CPA Reg 9
Jack, a return preparer, did not retain copies of all returns that he prepared but did keep a list
that reflected the taxpayer's name, identification number, tax year, and type of return for each
of his clients. Which of the following statements best describes this situation?
A. Jack is in compliance with the provisions of the tax code if he retains the list for a period of 1
year after the close of the return period in which the return was signed.
B. Jack is not in compliance with the tax code since he has not kept all the information required
by the Code.
C. Jack is not in compliance with the tax code since he must retain copies of all returns filed.
D. Jack is in compliance with the provisions of the tax code, provided he retains the list for a 3-
year period after the close of the return period in which the return was signed. ✔✔D
Which of the following situations describes a disclosure of tax return information by a tax
return preparer that would subject the preparer to a penalty?
A. After a client files for bankruptcy, the tax return preparer provides a copy of the last return
filed to the court-appointed fiduciary without written permission.
B. None of the answers are correct.
C. A grandfather's tax information is made available to his granddaughter to inform her that
she will be claimed as a dependent on the grandfather's return.
D. An employee of the tax return preparer makes corporate return information available to
shareholders. ✔✔B
Which of the following is a tax return preparer according to the tax return preparer rules?
A. Mr. A engages a number of persons to prepare tax returns on a commission basis but does
not himself prepare returns.
B. Mr. C is a fiduciary and files returns for the trust.
C. Mr. D, an attorney, regularly advises clients in arranging future business transactions to
minimize income tax.
D. Mr. B, controller of Corporation X, prepares and files X's corporate tax return. ✔✔A
Identify the item below that is accurate regarding preparer retention of records.
A. 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.
, B. 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 commissioner.
C. 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.
D. All of the answers are correct. ✔✔D
Morgan, a sole practitioner CPA, prepares individual and corporate income tax returns. What
documentation is Morgan required to retain concerning each return prepared?
A. An unrelated party compliance statement.
B. A power of attorney.
C. Workpapers associated with the preparation of each tax return.
D. Taxpayer's name and identification number or a copy of the tax return. ✔✔D
During an interview conducted by the tax return preparer, the client stated that he had paid
$1,500 for deductible travel expenses and $3,000 for charitable contributions. The preparer
asked if documentation existed in support of the deductions and was assured by the client that
adequate documentation did exist. When the client's return was later examined by the IRS, a
tax deficiency resulted due to the client's lack of supporting documentation for the travel
expenses. Which of the following statements best describes this situation?
A. The preparer is subject to a penalty under Sec. 6694 because she did not verify that her
client had supporting documentation.
B. The preparer is not subject to a penalty under Sec. 6694 because the understatement was
not substantial.
C. The preparer is subject to a penalty under Sec. 6694 because she did not verify the existence
of the documentation and a tax deficiency resulte ✔✔D
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, Form 1041, he
A. Is not considered a tax return preparer.
B. Is considered a tax return preparer because his father is the grantor of the trust.
C. May not sign the return unless he receives additional compensation for the tax return.
D. Must obtain the written permission of the beneficiary prior to signing as a tax return
preparer ✔✔A
Tax return preparers can be subject to penalties under the Internal Revenue Code for failure to
do any of the following, except
Jack, a return preparer, did not retain copies of all returns that he prepared but did keep a list
that reflected the taxpayer's name, identification number, tax year, and type of return for each
of his clients. Which of the following statements best describes this situation?
A. Jack is in compliance with the provisions of the tax code if he retains the list for a period of 1
year after the close of the return period in which the return was signed.
B. Jack is not in compliance with the tax code since he has not kept all the information required
by the Code.
C. Jack is not in compliance with the tax code since he must retain copies of all returns filed.
D. Jack is in compliance with the provisions of the tax code, provided he retains the list for a 3-
year period after the close of the return period in which the return was signed. ✔✔D
Which of the following situations describes a disclosure of tax return information by a tax
return preparer that would subject the preparer to a penalty?
A. After a client files for bankruptcy, the tax return preparer provides a copy of the last return
filed to the court-appointed fiduciary without written permission.
B. None of the answers are correct.
C. A grandfather's tax information is made available to his granddaughter to inform her that
she will be claimed as a dependent on the grandfather's return.
D. An employee of the tax return preparer makes corporate return information available to
shareholders. ✔✔B
Which of the following is a tax return preparer according to the tax return preparer rules?
A. Mr. A engages a number of persons to prepare tax returns on a commission basis but does
not himself prepare returns.
B. Mr. C is a fiduciary and files returns for the trust.
C. Mr. D, an attorney, regularly advises clients in arranging future business transactions to
minimize income tax.
D. Mr. B, controller of Corporation X, prepares and files X's corporate tax return. ✔✔A
Identify the item below that is accurate regarding preparer retention of records.
A. 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.
, B. 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 commissioner.
C. 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.
D. All of the answers are correct. ✔✔D
Morgan, a sole practitioner CPA, prepares individual and corporate income tax returns. What
documentation is Morgan required to retain concerning each return prepared?
A. An unrelated party compliance statement.
B. A power of attorney.
C. Workpapers associated with the preparation of each tax return.
D. Taxpayer's name and identification number or a copy of the tax return. ✔✔D
During an interview conducted by the tax return preparer, the client stated that he had paid
$1,500 for deductible travel expenses and $3,000 for charitable contributions. The preparer
asked if documentation existed in support of the deductions and was assured by the client that
adequate documentation did exist. When the client's return was later examined by the IRS, a
tax deficiency resulted due to the client's lack of supporting documentation for the travel
expenses. Which of the following statements best describes this situation?
A. The preparer is subject to a penalty under Sec. 6694 because she did not verify that her
client had supporting documentation.
B. The preparer is not subject to a penalty under Sec. 6694 because the understatement was
not substantial.
C. The preparer is subject to a penalty under Sec. 6694 because she did not verify the existence
of the documentation and a tax deficiency resulte ✔✔D
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, Form 1041, he
A. Is not considered a tax return preparer.
B. Is considered a tax return preparer because his father is the grantor of the trust.
C. May not sign the return unless he receives additional compensation for the tax return.
D. Must obtain the written permission of the beneficiary prior to signing as a tax return
preparer ✔✔A
Tax return preparers can be subject to penalties under the Internal Revenue Code for failure to
do any of the following, except
