ENROLLED AGENT PRT 3 (2 OF 4) – Flashcards
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The Office of Professional Responsibility can censure, suspend, or disbar a practitioner from practice before the IRS for incompetence or disreputable conduct. What is considered disreputable conduct?
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The OPR can censure, suspend, or disbar a practitioner from practice before the IRS for incompetence or disreputable conduct, such as giving false or misleading information, or participating in any way in giving false or misleading information, to the Treasury Department or any of its officers or employees.
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With respect to the contents of an answer filed in rebuttal to a complaint filed by the OPR, the respondent:
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With respect to the contents of an answer filed in rebuttal to a complaint filed by the OPR, the respondent may not deny a material allegation in the complaint that the respondent knows is true or state the respondent is without sufficient information to admit or deny an allegation, unless it is true.
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After a decision has been made on a complaint filed by the Office of Professional Responsibility, either the practitioner or the OPR may appeal the decision. With respect to filing an appeal of the decision, either party may appeal to the:
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Within 30 days after the Administrative Law Judge makes a decision on a complaint filed by the OPR, either the practitioner or OPR may appeal the decision to the Secretary of the Treasury or delegate.
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Under Circular 230 rules, the OPR may charge George, a CPA, with disreputable conduct if he:
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Under Circular 230 rules, the OPR may charge George, a CPA, with disreputable conduct if he provides false or misleading information to an IRS employee. It covers a felony or federal tax evasion only if the practitioner is convicted of such a crime.
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Rhonda and Roger, who are enrolled agents, operate a tax services partnership. Roger was accused by an IRS agent of offering a bribe during an audit of a client's tax return and was found guilty. The OPR then suspends Roger from practice before the IRS for 18 months. Can Rhonda assist Roger?
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Rhonda cannot knowingly assist Roger in practicing before the IRS in any manner during his 18-month suspension. She is not required to dissolve the partnership, but Roger cannot assist in any tax matter related to representation.
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Based on Circular 230, when may the IRS suspend a CPA from practice?
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Based on Circular 230, the IRS may suspend from practice a CPA who was suspended from practice by a State Board of Accountancy.
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The OPR can censure, suspend, or disbar a practitioner from practice before the IRS for incompetence or disreputable conduct. What is considered disreputable conduct?
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OPR can censure, suspend, or disbar a practitioner from practice before the IRS for incompetence or disreputable conduct, which includes: conviction of any criminal offense under the revenue laws of the U. S.; conviction of any criminal offense involving dishonesty or breach of trust; and giving false or misleading information, or participating in any way in giving false or misleading information, to the DOT or any officer or employee thereof.
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Josephine Jones, an enrolled agent, received a complaint from the OPR. With respect to the contents of the answer she files in rebuttal to the complaint, Josephine:
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In response to the complaint from the OPR, Josephine Jones, an enrolled agent, must specifically admit or deny each allegation set forth in the complaint, except she may state she is without sufficient information to admit or deny a specific allegation if that is true.
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Under Circular 230 rules, the IRS may suspend a tax professional for:
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Under Circular 230 rules, the IRS may suspend a tax professional for incompetence as a paid return preparer. The other actions are not covered by Circular 230. Note: Conviction of criminal offenses under the U.S. revenue laws, criminal offenses involving dishonesty or breach of trust, and any felony that renders a practitioner unfit to practice are subject to Circular 230 rules as disreputable conduct.
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Stuart Light, an enrolled agent, received a complaint from the OPR charging him with disreputable conduct. In the complaint, the OPR is not required to provide:
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The OPR complaint against Enrolled Agent Stuart Light for disreputable conduct is not required to list the identity of the employee who recommended the action against Stuart. The complaint must include: a demand for an answer to the charges, the specific sanctions recommended, and the charges against Stuart.
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A minimum of how many hours of continuing education credit must be completed during each enrollment cycle?
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A minimum of 72 hours of continuing education credit must be completed during each enrollment cycle.
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Janice has been an enrolled agent, enrolled to practice before the IRS, since 1985 and has been saving her CPE records every year since that date. When may she destroy her records documenting the continuing professional education she completes each year?
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Janice may destroy records documenting the continuing professional education she completes each year three years after the date of the EA renewal for which the CPE is credited.
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For purposes of Circular 230 (regulations governing practice), the definition of tax return includes:
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For purposes of Circular 230 (regulations governing practice), the definition of a tax return includes both an amended return and a claim for refund. See Circular 230 §10.2.
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John and Jane are each claiming their son Sam as a dependent child on their individual tax returns. Jason, a tax practitioner, may represent these former spouses in audits of their returns if:
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The same practitioner can represent clients (including former spouses) in an IRS audit that involves conflicting interests if all three conditions are met.
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Harmon comes to you for help filing a return this year because he received a Form W-2 from a second job. He tells you he has not filed tax returns for the past two years because his wages from his main job are paid in cash. What are your responsibilities as a tax professional?
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Tax professionals must advise clients about any failure to comply with the tax law and the consequences of the failure to comply. See Circular 230 §10.21.
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Your client paid $6,800 in mortgage interest but does not have a Form 1098. The client agrees to provide the name and address of the mortgage holder. What is the correct action to take in this situation?
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The tax professional may prepare the return taking the deduction if the client provides the mortgage holder's name, address, and TIN (if the TIN is available).
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Mike is an enrolled agent. Widget, Inc. is an accrual basis taxpayer. In 2009, while preparing Widget's 2008 return, Mike discovered Widget had unreported income for 2007. Widget received the income in 2008, but it was required to be reported in 2007 under the accrual method of accounting. What must Mike do?
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Mike, an enrolled agent, must advise Widget, Inc. of its failure to include the accrued income on its 2007 return and the consequences of not correcting the error.
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Mike is an enrolled agent. For the past five years, the information Anne provided Mike to prepare her return included a Schedule K-1 from a partnership showing significant income. This year, a Schedule K-1 from the partnership is not included in Anne's information. What does due diligence require Mike to do?
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Because Mike, an enrolled agent, knows about the partnership interest from past years, due diligence requires him to ask Anne about the K-1 and explain she should have received a Schedule K-1 even if she is no longer a partner.
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Sandra, an enrolled agent, prepares Linda's income tax return. Linda sold some corporate stock. She believes the proceeds of the sale are a return of capital, and therefore, not included in her gross income. After research, Sandra determines a reasonable basis exists for Linda's position, but not a realistic possibility of success on the merits. Under what circumstances can Sandra sign Linda's return if the proceeds are not reported as income on the return?
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Because she has determined a reasonable basis exists for the position, but not a realistic possibility of success on the merits, Sandra may sign Linda's return that does not report gain or loss from the sale of the stock only if Linda's position is not frivolous and is adequately disclosed on the return.
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Matt, an enrolled agent, provided tax advice to XYZ Corporation on a federal tax matter. The Securities and Exchange Commission (SEC) is reviewing a required filing of XYZ and asks to see a copy of Matt's tax advice. The IRC §7525 tax practitioner privilege does not protect the tax advice from disclosure to the SEC because:
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Matt's tax advice to XYZ Inc. is not protected from disclosure to the SEC because the federally authorized tax practitioner privilege under IRC §7525 protects advice only against disclosure to the IRS, not other government agencies.
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A covered opinion is defined to include a transaction that is the same as, or substantially similar to, a tax avoidance transaction as determined by the IRS and identified by published guidance as a listed transaction. A covered opinion includes written advice that:
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A covered opinion includes written advice that resolves a federal tax issue in the taxpayer's favor, and concludes that it has a 50% chance of success, unless the practitioner prominently discloses in the written advice it is not intended to be, and cannot be, used to avoid penalties. See Circular 230 §10.35.
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A client wants to take a position on her return you determine has a reasonable basis. What may you do for this client?
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If a client wants to take a position on a return that has a reasonable basis, the practitioner may prepare the return taking the position if the client agrees to disclose it on the return.
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During preparation of a client's current income tax return, a tax preparer discovers the client omitted $7,000 of income on her selfprepared, prior-year return. The correct action in this situation is for the tax preparer to inform the client:
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If a tax preparer discovers a client omitted income from a prior-year return, the tax preparer is required to inform the client about the omission and the consequences if the client takes no action to correct it.
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Sam, an enrolled agent, is representing Fred before the Examination division of the IRS with respect to his Schedule C gross income. While reviewing records Fred provided, Sam discovers income that was omitted from the return. Sam is required to advise:
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Upon discovering income was omitted from Fred's tax return, Sam must advise Fred promptly of the omission and the consequences provided by the IRC and regulations for such omission. He may, but is not required to, offer to prepare the amended return.
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Identify the appropriate action that a tax practitioner should take after becoming aware of an error or omission on a client's return.
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If a tax practitioner becomes aware of an error or omission on a client's return, the appropriate action is to advise the client of the problem and the consequences of not correcting it. Note: Although not required, it is good service to offer to amend the return.
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An enrolled agent can recommend a position on the client's tax return as long as the position is:
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An enrolled agent can recommend a position on a client's tax return as long as the position is not incorrect, inconsistent, or incomplete, is not frivolous, and is adequately disclosed.
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While you are employed as a tax professional by a tax preparation firm, you prepare a return for a client, Curtis, showing a refund of $339. You later learn that the IRS sent him a refund for $546 because he altered the return before he filed it. Which of the following best describes your responsibility as a tax professional? A. Do nothing; you did no wrong so it is not your problem B. Inform your supervisor so the tax firm can handle the issue according to its policy C. Inform the IRS that Curtis falsified his return and you are innocent of any wrong doing D. Insist that Curtis inform the IRS and immediately return the excess refund
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B.) Because you are employed as a tax professional by a tax preparation firm, your responsibility as a tax professional is to inform your supervisor so the tax firm can handle the issue according to its policy.
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Margaret Smith is a CPA who is representing John and Mary Jones before the IRS Wage and Investment Division. The IRS is questioning John and Mary about their deduction for charitable contributions. While reviewing the Jones' documentation, Margaret discovers contributions made to a nonqualified organization. Margaret must:
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Margaret Smith, a CPA who is representing John and Mary Jones before the IRS Wage and Investment division, must advise John and Mary promptly of the nonqualified contribution and the consequences provided by the IRC and regulations for not correcting such error.
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In describing their professional designation, enrolled agents are not permitted to use the:
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In describing their professional designation, enrolled agents are not permitted to use the designation "Enrolled Agent" in any manner while in inactive enrollment status.
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Sara Birch, became an enrolled agent on March 12, 2009, and is ordering business cards and advertising for her accounting and tax practice. What presentation violates the Circular 230 rules for advertising?
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Using the term "certified" is prohibited by the Circular 230 rules for advertising. Sara violates the rules if her business cards state "Sara Birch, Enrolled Agent, certified to practice before the Internal Revenue Service.
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The IRC §7525 confidentiality privilege does not apply to any services provided by an:
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The IRC §7525 confidentiality privilege does not apply to any services provided by an unenrolled tax practitioner.
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Are discussions surrounding the preparation of a tax return privileged?
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Discussions surrounding the preparation of a tax return are not privileged.
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The IRC §7525 confidentiality privilege does not apply to: - An enrolled agent - An enrolled actuary - A bank officer, who is not a CPA or an EA - A certified public accountant
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The IRC §7525 confidentiality privilege does not apply to a bank officer. It applies to Circular 230 practitioners authorized to practice before the IRS (enrolled agents, enrolled actuaries, and CPAs).
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When giving written advice (in paper or electronic format) about one or more federal tax issues, a tax practitioner may not base that advice on:
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When giving written advice (in paper or electronic format) about one or more federal tax issues, a tax practitioner may not base that advice on any of the listed criteria.
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The §7525 confidentiality privilege applies to:
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The §7525 confidentiality privilege applies to non-criminal tax proceedings before the IRS.
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John, an EA, provided Purple Corporation with a copy of his calculations of the basis of property that was sold and reported on Form 4797, and a copy of the completed tax return. Later, when the return was examined by the IRS, Purple refused to provide the calculations, claiming it was privileged communication. Purple Corporation:
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Purple Corporation must provide to the IRS the requested calculations (computing the basis of property sold and reported on Form 4797) because privilege does not apply to a determination with respect to an item that will be presented to the government on an original tax return.
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In the process of preparing the 2009 return for Orlo Corporation, Dave, an enrolled agent, provided to Orlo his calculations of the basis of property that was sold and reported on Form 4797. Later, when the IRS audited the 2009 return Orlo refused to provide the calculations, claiming it was privileged communication between Orlo and its federally authorized practitioner. With respect to the IRS request, Orlo Corporation:
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Orlo Corporation must provide the calculations (used to compute the basis of property that was sold and reported on Form 4797) to the IRS because the IRC §7525 privilege rules do not apply to a determination with respect to an item that will be presented to the government on an original return.
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Mr. Rhoad, a paid tax return preparer, did not sign the tax returns he prepared. What is the amount of penalty the IRS may assess?
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The IRS may assess a penalty of $50 per violation against Mr. Rhoad for failure to sign tax returns.
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An applicable income tax return preparer penalty may be assessed on:
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A preparer penalty may be assessed on an individual who prepares and signs a tax return or claim for refund or on an individual with the overall supervisory responsibility for advice given by a firm with respect to a tax return or claim.
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Lenore, age 43, opened a SIMPLE IRA on January 19, 2007. On September 22, 2008, she withdrew the entire $10,000 value of the account. The distribution does not meet any early withdrawal exceptions to the additional tax on early distributions. This distribution is subject to additional tax (penalty) of:
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Lenore is subject to a premature distribution penalty of $2,500. [$10,000 distribution × 25% = $2,500] The usual 10% penalty is increased to 25% for distributions from a SIMPLE IRA within two years of beginning participation in the plan. See IRS Publication 560.
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How much is the penalty for fraudulent failure to file if the tax due on the return is $3,000 and the return was filed nine months late?
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The fraudulent failure to file penalty is $2,250. [$3,000 tax due on the return × 75% fraud penalty = $2,250] A separate late-filing penalty would also apply.
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How much can a paid tax return preparer be penalized for failure to sign tax returns?
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The preparer penalty for failing to sign a return is $50 per violation, up to a maximum of $25,000 per calendar year. Paid preparers are required to sign each return they prepare after it is completed but before presenting it to the taxpayer for signature.
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When do the Treasury Department Circular 230 requirements that a practitioner exercise due diligence not apply?
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The requirement that a practitioner exercise due diligence in preparing, approving, and filing returns does apply if the practitioner is merely assisting with these tasks.
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Who is authorized to practice before the IRS if they hold power of attorney? A. Enrolled agents who are not under suspension or disbarment from practice, and who file a written declaration that they are a qualified EA and are authorized to represent a named taxpayer B. Attorneys who are not under suspension or disbarment from practice and who file a written declaration that they are a qualified attorney and are authorized to represent a named taxpayer C. Both A and B D. Neither A nor B
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Both A and B. Individuals who are authorized to practice before the IRS if they hold a client's power of attorney include any enrolled agent or attorney who: is not currently under suspension or disbarment from practice before the IRS, files a written declaration affirming current qualification as an enrolled agent or an attorney and the authorization to represent the particular party.
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Janet is not an enrolled agent, CPA, attorney, or enrolled actuary. The president of Widgets-R-Us engaged Janet to prepare the company's Form 1120-S for the past year. Janet prepared and signed the return. Later in the year, the IRS began an audit of an earlier-year return of Widgets-R-Us. Janet has a power of attorney to represent Widgets-RUs for the return she prepared and the return being audited. Under Circular 230, Janet may represent Widgets-R-Us during the IRS audit of:
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Under Circular 230, Janet is permitted to represent Widgets-R-Us during the examination only with regard to the past-year Form 1120S that she prepared. She cannot represent Widgets-R-Us for the earlier return, even with a POA, because she did not prepare it and has only limited authority to represent taxpayers before the IRS.
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The IRS began an examination of Mr. Jones' prior-year return. Mr. Jones hired Tyler, an enrolled agent and former IRS employee, to represent him before the IRS. Tyler wrote a memorandum to Mr. Jones outlining the issues that might be raised by the IRS and how to address these issues. Tyler correctly marked this memorandum as confidential and privileged under IRC §7525. During the audit, the Revenue Officer asked Tyler for a copy of the memorandum. Mr. Jones, invoking the §7525 privilege, told Tyler not to disclose it. Tyler is not required to provide the Revenue Officer with a copy of the memorandum because:
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Tyler is not required to provide the Revenue Officer with a copy of the memorandum outlining the issues that might be raised by the IRS and the treatment of those issues. The memorandum was correctly marked as confidential and privileged under IRC §7525, which extends the attorney-client privilege to authorized tax practitioners.
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Circular 230 contains rules with respect to:
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Eligibility to become an enrolled agent and renewal of enrollment are contained in Circular 230.
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What categories of individuals qualifies as a practitioner under Circular 230?
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Certified public accountant, enrolled actuary, and attorney qualify as practitioners under Circular 230.
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Enrolled agents generally must complete continuing education credits for renewed enrollment. What are the CPE credit requirements?
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Enrolled agents must generally complete a minimum of 16 hours of continuing professional education (CPE), including two hours of ethics or professional conduct, during each year of the enrollment cycle. A total of 72 hours of CPE are required during the 3-year enrollment cycle.
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In general, each individual who applies for renewal to practice before the IRS must retain the information required with regard to qualifying Continuing Professional Education (CPE) hours. How long must an individual retain verification of CPE hours?
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Each individual who applies for renewal to practice before the IRS must retain the required documentation that verifies completion of qualifying CPE hours for a period of three years following the date of renewal of enrollment. For example, CPE records applicable to an April 1, 2006, renewal must be maintained until April 1, 2009.
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The OPR notified Sally in February 2009 that she passed the Special Enrollment Examination. She submitted her application for enrollment and received the initial enrollment on June 15, 2009. Her CPE requirements until her first full renewal cycle are:
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Sally must complete two hours of CPE credit for each full or partial month in the current calendar year (or a total of 16 hours if less) and 24 hours in each remaining year of her renewal cycle.
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Andy is an enrolled agent. He is preparing a brochure to hand to prospective clients and wants to explain the designation "Enrolled Agent." What language is Andy not permitted to use?
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Andy, an enrolled agent, cannot state he is "certified to represent taxpayers before the IRS" in a brochure for prospective clients or in any other document.
