EA - Part 3 - Preparing Returns Exam
And Answers
Recording keeping tax returns for clients - Answer - ✔✔Under IRC 6695(d), a preparer
must:
- Retain a completed copy of the return or claim for refund, or alternatively retain a
record (by list, card file, electronically, or otherwise) of all the taxpayers, their taxpayer
identification numbers, the taxable years, and the type of returns or claims for refund
prepared.
- Retain a record (by copy of the return/claim for refund or by a list, card file,
electronically, or otherwise) of the name of the preparer required to sign the return or
claim for refund under IRC 6695(b) for each return or claim for refund presented to the
taxpayer.
- Make such copy or list available for inspection upon request by the IRS for a three
year period following the close of the return period.There is no requirement to maintain
software used in preparing returns.
An e-file provider - Answer - ✔✔An e-file provider is not a tax return preparer for the
purpose of assessing most preparer penalties as long as his services are limited to
typing, reproduction or other mechanical assistance in the preparation of a return or
claim for refund.
If an ERO, Intermediate Service Provider, Transmitter or the product of a Software
Developer alters the return information in a non-substantive way, this alteration is
considered to come under the mechanical assistance exception described in 301.7701-
15(c).
A non-substantive change is a correction or change limited to a transposition error,
misplaced entry, spelling error, or arithmetic correction.
What is a paid tax preparer not required to do on a tax return she prepared?
Sign the return.
Include her PTIN.
Include the tax preparation company's EIN.
, Include the location where the return was prepared. - Answer - ✔✔A tax preparer is
required to include her firm's name and address or her own business address if she is
self-employed but she is not required to provide the location where the return was
prepared.
Jane has not provided all the information necessary for her tax preparer, Bob, to
complete Jane's tax return. Bob is in a hurry, so he asks Jane to sign the partial return
as it is today. Bob assures Jane that he will complete and file the return when the rest of
the information is faxed to him. Jane faxes the information a few days later. Bob then
completes the return, files it with the IRS and faxes a copy of the completed return to
Jane. Has Bob violated his requirement to provide a copy of the return to Jane?
Yes, because a copy must be given to the taxpayer when it is presented to the taxpayer
for signature.
Yes, because a faxed copy is not acceptable.
Yes, because a fax is not secure.
No. - Answer - ✔✔The tax preparer must furnish a completed copy of the return or claim
for refund to the taxpayer no later than the time it is presented for the taxpayer's
signature. Bob did not provide the completed copy to Jane until after she had signed it.
Under IRC Section 6695(a), Bob may be fined $50 for this and similar violations, up to a
maximum of $25,500/year.
Identify the item below that is not accurate regarding preparer retention of records:
The preparer must retain a completed copy of each return or claim for refund prepared
or retain a record, by list, card file, or otherwise of information, as required by regulation,
about each return prepared.
The preparer must retain information about the preparer of each return presented to a
taxpayer for signature. This information may be retained via retention of a copy of the
return or claim for refund, maintenance of a list or card file, or otherwise.
The preparer must make the copy or record of returns and claims for refund and record
of the individuals required to sign available for inspection upon request by the district
director.
None of the above. - Answer - ✔✔All three of the listed rules apply. The preparer must
make the copy or record of returns AND claims for refund AND record of the individuals
required to sign available for inspection upon request by the district director.
And Answers
Recording keeping tax returns for clients - Answer - ✔✔Under IRC 6695(d), a preparer
must:
- Retain a completed copy of the return or claim for refund, or alternatively retain a
record (by list, card file, electronically, or otherwise) of all the taxpayers, their taxpayer
identification numbers, the taxable years, and the type of returns or claims for refund
prepared.
- Retain a record (by copy of the return/claim for refund or by a list, card file,
electronically, or otherwise) of the name of the preparer required to sign the return or
claim for refund under IRC 6695(b) for each return or claim for refund presented to the
taxpayer.
- Make such copy or list available for inspection upon request by the IRS for a three
year period following the close of the return period.There is no requirement to maintain
software used in preparing returns.
An e-file provider - Answer - ✔✔An e-file provider is not a tax return preparer for the
purpose of assessing most preparer penalties as long as his services are limited to
typing, reproduction or other mechanical assistance in the preparation of a return or
claim for refund.
If an ERO, Intermediate Service Provider, Transmitter or the product of a Software
Developer alters the return information in a non-substantive way, this alteration is
considered to come under the mechanical assistance exception described in 301.7701-
15(c).
A non-substantive change is a correction or change limited to a transposition error,
misplaced entry, spelling error, or arithmetic correction.
What is a paid tax preparer not required to do on a tax return she prepared?
Sign the return.
Include her PTIN.
Include the tax preparation company's EIN.
, Include the location where the return was prepared. - Answer - ✔✔A tax preparer is
required to include her firm's name and address or her own business address if she is
self-employed but she is not required to provide the location where the return was
prepared.
Jane has not provided all the information necessary for her tax preparer, Bob, to
complete Jane's tax return. Bob is in a hurry, so he asks Jane to sign the partial return
as it is today. Bob assures Jane that he will complete and file the return when the rest of
the information is faxed to him. Jane faxes the information a few days later. Bob then
completes the return, files it with the IRS and faxes a copy of the completed return to
Jane. Has Bob violated his requirement to provide a copy of the return to Jane?
Yes, because a copy must be given to the taxpayer when it is presented to the taxpayer
for signature.
Yes, because a faxed copy is not acceptable.
Yes, because a fax is not secure.
No. - Answer - ✔✔The tax preparer must furnish a completed copy of the return or claim
for refund to the taxpayer no later than the time it is presented for the taxpayer's
signature. Bob did not provide the completed copy to Jane until after she had signed it.
Under IRC Section 6695(a), Bob may be fined $50 for this and similar violations, up to a
maximum of $25,500/year.
Identify the item below that is not accurate regarding preparer retention of records:
The preparer must retain a completed copy of each return or claim for refund prepared
or retain a record, by list, card file, or otherwise of information, as required by regulation,
about each return prepared.
The preparer must retain information about the preparer of each return presented to a
taxpayer for signature. This information may be retained via retention of a copy of the
return or claim for refund, maintenance of a list or card file, or otherwise.
The preparer must make the copy or record of returns and claims for refund and record
of the individuals required to sign available for inspection upon request by the district
director.
None of the above. - Answer - ✔✔All three of the listed rules apply. The preparer must
make the copy or record of returns AND claims for refund AND record of the individuals
required to sign available for inspection upon request by the district director.
