When should you submit your application to become an Authorized IRS E-File Provider?
A. When you file your initial return electronically
B. No later than 45 days prior to the date you intend to begin filing returns electronically.
C. By April 15
D. You must submit an application each year before January 31.
B.
No later than 45 days prior to the date you intend to begin filing returns electronically.
What is the preparer penalty for unauthorized disclosure of or use of a taxpayer’s information?
A. $60 for each disclosure, up to an annual maximum of $30,000
B. $100 for each disclosure, up to an annual maximum of $50,000
C. $250 for each disclosure, up to an annual maximum of $10,000
D. $600 for each disclosure, no maximum
Answer C.
$250 for each disclosure, up to an annual maximum of $10,000
Feedback:
Section 6713 of the Internal Revenue Code imposes monetary penalties on the unauthorized disclosures or uses of taxpayer information by any person engaged in the business of preparing or providing services in connection with the preparation of tax returns. The penalty is $250 for each disclosure or use, but the total amount imposed on such a person for any calendar year shall not exceed $10,000.
Note: There are also criminal penalties for knowingly or recklessly making unauthorized disclosures.
Where should a taxpayer file a complaint regarding identity theft?
A. The Federal Bureau of Investigation
B. The Internal Revenue Service
C. The National Security Administration
D. The Federal Trade Commission
Correct Answer:
D. The Federal Trade Commission
Explanation/Feedback:
The Federal Trade Commission (FTC) is the lead federal agency on general identity theft issues. The FTC recommends filing a complaint at www.identitytheft.gov
if you suspect identity theft.
Who is the owner of an EFIN?
A. All tax preparers own their EFIN.
B. The signing preparer owns the EFIN used on the return.
C. The firm owns the EFIN.
D. The IRS owns the EFIN.
Correct Answer:
C. The firm owns the EFIN.
Explanation/Feedback:
The firm owns the EFIN. The firm uses either its Employer Identification Number (EIN) or the sole proprietor’s Social Security Number, if it doesn’t have an EIN, to apply for an EFIN.
A calendar-year taxpayer has W-2 wages and withholding throughout the year. He files his 20X1 return and writes the IRS a check for his remaining 20X1 tax liability on May 1, 20X3. He discovers a mistake in his favor and wants to amend the return to claim a full refund. Until when can he do so?
A. April 15, 20X5
B. May 1, 20X5
C. May 1, 20X6
D. April 15, 20X6
Correct Answer:
A. April 15, 20X5
Explanation/Feedback:
To amend a return to claim a refund, a taxpayer generally has 3 years from the date the return was filed (or the due date if filed on time), or 2 years from the date the tax was paid, whichever is later.
A tax preparer retains copies of client returns or a list of returns prepared for three years following the end of the return period. What is a return period?
A. The period from January 1 to April 15th of each year
B. The 12-month period beginning on July 1 of each year
C. The 12-month period ending on April 15th of each year
D. The period from January 1 to June 30th of each year
Correct Answer:
B. The 12-month period beginning on July 1 of each year
Explanation/Feedback:
A tax return preparer must retain either a completed copy of the return/claim for refund or a list with taxpayer name, TIN, taxable year, and type of return prepared. Records must be available for inspection for three years after the close of the return period.
A return period = 12 months starting July 1 and ending June 30 of the following year.
The FTC financial privacy rule requires financial institutions, including tax return preparers, to perform which of the following actions?
A. Give their customers privacy notices
B. Develop, implement, and maintain an Information Security Program
C. Encrypt electronically stored taxpayer data
D. All of the above
A.
Give their customers privacy notices
Feedback:
The Financial Privacy Rule aims to protect the privacy of the consumer by requiring financial institutions, as defined, which includes professional tax preparers, data processors, affiliates and service providers to give their customers privacy notices that explain the financial institution’s information collection and sharing practices.
Question:
Tom, a paid tax preparer, was assessed a penalty of $1,000 for taking an unreasonable position on a tax return. An Administrative Law Judge also determined that Tom acted with willful or reckless conduct on the same return. Tom’s fee for preparing the return was $1,500. What is Tom’s total penalty for his violations of Sec. 6694 on this return?
A. $1,000
B. $4,000
C. $5,000
D. $6,500
C.
$5,000
Feedback:
The penalty for willful or reckless conduct is the greater of $5,000 or 75% of the preparer’s fee. The penalty is reduced by any penalty for an unreasonable position. Tom will pay a penalty of $1,000 for the unreasonable position. The $5,000 penalty for willful or reckless conduct will be reduced to $4,000. Tom will pay a total of $1,000 + $4,000 = $5,000 penalty.
If a calendar-year taxpayer timely obtains an extension and so files his 20X1 return on June 29, 20X2, but then discovers a mistake in his favor and wants to amend the return to claim a refund, until when can he do so?
A. June 29, 20X5
B. October 15, 20X5
C. April 15, 20X5
D. June 29, 20X4
A.
June 29, 20X5
Feedback:
If a taxpayer wants to amend a timely-filed return to claim a refund or credit, he can do so within three years from the due date of the return. Returns filed before the due date are treated as being filed on the due date. An extension changes the due date for filing a tax return; however, if you had an extension to file (for example, until October 15) but you filed earlier and the IRS receives it June 29, your return is considered filed on June 29.
What is the relationship between penalties for filing returns with unreasonable positions and penalties for willful or reckless misconduct?
A. Each penalty is assessed independently and in its entirety – without exception.
B. A penalty for an unreasonable position is added to a penalty for misconduct.
C. A penalty for an unreasonable position reduces the penalty for misconduct.
D. None of the above.
C.
A penalty for an unreasonable position reduces the penalty for misconduct.
Feedback
The amount of any penalty payable for willful misconduct is reduced by any penalty for an unreasonable position.
Lila must apply to renew her enrollment with the IRS by Jan 31, 20X1. When may she destroy records documenting her continuing professional education from 20X1?
A. April 1, 20X4
B. Jan 31, 20X4
C. April 1, 20X5
D. April 1, 20X8
D.
April 1, 20X8
Feedback
The enrollment cycle is a period of three successive enrollment years preceding the effective date of renewal. Upon renewal, you must attest to the completion of your CE requirements from the prior 3-year period.
Lila will not attest to her 20X1 CE until 20X4 because a new enrollment period begins in 20X1. Her next enrollment renewal is effective on April 1, 20X4.
Proof of CPE must be kept for a period of four years following the date of renewal of enrollment.
The effective date of renewal is April 1 of the year following the close of the period for renewal.
Four years from April 1, 20X4 is April 1, 20X8.
An enrolled practitioner’s communications with his client are confidential ______
A. With regard to non-criminal tax matters before the IRS only.
B. With regard to non-criminal tax matters before the IRS or in non-criminal tax proceedings in federal court.
C. With regard to non-criminal tax matters before the IRS or in non-criminal tax proceedings in federal court and also with regard to non-criminal tax matters before other federal, but not state, agencies.
D. For all non-criminal purposes.
B.
With regard to non-criminal tax matters before the IRS or in non-criminal tax proceedings in federal court.
Feedback
A limited confidentiality privilege exists with regard to communications between an enrolled practitioner and his client about tax advice, but such a privilege is limited only to non-criminal tax matters before the IRS and to non-criminal federal court tax matters.
The Treasury Department and the IRS have concluded that the federally authorized tax practitioner privilege generally does not apply to communications between a taxpayer and an unenrolled tax return preparer, because the advice an unenrolled preparer provides is ordinarily intended to be reflected on a tax return and is not intended to be confidential or privileged.
Molly is a practitioner who willfully failed to sign a tax return even though federal tax law requires the signature. The IRS may sanction Molly under:
A. Incompetence and Disreputable Conduct
B. Negotiation of Check
C. Willful or reckless conduct
D. Tax shelter
A.
Incompetence and Disreputable Conduct
Feedback
- Incompetence and disreputable conduct for which the IRS may sanction a practitioner includes, but is not limited to:
-criminal offenses,
- giving false or misleading information,
-misappropriation of funds, and
- willfully failing to sign a tax return unless the failure is due to reasonable cause and not due to willful neglect.
Because Molly willfully failed to sign the return, the sanction falls under Incompetence and Disreputable Conduct (Circular 230).
An Enrolled Agent (EA) can represent a taxpayer:
A. Before any administrative level of the IRS
B. Only if the EA prepared the return
C. At all tax-related federal court proceedings
D. Before collections, examinations, and Tax Court
A.
Before any administrative level of the IRS
Feedback
Enrolled agent status is the highest credential the IRS awards. The individual is enrolled to practice before the United States Treasury Department.
Enrolled agents, certified public accountants, and attorneys have unlimited representation rights before the IRS. Tax professionals with these credentials may represent their clients on any matters including:
audits
payment/collection issues
appeals
Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter, regardless of who prepared the return.
Enrollment to practice before the IRS does not grant the ability to practice law. Only an attorney or those duly authorized are admitted to practice in court.
Tax Court Rule 200; Circular 230, sections 10.2, 10.3 & 10.32
Which of the following statements is correct?
A. An enrollment cycle is the three successive enrollment years preceding the effective date of renewal.
B. Your enrollment cycle begins when you pass all three SEE exams.
C. Your enrollment cycle begins when you file Form 23, Application for Enrollment to Practice Before the IRS.
D. The enrollment cycle begins on your effective date of renewal.
A.
An enrollment cycle is the three successive enrollment years preceding the effective date of renewal.
Feedback
The definition of enrollment cycle per Treasury Circular 230 is:
➡️ “The three successive enrollment years preceding the effective date of renewal.”
What is an enrolled agent?
A. An enrolled agent is a tax professional who has been certified by the IRS and can represent taxpayers before any division of the IRS.
B. An enrolled agent is a tax professional who has demonstrated special competence in tax matters, applied for enrollment, and has been issued an enrollment card.
C. An enrolled agent is an attorney or CPA who represents taxpayers before the IRS.
D. An enrolled agent is a tax professional who has passed all three parts of the Special Enrollment Examination (SEE).
B.
An enrolled agent is a tax professional who has demonstrated special competence in tax matters, applied for enrollment, and has been issued an enrollment card.
Feedback
The Office of Professional Responsibility (OPR) may grant enrollment to practice before the IRS to an applicant who:
demonstrates special competence in tax matters,
by passing a written examination administered by the IRS (the SEE), or
by having past service and technical experience within the IRS.
In either case, the applicant must:
submit Form 23, Application for Enrollment to Practice Before the IRS, and
be issued an enrollment card.
Annie Holt, an enrolled agent, was issued findings of fact, conclusions of law, and a decision ruling that she committed acts of misconduct, which were violations pursuant to Circular 230, and, therefore, a decision was entered ruling that she should be disbarred. What’s next?
A. Annie Holt has a right to appeal the decision to the Secretary of the Treasury.
B. Annie Holt must acquiesce to the decision of the administrative law judge.
C. Annie Holt is permanently barred from IRS practice.
D. Annie Holt must pay a fine to the Office of Professional Responsibility.
A. Annie Holt has a right to appeal the decision to the Secretary of the Treasury.
Feedback
Any party to such a proceeding may file an appeal of the decision of the Administrative Law Judge with the Secretary of the Treasury or a delegate.
The practitioner must:
file the appeal and brief, in duplicate,
with the Director of the OPR,
within 30 days of the date the ALJ decision is served on the parties.
The Director of the OPR will then immediately send a copy of the appeal to the Secretary of the Treasury (or delegate), who decides appeals.
If an IRS examiner believes that a practitioner filed a return that contains a frivolous position, to whom does he report his concern?
A. To the practitioner.
B. To the Director of the Office of Professional Responsibility.
C. To the Secretary of the Treasury.
D. To the Administrative Law Judge.
B.
To the Director of the Office of Professional Responsibility.
Feedback
Circular 230, Section 10.53 provides:
If an officer or employee of the Internal Revenue Service has reason to believe that a practitioner has violated any provision of Circular 230, the officer or employee must promptly make a written report to the Director of the Office of Professional Responsibility (OPR) regarding the suspected violation.
The report must explain:
the facts, and
the reasons upon which the officer’s or employee’s belief rests.
The Director of Practice notified Sally in February 20X1 that she passed the Special Enrollment Examination. She submitted her application for enrollment and received the initial enrollment on June 15, 20X1. Her Continuing Professional Education requirements until the first full renewal cycle are:
A. She does not have to complete any Continuing Professional Education requirements until the first full renewal cycle
B. She must complete two hours of credit for each full month and each part of a month left in the current renewal cycle
C. She must complete a minimum of 72 hours of Continuing Professional Education unless she is within less than a year before the end of the current cycle
D. She must complete two hours of credit for only each full month left in the current renewal cycle
B
She must complete two hours of credit for each full month and each part of a month left in the current renewal cycle
Feedback
Enrolled Agents are required to take 72 hours of continuing education during the 3-year enrollment cycle, and at least 16 hours for each respective year. These 16 hours must include at least 2 hours of ethics or professional conduct education. The continuing education requirements are pro-rated if enrollment occurs in the middle of an enrollment cycle, at a rate of 2 hours required education for each month or part of a month enrolled.
Where are the proceedings for disbarment of an enrolled agent held?
A. At a time and place set by a judge of the Tax Court.
B. At a time and place set by a judge of the Federal District Court.
C. At a time and place set by an Administrative Law Judge.
D. At a time and place set by the Director of the Office of Professional Responsibility.
C
At a time and place set by an Administrative Law Judge.
Feedback
Circular 230 provides that the Administrative Law Judge has the authority to set the time and place for a disbarment hearing or any other proceeding initiated by the Director of the Office of Professional Responsibility and assigned or referred to the Administrative Law Judge.
An unenrolled tax return preparer with an AFSP Record of Completion for the tax year under examination and the tax year the examination is conducted has limited representation rights before the IRS. In which of the following circumstances can this unenrolled return preparer represent a taxpayer?
A – To discuss a tax return he did not prepare or sign with a revenue agent.
B – To discuss a tax return he prepared and signed with a revenue agent.
C – To discuss a tax return he prepared and signed with a revenue officer.
D – To discuss a tax return he did not prepare or sign with a customer service agent.
B – To discuss a tax return he prepared and signed with a revenue agent.
Feedback
Only unenrolled return preparers with a valid PTIN and who hold a record of completion for both the tax return year (2016 or thereafter) under examination and the year the examination is conducted may represent taxpayers, and only before revenue agents, customer service representatives, or similar IRS employees (including the Taxpayer Advocate Service) during an examination of the taxable period covered by the tax return they prepared and signed.
Unenrolled preparers cannot represent taxpayers before appeals officers, revenue officers, counsel, or similar IRS or Treasury employees.
What is the limit of a monetary penalty issued for incompetence or disreputable conduct?
A – 10% of the annual income of the individual or firm under sanction
B – 75% of the income derived or expected to be derived from the action resulting in the penalty
C – The full amount of the income derived or expected from the action resulting in the penalty
D – No limit is placed on monetary penalties
C – The full amount of the income derived or expected from the action resulting in the penalty
Feedback
The amount of a monetary penalty shall not exceed the gross income derived or expected to be derived from the conduct resulting in the penalty.
Statute of Limitation vs Collection Statute Expiration Date (CSED):
Statue of limitations: IRS has 3 years from the due date or date filed (later) to ASSESS additional taxes
Collection Statute Expiration Date (CSED): IRS has 10 years from the date of ASSESSMENT to COLLECT tax liability
Nancy, a calendar year taxpayer, filed her federal income tax return for 20X1, which was due April 15, 20X2, on May 1, 20X2. Nancy did not request and therefore did not receive an extension of time to file her tax return. Nancy paid the amount due as shown on the return on June 30, 20X2. Based on these facts, the last day for the IRS to assess additional tax with respect to Nancy’s 20X1 tax return is:
A – April 15, 20X4
B – April 15, 20X5
C – May 1, 20X5
D – June 30, 20X5
C – May 1, 20X5
Feedback
In most cases, the IRS has 3 years from the due date of the return or the date actually filed (whichever is later) to assess any additional taxes that may be owed. The IRS generally has 10 years from the date of assessment to collect a timely assessed tax liability. There is no statute of limitations for fraud.
