including extensions)?
A penalty of 5% a month (up to a maximum of 25%) of the deficiency on the tax return (when filed)
Which of the following may the Internal Revenue Service settle by accepting an Offer in Compromise for less than the full amount of the balance due?
A - Doubt as to whether or not the assessed tax is correct
B - Doubt as to the collectability
C - Doubt as to whether or not the assessed tax is correct and doubt as to the collectability
D - A tax deficiency plus accrued interest, but not penalties
C - Doubt as to whether or not the assessed tax is correct and doubt as to the collectability