CPA REG EXAM |ACTUAL QUESTIONS AND
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Which, if any, of the following could result in penalties against an income tax return
preparer?
a. Knowing or reckless disclosure or use of tax information obtained in preparing a return
b. A willful attempt to understate any client's tax liability on a return or claim for refund
c. a and b
d. Neither a or b
CORRECT ANSWER
c. a and b
A tax return preparer who knowingly or recklessly discloses or uses tax information
obtained in preparing a return is subject to criminal penalties. A penalty equal to the
greater of $5,000 or 50% of the income derived or to be derived is imposed on the
preparer if any part of an understatement of tax liability results from a willful attempt to
understate it or from reckless or intentional disregard of rules or regulations.
Question 2
Pursuant to Treasury Circular 230, which of the following statements about the return of a
client's records is correct?
a. The practitioner may retain copies of the client's records.
b. The client's records are to be destroyed upon submission of a tax return.
1
, c. The practitioner does not need to return any client records that are necessary for the
client to comply with the client's federal tax obligations.
d. The existence of a dispute over fees generally relieves the practitioner of responsibility to
return the client's records.
e. None of the above
CORRECT ANSWER
a. The practitioner may retain copies of the client's records.
A return preparer is required to retain a completed copy of each return or claim prepared
for 3 years after the close of the return period.
Question 3
A CPA prepared a tax return for a client who will receive a refund check. The client is
traveling abroad and asked the CPA to pick up the check at the client's home address.
Under Treasury Circular 230, any of the following actions, if taken by the CPA relating to
the refund check, would be a violation of the rules of practice before the Internal Revenue
Service, except
a. Holding the check for safe keeping and awaiting the client's return.
b. Endorsing the check and depositing it into the client's bank account.
c. Holding the check until the client is billed, then endorsing and depositing the check into
the CPA's account as payment for the bill.
d. Endorsing the check and depositing it into an escrow account for the client's benefit.
e. None of the above
CORRECT ANSWER
a. Holding the check for safe keeping and awaiting the client's return.
An agent must not negotiate, including by endorsement, any income tax refund check
issued to a client. An agent can, however, receive the check and hold it for safe keeping
until the client returns.
2
, Question 4
To avoid tax return preparer penalties for a return's understated tax liability due to an
intentional disregard of the regulations, which of the following actions must a tax preparer
take?
a. Audit the taxpayer's corresponding business operations.
b. Make reasonable inquiries if the taxpayer's information is incomplete.
c. Review the accuracy of the taxpayer's books and records.
d. Examine the taxpayer's supporting documents.
CORRECT ANSWER
b. Make reasonable inquiries if the taxpayer's information is incomplete.
Understatement penalties may be excused if there is reasonable cause and good faith
and if the taxpayer makes appropriate inquiries to determine the existence of facts
required by a Code section or regulation.
Question 5
All of the following are considered examples of disreputable conduct for which a CPA can
be disbarred or suspended except
a. Failure to timely pay personal income taxes.
b. Knowingly aiding and abetting another person to practice before the Internal Revenue
Service during a period of suspension or disbarment.
c. Directly or indirectly attempting to influence the official action of any employee of the
Internal Revenue Service by use of threats or false accusations or by bestowing any gift,
favor, or thing of value.
3
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Which, if any, of the following could result in penalties against an income tax return
preparer?
a. Knowing or reckless disclosure or use of tax information obtained in preparing a return
b. A willful attempt to understate any client's tax liability on a return or claim for refund
c. a and b
d. Neither a or b
CORRECT ANSWER
c. a and b
A tax return preparer who knowingly or recklessly discloses or uses tax information
obtained in preparing a return is subject to criminal penalties. A penalty equal to the
greater of $5,000 or 50% of the income derived or to be derived is imposed on the
preparer if any part of an understatement of tax liability results from a willful attempt to
understate it or from reckless or intentional disregard of rules or regulations.
Question 2
Pursuant to Treasury Circular 230, which of the following statements about the return of a
client's records is correct?
a. The practitioner may retain copies of the client's records.
b. The client's records are to be destroyed upon submission of a tax return.
1
, c. The practitioner does not need to return any client records that are necessary for the
client to comply with the client's federal tax obligations.
d. The existence of a dispute over fees generally relieves the practitioner of responsibility to
return the client's records.
e. None of the above
CORRECT ANSWER
a. The practitioner may retain copies of the client's records.
A return preparer is required to retain a completed copy of each return or claim prepared
for 3 years after the close of the return period.
Question 3
A CPA prepared a tax return for a client who will receive a refund check. The client is
traveling abroad and asked the CPA to pick up the check at the client's home address.
Under Treasury Circular 230, any of the following actions, if taken by the CPA relating to
the refund check, would be a violation of the rules of practice before the Internal Revenue
Service, except
a. Holding the check for safe keeping and awaiting the client's return.
b. Endorsing the check and depositing it into the client's bank account.
c. Holding the check until the client is billed, then endorsing and depositing the check into
the CPA's account as payment for the bill.
d. Endorsing the check and depositing it into an escrow account for the client's benefit.
e. None of the above
CORRECT ANSWER
a. Holding the check for safe keeping and awaiting the client's return.
An agent must not negotiate, including by endorsement, any income tax refund check
issued to a client. An agent can, however, receive the check and hold it for safe keeping
until the client returns.
2
, Question 4
To avoid tax return preparer penalties for a return's understated tax liability due to an
intentional disregard of the regulations, which of the following actions must a tax preparer
take?
a. Audit the taxpayer's corresponding business operations.
b. Make reasonable inquiries if the taxpayer's information is incomplete.
c. Review the accuracy of the taxpayer's books and records.
d. Examine the taxpayer's supporting documents.
CORRECT ANSWER
b. Make reasonable inquiries if the taxpayer's information is incomplete.
Understatement penalties may be excused if there is reasonable cause and good faith
and if the taxpayer makes appropriate inquiries to determine the existence of facts
required by a Code section or regulation.
Question 5
All of the following are considered examples of disreputable conduct for which a CPA can
be disbarred or suspended except
a. Failure to timely pay personal income taxes.
b. Knowingly aiding and abetting another person to practice before the Internal Revenue
Service during a period of suspension or disbarment.
c. Directly or indirectly attempting to influence the official action of any employee of the
Internal Revenue Service by use of threats or false accusations or by bestowing any gift,
favor, or thing of value.
3
