Section 1 Review Flashcards
1
Q
How much is the due diligence penalty?
A
For returns filed for the 2022 tax year, the penalty is $560 per failure, per return
2
Q
A practitioner’s status as an enrolled agent must be renewed every three years as determined by:
A
The last digit of their SS number
3
Q
In the case of direct mail and e-commerce communications, the practitioner must retain a copy of the advertisement, along with a list of persons to whom the ad was mailed of distributed, for at least
A
36 months
4
Q
If an employee simply offers technical or clerical help when preparing a tax return, are they required to have a PTIN?
A
No
5
Q
Under Circular 230 §10.26, a practitioner can publish a fee schedule. However, he must adhere to the schedule for:
A
30 days after it is last published.
6
Q
If the Office of Professional Responsibility (OPR) issues a formal complaint against a practitioner, the complaint may be served in the following ways:
A
- Certified mail
- First class mail if returned undelivered by certified mail
- Private delivery service (UPS or Fed-EX)
- In person, or by leaving the complaint at the office of the practitioner
7
Q
The OPR investigates complaints against practitioners and then institutes judicial proceedings. However, if a hearing is required, who will make the decision regarding disbarment or other appropriate sanctions?
A
an administrative law judge
8
Q
The IRS requires that records for continuing education credits be retained for_______ following the date of renewal.
A
4 years
9
Q
What is the governing body within the IRS responsible for interpreting and applying the Regulations Governing Practice before the Internal Revenue Service (Treasury Department Circular 230)?
A
The Office of Professional Responsibility
10
Q
Can the IRS disbar a practitioner, even without bringing a criminal prosecution?
A
Yes, the IRS can disbar or suspend a tax return preparer who engages in misconduct or incompetence
11
Q
If a suspension is sought, must the OPR specify the duration of the suspension?
A
Yes
12
Q
The OPR can move quicker to sanction practitioners by using expedited procedures in certain circumstances, including when a practitioner has been convicted of a crime involving dishonesty or breach of trust. The procedures are also allowed when a practitioner has demonstrated a pattern of “willful disreputable conduct” involving the following:
A
- Failing to file his federal income tax returns in four of the five previous tax years.
- Failing to file a return required more frequently than annually (such as employment tax returns) during five of the seven previous tax periods.
13
Q
A suspended or disbarred individual is banned from practicing before the IRS, which includes filing powers of attorney. However, suspended or disbarred individuals are allowed to do the following:
A
- Represent himself in any matter (or represent a close family member, like his own child).
- Appear before the IRS as a trustee, receiver, guardian, administrator, executor, or other
fiduciary if duly qualified/authorized under the law of the relevant jurisdiction. - Appear as a witness for a taxpayer.
- Furnish information at the request of the IRS or any of its officers or employees.
- Receive IRS information pursuant to a valid tax information authorization. However, simply
receiving this information does not entitle him to practice before the IRS on behalf of that
taxpayer.
14
Q
The Annual Filing Season Program requirements are as follows:
A
- Active PTIN
- Eighteen (or 15) hours of specific types of continuing education from IRS-approved
providers - Consent to Circular 230 subpart B and section 10.51
- Tax compliance
15
Q
A
15
Q
Is there a fee to obtain an Annual Filing Season Program (AFSP) certificate from the IRS?
A
No, the IRS does not chare a gee for participating in the AFSP program
16
Q
The Tax Court can impose a penalty of up to $25,000 for the following reasons
A
- When a taxpayer unreasonably fails to pursue the case within the IRS’s appeals system
- If a taxpayer’s case is intended primarily to cause a delay
- If a taxpayer’s position is frivolous reven or groundless
17
Q
Are revenue rulings and revenue procedures binding in court?
A
No, they are not binding in the Tax Court or any other court. However, taxpayers can use revenue ruling and revenue procedures as official IRS guidance to avoid accuracy-related penalties
18
Q
Circular 230 states that the standard used to determine penalties is evaluating a practitioner’s pattern of conduct, and whether he acted
A
“knowingly, recklessly, and through gross incompetence”
19
Q
A substantial valuation misstatement results if the value of any property claimed on a tax return is 150% or more of the amount determined to be the correct amount. The “substantial valuation misstatement” penalty is calculated as a
A
flat 20% of the net understatement of tax.
NOTE: The penalty increases to 40% of the net understatement of tax if the taxpayer claims a value for property on a tax return that is 200% or more of the correct amount. This is known as a “gross valuation misstatement”.
20
Q
How long does the IRS have to respond to a FOIA request?
A
20 business days
21
Q
When is an enrolled practitioner allowed delegate authority to another representative?
A
Only if the taxpayer has specifically given him the power to delegate authority to someone else
22
Q
The authority to regulate the practice of representatives of persons before the Department of the Treasury, including the IRS, comes from:
A
Title 31 USC 330
23
Q
When should a practitioner file Form 8275, Disclosure Statement?
A
To avoid accuracy-related penalties by disclosing positions on a tax return that are not otherwise adequately disclosed.
24
Which government agency is responsible for FBAR enforcement?
The IRS
25
Is an EA allowed to advise clients about the likelihood of being audited if they claim certain deductions or credits?
No, this type of advice is not allowed
26
Treasury regulations are:
the U.S. Treasury Department’s official interpretations of the Internal Revenue Code.
27
Advocating for a taxpayer during an IRS examination would require an
IRS Power of Attorney (Form 2848)
28
Form 2848, Power of Attorney and Declaration of Representative, requires the representative to declare, under penalties of perjury, that he is:
- Not currently under suspension or disbarment from practice before the IRS.
- Subject to regulations contained in Circular 230, as amended, concerning practice before the IRS.
- Authorized to represent the taxpayer (identified on the form) for the matters specified.
29
There are three types of Treasury regulations:
legislative, interpretive, and procedural.
30
During a field audit, if an IRS examiner determines a preparer penalty applies, a detailed report is prepared and the preparer is provided with a copy of the report. The preparer then has _______________s to request an appeal before the preparer's penalty is assessed.
30 dyas
31
8821
Tax Information Authorization, is a disclosure form that authorizes a third party to receive confidential tax information for the type of tax and the periods listed on the form. Form 8821 is used by tax preparers, banks, employers, and other institutions to receive financial information on behalf of an individual or a business.
32
The IRS’s computer database that contains information regarding the authorizations taxpayers have given representatives for their accounts is called:
CAF "Centralized Authorization File"
33
Penalty for filing a frivolous return?
$5,000 per return
34
8275
used by taxpayers and tax return preparers to disclose items or positions, except those taken contrary to a regulation, that are not otherwise adequately disclosed on a tax return to avoid certain penalties.
35
What is the penalty if the tax preparer fails to sign the preparer's section of the tax return in 2022?
$55 per failure
36
What is a Technical Advice Memorandum (TAM)?
Written guidance furnished by the IRS Office of Chief Counsel upon the request of an IRS director.
37
When does Form 8821, Tax Information Authorization, expire?
Upon the taxpayer’s revocation or the appointee’s withdrawal.
38
The legal act of seizing property to satisfy a tax debt is called:
A Tax levy
39
Small tax case procedures are also known as:
S-case procedures
40
How does the IRS use Collection Financial Standards?
Collection Financial Standards are used to help the IRS determine a taxpayer's ability to pay a delinquent tax liability
41
When must a Taxpayer physically appear in person in an IRS examination, assuming Form 2848 has been properly signed and submitted?
Never
42
The IRS has broad authority to examine records, issue summons, and take testimony from taxpayers for the purposes of:
- Ascertaining the correctness of any return;
- Making a return where none has been made;
- Determining the liability of any person for any Internal Revenue tax;
- Collecting any such liability; or
- Inquiring into any offense connected with the administration or enforcement of the Internal Revenue laws.
43
If a taxpayer fails to petition their case to a U.S. Tax Court within the required 90 days after the notice of deficiency. How long do they have to pay the contested deficiency without incurring additional penalties and interest?
10 days
44
How long does a taxpayer have to respond to a "Notice of Deficiency"?
90 days unless they live outside the U.S. and then they have 150 days
45
Can a taxpayer appeal an S-case?
No
46
The IRS generally has ______ years from the date of assessment to collect a tax debt from a taxpayer.
10
47
What is a split refund?
A split refund lets a taxpayer divide their tax refund and direct deposit the funds into up to three different accounts with U.S. financial institutions.
48
A qualified account for Direct Deposit can be:
checking, savings, or other qualifying financial account, such as an individual retirement arrangement (IRA), health savings account, (HSA), Archer MSA, Coverdell education savings account (ESA), and TreasuryDirect online account.
49
Taxpayers who choose Direct Deposit must provide Providers with:
account numbers and bank routing transit numbers for qualified accounts.
50
With regards to direct deposit of taxpayer refunds, a single financial account is limited to _____ electronically-deposited refunds per tax year
3
51
During an installment agreement, the IRS is prohibited by law from:
levying a taxpayer's wages or assets.
52
Can an installment agreement be paid once a year as an annual payment plan?
No
53
The minimum monthly payment under an installment agreement is:
$25
54
The maximum length of time to pay an installment agreement?
60 months.
However, an exception applies for taxpayers who owe up to $50,000. They can pay monthly over a period of 72 months (six years), as long as they use direct debit as their payment method.
55
1127
Used by a taxpayer who is unable to pay their tax deficiency
56
What corporations are required to electronically file their Forms 1120, 1120S, and 1120-F
Corporations with $10 million or more of total assets
57
Safeguarding of IRS e-file from fraud and abuse is the responsibility of:
D. The IRS and Authorized IRS e-file Providers.
58
8949
Preparer Explanation for Not Filing Electronically
59
Any tax return preparer who anticipates preparing and filing 11 or more Forms 1040 and/or 1041 during a calendar year must:
use IRS e-file (unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver
60
The Internal Revenue Service e-file Program allows EROs to schedule their client's tax payments by Electronic Funds Withdrawal on a future date. Scheduled payments must be effective on or before:
The return due date.
61
Raymundo is a newly licensed CPA who wants to become an authorized e-file provider. What is the first step he should take in the process?
Create an IRS e-services account
62
EFINs are issued on a _____ basis?
Firm
All preparers in a firm’s office are covered by one EFIN. However, a firm with multiple offices needs a separate EFIN for each physical location.
63
When will the IRS automatically inactivate an EFIN?
When the Responsible Official is deceased.
64
What is an ERO?
An ERO is an IRS-approved provider that originates the submission of electronic returns.
65
The IRS generally has ______ from the date of assessment to collect a tax debt from a taxpayer.
10 years
66
The ten-year collection period can be suspended in the following cases:
- While the IRS and the Office of Appeals consider a request for an installment agreement or an offer in compromise
- From the date a taxpayer requests a collection due process (CDP) hearing
- While the taxpayer is residing outside the United States
- For tax periods included in a bankruptcy
67
Form 433
contains detailed financial information about the taxpayer’s income, bank and retirement accounts, real estate and other assets, and any other outstanding debts. It may also include information concerning the taxpayer’s obligations for court-ordered payments, such as child support and alimony, since the taxpayer will generally have little flexibility regarding these obligations.
68
The IRS can certify a taxpayer has “seriously delinquent tax debt,” which can lead to the denial and/or revocation of a taxpayer’s passport. The threshold in 2022 is
$55,000
69
Once the IRS sends out a Notice of Intent to Levy, how long must the IRS wait before it can seize taxpayer property to satisfy the tax debt?
30 days
70
In most cases, the amount of a taxpayer’s IRS debt must be ________ or more before the IRS will issue a Notice of Federal Tax Lien.
$10,000
71
What is a "certificate of service” in relation to an IRS tax lien?
A certificate that must be signed to document that a taxpayer was properly served with a summons.`
72
30-day letter includes:
- A notice explaining the taxpayer’s right to appeal the proposed changes within 30 days
- A copy of the revenue agent report explaining the examiner’s proposed changes
- An agreement or waiver form
- A copy of Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree
73
What kind of IRS notice must a taxpayer wait for, in order to file a petition with the U.S. Tax Court?
A Statutory Notice of Deficiency (90 day letter)
74
A taxpayer can file a “small case request” if the total amount of his disputed tax, penalties, and interest is ________ or less.
$25,000
75
Under the rules of Circular 230 §10.22, a practitioner is required to exercise ____________ when performing all duties that involve representing clients before the IRS.
Diligence as to accuracy
76
If a tax preparer fails to meet due diligence requirements, the preparer can face:
- Civil return preparer penalties
- Suspension or expulsion from IRS e-file
- Disciplinary action by the IRS Office of Professional Responsibility
- An injunction barring the preparer from preparing tax returns for others
- Criminal penalties for filing fraudulent returns
77
The Office of Professional Responsibility (OPR) takes the position that Circular 230 applies to:
enrolled practitioners (EAs, CPAs, and attorneys) as well as anyone submitting a power of attorney in connection with a limited representation of a taxpayer before the IRS with respect to a specific matter before the Agency
78
Regarding the retention period for conflict of interest waivers, a practitioner is required to retain written waivers or consents for at least:
3 years post-representation
79
Under IRC §6107, tax preparers are required to give a completed copy of a tax return no later than:
The time the return is presented for the taxpayer's signature.
80
What is IRC §6695 and what is its relevance to tax preparers?
This code section outlines penalties preparers may face in connection with the preparation of tax returns for other persons.
81
8867
Paid Preparer's Due Diligence Checklist, must be filed with the tax return for any taxpayer claiming EIC, the CTC/ACTC, and/or the AOTC. Only paid preparers have to complete this form.
82
Does a taxpayer need a Social Security number to claim the Earned Income Tax Credit?
Yes
83
Penalty for failing to file an 8867
$560 per failure
84
What is the OPR’s "burden of proof" with regards to a disciplinary proceeding of a tax practitioner?
OPR must prove that the practitioner willfully violated one or more provisions of Circular 230.
85
In the case of an estate, if there is more than one executor, who must sign a 2848 to assign Powers or Attorney to an EA or CPA
Only one co-executor
86
Where is a third party designee authorization recorded?
Directly in the taxpayer’s account with the IRS.
87
The "checkbox authority" lasts:
For one year from the due date of the return not including extensions.
88
If a practitioner is facing disbarment or other disciplinary hearing, an administrative law judge will hear the evidence and decide whether the Office of Professional Responsibility has proven its case. Within ______ days of the conclusion of a hearing, the administrative law judge must enter a decision.
180
89
A disbarred practitioner can petition for reinstatement after:
5 years
90
Under §10.26 of Circular 230, a tax practitioner is allowed to be a notary public. However, a notary public who is employed as counsel, attorney, or agent in a matter before the IRS or who has a material interest in the matter cannot:
engage in any notary activities related to that matter
91
Under IRC §6107, tax preparers are required to give a completed copy of a tax return no later than:
The time the return is presented for the taxpayer's signature.
92
Under Circular 230, a "tax return" is defined as:
An original return, a claim for refund, or an amended return.
93
The IRS is unable to consider an OIC while there is:
an open bankruptcy; once it is discharged and closed, the taxpayer can file an offer.
94
Beverly owes a substantial sum to the IRS, and she wants to submit an offer in compromise to the IRS. In which of the following circumstances is she not required to send an initial payment along with her application?
Doubt as to liability
95
An IRS lien will be released if:
taxpayer's offer (OIC) is accepted and the agreed offer amount has been paid in full.
96
The IRS requires a taxpayer whose offer in compromise has been rejected to file an appeal within:
30 days
97
A taxpayer may request audit reconsideration in the following circumstances:
- If the taxpayer did not appear for the audit
- Moved and did not receive correspondence from the IRS
- The taxpayer has additional information to present that was not presented during the original audit
- The taxpayer disagrees with the assessment from the audit
98
What is a CP-2000 Notice?
. A notice from the IRS that the income or payment information it has, does not match the information a taxpayer has reported on his tax return.
99
Even if a joint return is involved, the husband and wife must each file a separate ______ if they both want to be represented
separate Form 2848, Power of Attorney and Declaration of Representative
100
If a taxpayer becomes uncomfortable during an audit and wishes to consult with a tax advisor, the IRS must
suspend the interview and reschedule it.
101
The Tax Court has jurisdiction over cases that involve the following:
- Income tax
- Estate tax and gift tax
- Certain excise taxes
- Redetermination of transferee liability
- Worker classification
- Relief from joint and several liability on a joint return
- Whistleblower awards
102
The IRS has broad authority to examine records, issue summons, and take testimony from taxpayers for the purposes of:
- Ascertaining the correctness of any return;
- Making a return where none has been made;
- Determining the liability of any person for any Internal Revenue tax;
- Collecting any such liability; or
- Inquiring into any offense connected with the administration or enforcement of the Internal Revenue laws.
103
Where are Treasury regulations published?
The Federal Register
104
Official Treasury Regulations generally carry the same legal authority as the Internal Revenue Code itself. However, a legislative regulation may be overturned by the courts if:
It is deemed outside the power delegated to the U.S. Treasury.
105
Under IRC § 6694(b) for an understatement due to willful or reckless conduct, the penalty is
the greater of $5,000 or 75% of the income derived by the tax return preparer with respect to the return or claim for refund.
106
When does Form 8821, Tax Information Authorization, expire?
Upon the taxpayer’s revocation or the appointee’s withdrawal
107
With regards to FBAR requirements, under which title of the U.S. code do FBAR filings fall under?
FBAR reporting falls under Title 31 of the U.S. Code.
108
