Circular 230 Test

Circular 230 Test Which fees are a tax preparer NOT allowed to charge a client? - Contingent How long does a preparer have to hold onto a copy of their client's tax return? - 3 years Of the four types of sanctions on can receive from the IRS, which is most severe? - Disbarment Circular 230 was implemented after the ending of which war? - Civil War Explain how you would apply due diligence while researching to see if your client qualifies for the American Education Credit? - First, you must begin with general questions for your client like who is attending? Major? how long? etc. Then, research the qualifications using credible databases. Next, document sufficiency relevant primary sources along with client description and proof that the client meets those qualifications. You want to acquire and organize as much info as possible to show you are acting in good faith and performing your due diligence. 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 be coercion d. None of the above - None of the above List 5 things a paid tax preparer should not do - 1. willfully not sign a tax return you prepared 2. mislead an threaten clients 3. attempt to influence an employee of the IRS by bribes, false accusations or threats 4. assist a client to violate federal tax law 5. retain or withhold client records beyond the scope allowed by state law it is required for a paid tax preparer to have _______ before legally being able to prepare returns - valid PTIN Circular 230 is a regulation issued by what major section of the US government? - Treasury Dept. When preparing a client's tax return, they express to you some information that you deem to be suspicious and incomplete. You have done this client's return for the past 3 years but are worried that this might be an issue. What do you do as a CPA in this situation? - Practice due diligence and ask the appropriate questions so that you can complete the return correctly. Define and elaborate on two examples of frivolous positions a tax preparer can take - A frivolous position is a position that is knowingly in bad faith and patently improper. Two examples could be paying federal income tax is "voluntary" and refusing to pay taxes based upon "religious or personal beliefs". Such positions can lead to penalties such as up to $100,000 fine for taxpayer for individual returns and willful or reckless conduct: $5,000 minimum penalty for tax preparer. The AFTRC covers which main topic? a. New law/updates b. general review c. ethics and practices d. all of the above - all of the above Which of the following is not an example of a frivolous position? - Persons that receive gifts do not owe any tax on such gifts Which of the following is not a type of sanction that can be issued by the IRS? - criminal prosecution