Study Unit 1-Ethics and Professional
Responsibilities (TB PART 2) Exam
Q&A
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? - Answer-The preparer is not
subject to a penalty under Sec. 6694 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, §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? - Answer-All of the answers are correct.
Jane is a Certified Public Accountant who specializes in preparing federal tax
returns. Which of the following returns would not qualify Jane as a tax return
preparer? - Answer-None of the answers are correct.
When must a tax return preparer provide a copy of a tax return to a taxpayer? -
Answer-Not later than the time the original return is presented to the taxpayer for
signature.
Sam, a CPA, is representing Fred before the Examination Division of the Internal
Revenue Service. The Internal Revenue Service is questioning Fred on his Schedule
C gross income that is listed on the 2014 tax return. While reviewing the
documentation Fred provided, Sam discovers income that was omitted from the tax
return. What is the appropriate action for Sam to take? - Answer-Sam must advise
Fred promptly of the omission and the consequences provided by the Internal
Revenue Code and regulations for such omission.
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.
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? - Answer-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.
, Which of the following is false regarding the filing of information returns concerning
employees who prepare tax returns? - Answer-Information returns of income tax
return preparers must be maintained by the preparer for 2 years.
With regard to the reporting requirements for tax return preparers under the Internal
Revenue Code, which of the following statements is false? - Answer-The provisions
of the Internal Revenue Code only apply to preparers who employ five or more tax
preparers.
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
taxpayer.
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 they 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.
Identify the item below that is accurate regarding preparer retention of records. -
Answer-All of the answers are correct.
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.
Which of the following persons would be subject to the penalty for improperly
negotiating a taxpayer's refund check? - Answer-A tax return preparer who operates
a check cashing agency that cashes, endorses, or negotiates tax refund checks for
returns he prepared.
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.
Which of the following acts by a CPA will not result in a CPA's incurring an IRS
penalty? - Answer-Understating a client's tax liability as a result of an error in
calculation.
A CPA who prepares clients' federal income tax returns for a fee must - Answer-
Keep a completed copy of each return for a specified period of time or keep a
summarized list of specified return information.
Responsibilities (TB PART 2) Exam
Q&A
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? - Answer-The preparer is not
subject to a penalty under Sec. 6694 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, §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? - Answer-All of the answers are correct.
Jane is a Certified Public Accountant who specializes in preparing federal tax
returns. Which of the following returns would not qualify Jane as a tax return
preparer? - Answer-None of the answers are correct.
When must a tax return preparer provide a copy of a tax return to a taxpayer? -
Answer-Not later than the time the original return is presented to the taxpayer for
signature.
Sam, a CPA, is representing Fred before the Examination Division of the Internal
Revenue Service. The Internal Revenue Service is questioning Fred on his Schedule
C gross income that is listed on the 2014 tax return. While reviewing the
documentation Fred provided, Sam discovers income that was omitted from the tax
return. What is the appropriate action for Sam to take? - Answer-Sam must advise
Fred promptly of the omission and the consequences provided by the Internal
Revenue Code and regulations for such omission.
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.
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? - Answer-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.
, Which of the following is false regarding the filing of information returns concerning
employees who prepare tax returns? - Answer-Information returns of income tax
return preparers must be maintained by the preparer for 2 years.
With regard to the reporting requirements for tax return preparers under the Internal
Revenue Code, which of the following statements is false? - Answer-The provisions
of the Internal Revenue Code only apply to preparers who employ five or more tax
preparers.
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
taxpayer.
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 they 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.
Identify the item below that is accurate regarding preparer retention of records. -
Answer-All of the answers are correct.
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.
Which of the following persons would be subject to the penalty for improperly
negotiating a taxpayer's refund check? - Answer-A tax return preparer who operates
a check cashing agency that cashes, endorses, or negotiates tax refund checks for
returns he prepared.
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.
Which of the following acts by a CPA will not result in a CPA's incurring an IRS
penalty? - Answer-Understating a client's tax liability as a result of an error in
calculation.
A CPA who prepares clients' federal income tax returns for a fee must - Answer-
Keep a completed copy of each return for a specified period of time or keep a
summarized list of specified return information.
