1a - Ethics and Licensing Latest Exam
Questions With All Complete Answers.
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? - Answer Make
reasonable inquiries to determine if the taxpayer's information is incomplete.
What is the second-tier penalty if a tax preparer willfully or recklessly understated a taxpayer's liability? -
Answer The greater of $5,000 or 75% of the liability
What is the first-tier penalty if a tax preparer willfully or recklessly understated a taxpayer's liability? -
Answer the greater of $1,000 or 50% of income derived by the tax preparer for each tax return or claim
for refund that understates the taxpayer's liability due to unreasonable positions.
A practitioner may represent conflicting interests provided that each affected client waives the conflict
by: - Answer informed, written consent.
Generally, a practitioner cannot represent conflicting interests in practice before the IRS.
When preparing a client's Form 1040, U.S. Individual Income Tax Return, a CPA determined that there
was documentation supporting only $12,000 of the $20,000 travel expenses claimed by the client. Which
of the following courses of action taken by the CPA would be in compliance with Treasury Circular 230? -
Answer The CPA makes reasonable inquiries to obtain the needed documentation if the information as
furnished appears to be incorrect or incomplete.
A practitioner...generally may rely in good faith without verification upon information furnished by the
client. In this case the CPA knows of the difference and must inquire.
A tax preparer has advised a company to take a position on its tax return. The tax preparer believes that
there is a 75% probability the position will be sustained if audited by the IRS. If the position is not
sustained, an accuracy-related penalty and a late-payment penalty would apply. What is the tax
preparer's responsibility regarding disclosure of the penalty to the company? - Answer A practitioner
must inform a client of any and all penalties that might to apply to the client with respect to a position
taken on a tax return.
, While preparing a tax return for a new client and reviewing the client's prior-year return, a CPA noticed
an error made by the client's former tax preparer. According to Treasury Department Circular 230, which
of the following is the CPA specifically required to do in this case? - Answer Inform the client of the
error and advise of the consequences.
According to the ethical standards of the profession, which of the following acts is generally prohibited? -
Answer Retaining client records after an engagement is terminated prior to completion and the client
has demanded their return
According to the standards of the profession, which of the following statements is correct regarding the
action to be taken by a CPA who discovers an error in a client's previously filed tax return? - Answer
Advise the client of the error and recommend the measures to be taken.
Which of the following fee arrangements generally would not be permitted under the ethical standards
published in the Treasury Department Circular 230? - Answer A contingent fee for preparing a client's
income tax return
Charging a contingent fee is permitted for representing a client in a tax examination or in tax court.
Referral fees to obtain clients and commissions for compiling internal-use financial statements are
permitted.
A tax preparer filed a return for a taxpayer and used the taxpayer's detailed check register containing
both business and personal expenses. If the tax preparer knowingly included personal expenses as
deductible business expenses on the taxpayer's business, then the: - Answer tax preparer will be liable
for penalties arising from an understatement due to willful or reckless conduct.
Joe is the trustee of a trust set up for his father. Under the Internal Revenue Code, when Joe prepares
the annual trust tax return, IRS Form 1041, he: - Answer is not considered a tax return preparer.
An individual may represent a member of their immediate family before the IRS. Since Joe is the trustee
of a trust set up for his father, he is representing his father.
A CPA prepares a client's tax return containing business travel expenses, including the costs of operating
an automobile used for business, without inquiring about the existence of documentation for any of the
Questions With All Complete Answers.
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? - Answer Make
reasonable inquiries to determine if the taxpayer's information is incomplete.
What is the second-tier penalty if a tax preparer willfully or recklessly understated a taxpayer's liability? -
Answer The greater of $5,000 or 75% of the liability
What is the first-tier penalty if a tax preparer willfully or recklessly understated a taxpayer's liability? -
Answer the greater of $1,000 or 50% of income derived by the tax preparer for each tax return or claim
for refund that understates the taxpayer's liability due to unreasonable positions.
A practitioner may represent conflicting interests provided that each affected client waives the conflict
by: - Answer informed, written consent.
Generally, a practitioner cannot represent conflicting interests in practice before the IRS.
When preparing a client's Form 1040, U.S. Individual Income Tax Return, a CPA determined that there
was documentation supporting only $12,000 of the $20,000 travel expenses claimed by the client. Which
of the following courses of action taken by the CPA would be in compliance with Treasury Circular 230? -
Answer The CPA makes reasonable inquiries to obtain the needed documentation if the information as
furnished appears to be incorrect or incomplete.
A practitioner...generally may rely in good faith without verification upon information furnished by the
client. In this case the CPA knows of the difference and must inquire.
A tax preparer has advised a company to take a position on its tax return. The tax preparer believes that
there is a 75% probability the position will be sustained if audited by the IRS. If the position is not
sustained, an accuracy-related penalty and a late-payment penalty would apply. What is the tax
preparer's responsibility regarding disclosure of the penalty to the company? - Answer A practitioner
must inform a client of any and all penalties that might to apply to the client with respect to a position
taken on a tax return.
, While preparing a tax return for a new client and reviewing the client's prior-year return, a CPA noticed
an error made by the client's former tax preparer. According to Treasury Department Circular 230, which
of the following is the CPA specifically required to do in this case? - Answer Inform the client of the
error and advise of the consequences.
According to the ethical standards of the profession, which of the following acts is generally prohibited? -
Answer Retaining client records after an engagement is terminated prior to completion and the client
has demanded their return
According to the standards of the profession, which of the following statements is correct regarding the
action to be taken by a CPA who discovers an error in a client's previously filed tax return? - Answer
Advise the client of the error and recommend the measures to be taken.
Which of the following fee arrangements generally would not be permitted under the ethical standards
published in the Treasury Department Circular 230? - Answer A contingent fee for preparing a client's
income tax return
Charging a contingent fee is permitted for representing a client in a tax examination or in tax court.
Referral fees to obtain clients and commissions for compiling internal-use financial statements are
permitted.
A tax preparer filed a return for a taxpayer and used the taxpayer's detailed check register containing
both business and personal expenses. If the tax preparer knowingly included personal expenses as
deductible business expenses on the taxpayer's business, then the: - Answer tax preparer will be liable
for penalties arising from an understatement due to willful or reckless conduct.
Joe is the trustee of a trust set up for his father. Under the Internal Revenue Code, when Joe prepares
the annual trust tax return, IRS Form 1041, he: - Answer is not considered a tax return preparer.
An individual may represent a member of their immediate family before the IRS. Since Joe is the trustee
of a trust set up for his father, he is representing his father.
A CPA prepares a client's tax return containing business travel expenses, including the costs of operating
an automobile used for business, without inquiring about the existence of documentation for any of the
