Section 2 of SU 1 Exam Questions and
Answers
Which of the following is a tax return preparer according to the tax return preparer
rules? - Answer-Person A engages a number of persons to prepare tax returns on a
commission basis but does not himself prepare returns
Which of the following is NOT a tax return preparer? - Answer-Someone who
prepares a return or claim for refund for his or her employer
During an interview conducted by the tax return preparer, the client stated that he
had paid $1500 for deductible travel expenses and $3000 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? - Answer-The preparer is not
subject to a penalty because she is not required to examine or review the client's
books and records in order to verify the client's information
Circular 230, Sec. 10.34, discusses standards for advising clients with respect to tax
return positions and for preparing or signing returns. Which of the statements below
is true?
A. A practitioner may not sign a tax return as a preparer if the practitioner determines
that the tax return contains a frivolous position.
B. A practitioner advising a client to take a position on a tax return, or preparing or
signing a tax return as a preparer, must inform the client of the penalties reasonably
likely to apply to the client with respect to the position advised, prepared, or reported.
C. A practitioner advising a client to take a position on a tax return, or preparing or
signing a tax return as a preparer, generally may rely in good faith without
verification upon information furnished by the client. The practitioner may not,
however, ignore the implications of information furnished to, or actually known by,
the practiti - Answer-All of these answers are correct
Identify the item below that does NOT describe information a preparer must maintain
about every return prepared - Answer-The date the return or claim for refund was
prepared
By what date must a tax return preparer furnish a copy of the original return to a
taxpayer? - Answer-By the date the tax return is presented for the signature of the
tax payer
A tax return preparer must complete the paid preparer's area of the return if -
Answer-The individual was paid to prepare, assist in preparing, or review the tax
return
, Which of the following statements is true regarding records required to be
maintained by return preparers? - Answer-Tax return preparers are required to
maintain a complete copy of each return or claim for refund that have filed for 3
years after the return period, OR are required to maintain a list of the names,
identification numbers, and tax years for whom returns are prepared and to keep this
list for 3 years after the return period
A penalty may be assessed on any preparer or - Answer-Any person who prepares
and signs a tax return or claim for refund and the individual with overall supervisory
responsibility for the advice given by the firm with respect to the return or claim
A penalty may be assessed against an income tax return preparer who takes an
unreasonable position that causes an understatement of liability on a return. For
purposes of assessing the penalty, "understatement of liability" means - Answer-Any
understatement of the tax liability or overstatement of the amount to be refunded or
credited
In which of the following situations may the tax return preparer disclose the tax return
information requested without first obtaining the consent of the taxpayer/client?
A. The preparer receives a state grand jury subpoena requesting copies of federal
and state income tax returns.
B. An IRS agent, in his or her official capacity, visits the preparer and requests
copies of state and federal income tax returns, related returns, schedules, and
records of the taxpayer used in the preparation of the tax returns.
C. A partner in a partnership, who was not involved with the return preparation or
partnership records, requests a copy of the partnership return, including the
Schedule K-1s for all parters - Answer-All the answers are correct
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. 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
B. An employee of the tax return preparer makes corporate return information
available to shareholders.
C. 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 - Answer-
None of the answers are correct
Which of the following situations describes a disclosure of tax information by an
income tax preparer that would subject the preparer to a penalty? - Answer-Ron died
after furnishing tax return information to his tax return preparer. Ron's tax return
preparer disclosed the information to Jerry, Ron's nephew, who is NOT the fiduciary
of Ron's estate.
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 if the tax payer's information is
incomplete
Answers
Which of the following is a tax return preparer according to the tax return preparer
rules? - Answer-Person A engages a number of persons to prepare tax returns on a
commission basis but does not himself prepare returns
Which of the following is NOT a tax return preparer? - Answer-Someone who
prepares a return or claim for refund for his or her employer
During an interview conducted by the tax return preparer, the client stated that he
had paid $1500 for deductible travel expenses and $3000 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? - Answer-The preparer is not
subject to a penalty because she is not required to examine or review the client's
books and records in order to verify the client's information
Circular 230, Sec. 10.34, discusses standards for advising clients with respect to tax
return positions and for preparing or signing returns. Which of the statements below
is true?
A. A practitioner may not sign a tax return as a preparer if the practitioner determines
that the tax return contains a frivolous position.
B. A practitioner advising a client to take a position on a tax return, or preparing or
signing a tax return as a preparer, must inform the client of the penalties reasonably
likely to apply to the client with respect to the position advised, prepared, or reported.
C. A practitioner advising a client to take a position on a tax return, or preparing or
signing a tax return as a preparer, generally may rely in good faith without
verification upon information furnished by the client. The practitioner may not,
however, ignore the implications of information furnished to, or actually known by,
the practiti - Answer-All of these answers are correct
Identify the item below that does NOT describe information a preparer must maintain
about every return prepared - Answer-The date the return or claim for refund was
prepared
By what date must a tax return preparer furnish a copy of the original return to a
taxpayer? - Answer-By the date the tax return is presented for the signature of the
tax payer
A tax return preparer must complete the paid preparer's area of the return if -
Answer-The individual was paid to prepare, assist in preparing, or review the tax
return
, Which of the following statements is true regarding records required to be
maintained by return preparers? - Answer-Tax return preparers are required to
maintain a complete copy of each return or claim for refund that have filed for 3
years after the return period, OR are required to maintain a list of the names,
identification numbers, and tax years for whom returns are prepared and to keep this
list for 3 years after the return period
A penalty may be assessed on any preparer or - Answer-Any person who prepares
and signs a tax return or claim for refund and the individual with overall supervisory
responsibility for the advice given by the firm with respect to the return or claim
A penalty may be assessed against an income tax return preparer who takes an
unreasonable position that causes an understatement of liability on a return. For
purposes of assessing the penalty, "understatement of liability" means - Answer-Any
understatement of the tax liability or overstatement of the amount to be refunded or
credited
In which of the following situations may the tax return preparer disclose the tax return
information requested without first obtaining the consent of the taxpayer/client?
A. The preparer receives a state grand jury subpoena requesting copies of federal
and state income tax returns.
B. An IRS agent, in his or her official capacity, visits the preparer and requests
copies of state and federal income tax returns, related returns, schedules, and
records of the taxpayer used in the preparation of the tax returns.
C. A partner in a partnership, who was not involved with the return preparation or
partnership records, requests a copy of the partnership return, including the
Schedule K-1s for all parters - Answer-All the answers are correct
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. 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
B. An employee of the tax return preparer makes corporate return information
available to shareholders.
C. 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 - Answer-
None of the answers are correct
Which of the following situations describes a disclosure of tax information by an
income tax preparer that would subject the preparer to a penalty? - Answer-Ron died
after furnishing tax return information to his tax return preparer. Ron's tax return
preparer disclosed the information to Jerry, Ron's nephew, who is NOT the fiduciary
of Ron's estate.
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 if the tax payer's information is
incomplete
