INTRODUCTION TO TAX PRACTICE AND ETHICS EXAM
/ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS |
GRADED A+ | VERIFIED ANSWERS | LATEST VERSION
In a modern, industrial society, the tax system is derived from several disciplines.
Identify the disciplines that play this role in the United States. Explain how each of
them affects the U.S. tax system. - ANSWER✔✔-In the United States, the tax system is
an outgrowth of the following five disciplines: law, accounting, economics, political
science, and sociology. The environment for the tax system is provided by the principles
of economics, sociology, and political science, while the legal and accounting fields are
responsible for the system's interpretation and application.
Each of these disciplines affects this country's tax system in a unique way. Economists
address such issues as how proposed tax legislation will affect the rate of inflation or
economic growth. Measurement of the social equity of a tax and determining whether a
tax system discriminates against certain taxpayers are issues that are examined by
sociologists and political scientists. Finally, attorneys are responsible for the
interpretation of the taxation statutes, and accountants ensure that these same statutes
are applied consistently
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 1
,The elements of tax practice fall into what major categories in addition to tax research? -
ANSWER✔✔-The other major categories of tax practice in addition to tax research are
as follows:
· Tax compliance
· Tax planning
· Tax litigation
What is tax compliance as practiced in the United States? Give several examples of
activities that can be classified as tax compliance. - ANSWER✔✔-Tax compliance
consists of gathering pertinent information, evaluating and classifying that information,
and filing any necessary tax returns. Compliance also includes other functions
necessary to satisfy governmental requirements, such as representing a client during an
Internal Revenue Service (IRS) audit.
Several groups of individuals do most of the tax compliance work in the United States.
Identify these groups and briefly describe the kind of work that each group does. In this
regard, be sure to define the term enrolled agent. - ANSWER✔✔-Most of the tax
compliance work is performed by commercial tax preparers, enrolled agents (EAs),
attorneys, and certified public accountants (CPAs). Noncomplex individual,
partnership, and corporate tax returns often are completed by commercial tax
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 2
, preparers. The preparation of more complex returns usually is performed by EAs,
attorneys, and CPAs. The latter groups also provide tax planning services and represent
their clients before the IRS.
An EA is one who is admitted to practice before the IRS by passing a special IRS-
administered examination, or who has worked for the IRS for five years and is issued a
permit to represent clients before the IRS. CPAs and attorneys are not required to take
this examination and are automatically admitted to practice before the IRS if they are in
good standing with the appropriate professional licensing board.
What is tax planning? Explain the difference between tax evasion and tax avoidance
and the role of each in professional tax planning. - ANSWER✔✔-Tax planning is the
process of arranging one's financial affairs to minimize any tax liability. Much of
modern tax practice centers around this process, and the resulting outcome is tax
avoidance. There is nothing illegal or immoral in the avoidance of taxation as long as
the taxpayer remains within legal bounds. In contrast, tax evasion constitutes the illegal
nonpayment of a tax and cannot be condoned. Activities of this sort clearly violate
existing legal constraints and fall outside of the domain of the professional tax
practitioner.
Tax planning falls into two major categories: the "open" transaction and the "closed"
transaction. Discuss each type of transaction and describe how each affects tax
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 3
/ACTUAL EXAM QUESTIONS AND CORRECT ANSWERS |
GRADED A+ | VERIFIED ANSWERS | LATEST VERSION
In a modern, industrial society, the tax system is derived from several disciplines.
Identify the disciplines that play this role in the United States. Explain how each of
them affects the U.S. tax system. - ANSWER✔✔-In the United States, the tax system is
an outgrowth of the following five disciplines: law, accounting, economics, political
science, and sociology. The environment for the tax system is provided by the principles
of economics, sociology, and political science, while the legal and accounting fields are
responsible for the system's interpretation and application.
Each of these disciplines affects this country's tax system in a unique way. Economists
address such issues as how proposed tax legislation will affect the rate of inflation or
economic growth. Measurement of the social equity of a tax and determining whether a
tax system discriminates against certain taxpayers are issues that are examined by
sociologists and political scientists. Finally, attorneys are responsible for the
interpretation of the taxation statutes, and accountants ensure that these same statutes
are applied consistently
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 1
,The elements of tax practice fall into what major categories in addition to tax research? -
ANSWER✔✔-The other major categories of tax practice in addition to tax research are
as follows:
· Tax compliance
· Tax planning
· Tax litigation
What is tax compliance as practiced in the United States? Give several examples of
activities that can be classified as tax compliance. - ANSWER✔✔-Tax compliance
consists of gathering pertinent information, evaluating and classifying that information,
and filing any necessary tax returns. Compliance also includes other functions
necessary to satisfy governmental requirements, such as representing a client during an
Internal Revenue Service (IRS) audit.
Several groups of individuals do most of the tax compliance work in the United States.
Identify these groups and briefly describe the kind of work that each group does. In this
regard, be sure to define the term enrolled agent. - ANSWER✔✔-Most of the tax
compliance work is performed by commercial tax preparers, enrolled agents (EAs),
attorneys, and certified public accountants (CPAs). Noncomplex individual,
partnership, and corporate tax returns often are completed by commercial tax
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 2
, preparers. The preparation of more complex returns usually is performed by EAs,
attorneys, and CPAs. The latter groups also provide tax planning services and represent
their clients before the IRS.
An EA is one who is admitted to practice before the IRS by passing a special IRS-
administered examination, or who has worked for the IRS for five years and is issued a
permit to represent clients before the IRS. CPAs and attorneys are not required to take
this examination and are automatically admitted to practice before the IRS if they are in
good standing with the appropriate professional licensing board.
What is tax planning? Explain the difference between tax evasion and tax avoidance
and the role of each in professional tax planning. - ANSWER✔✔-Tax planning is the
process of arranging one's financial affairs to minimize any tax liability. Much of
modern tax practice centers around this process, and the resulting outcome is tax
avoidance. There is nothing illegal or immoral in the avoidance of taxation as long as
the taxpayer remains within legal bounds. In contrast, tax evasion constitutes the illegal
nonpayment of a tax and cannot be condoned. Activities of this sort clearly violate
existing legal constraints and fall outside of the domain of the professional tax
practitioner.
Tax planning falls into two major categories: the "open" transaction and the "closed"
transaction. Discuss each type of transaction and describe how each affects tax
COPYRIGHT © 2025 BY OLIVIA GREENWAYS, ALL RIGHTS RESERVED 3
