New York Certified Public Accountant
(CPA) Regulation (REG) Questions
And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
Instant Download Pdf
1.
A tax practitioner is subject to Treasury Circular 230 when representing
taxpayers before which federal agency?
A. Securities and Exchange Commission
B. Internal Revenue Service
C. Department of Labor
D. Federal Trade Commission
Answer: B. Internal Revenue Service
Rationale: Treasury Circular 230 governs practice before the Internal
Revenue Service and establishes standards for eligible practitioners,
including CPAs, attorneys, enrolled agents, and other authorized
representatives.
2.
Under Circular 230, a practitioner generally may not knowingly assist a
client in which activity?
A. Filing an amended return
B. Requesting an extension
,C. Presenting a frivolous tax position
D. Requesting an IRS transcript
Answer: C. Presenting a frivolous tax position
Rationale: A practitioner must not knowingly take or assist in taking a
position that is frivolous or lacks the required reasonable basis and
appropriate support.
3.
A CPA discovers that a client previously submitted a tax return
containing a material error. What is generally the CPA's appropriate
response?
A. Ignore the error because the return was already filed
B. Advise the client promptly of the error and its consequences
C. Automatically notify the IRS without informing the client
D. Destroy the workpapers relating to the return
Answer: B. Advise the client promptly of the error and its
consequences
Rationale: Professional responsibilities generally require the
practitioner to advise the client promptly of an error or noncompliance
and explain the potential consequences. The practitioner should not
conceal the error.
4.
Which source generally has the highest authority in federal tax matters?
A. Treasury regulation
B. IRS revenue procedure
C. Internal Revenue Code
D. IRS private letter ruling
,Answer: C. Internal Revenue Code
Rationale: The Internal Revenue Code is enacted by Congress and
generally occupies a higher position in the federal tax authority
hierarchy than administrative guidance such as regulations, revenue
procedures, and private letter rulings.
5.
A taxpayer wants to challenge an IRS deficiency. Which court generally
allows a taxpayer to litigate the deficiency before paying it?
A. U.S. Tax Court
B. U.S. District Court
C. Court of Federal Claims
D. Supreme Court
Answer: A. U.S. Tax Court
Rationale: The U.S. Tax Court generally provides a prepayment forum
for taxpayers contesting federal income tax deficiencies. District courts
and the Court of Federal Claims generally require payment before
suit.
6.
A taxpayer receives a statutory notice of deficiency. The taxpayer
generally has what period to petition the Tax Court?
A. 10 days
B. 30 days
C. 90 days
D. 180 days
Answer: C. 90 days
, Rationale: A taxpayer generally has 90 days from the mailing of a
notice of deficiency to petition the Tax Court, subject to special rules
such as certain notices involving taxpayers outside the United States.
7.
Which federal tax court generally hears cases involving federal tax
disputes but does not use juries?
A. U.S. Tax Court
B. U.S. District Court
C. State superior court
D. Bankruptcy court exclusively
Answer: A. U.S. Tax Court
Rationale: The U.S. Tax Court is a specialized federal court for federal
tax disputes and generally decides cases without juries.
8.
A taxpayer deliberately understates taxable income on a return with the
intent to evade tax. Which type of conduct is most likely involved?
A. Mathematical error
B. Negligence
C. Fraud
D. Reasonable cause
Answer: C. Fraud
Rationale: Fraud involves intentional wrongdoing designed to evade
tax or deceive the taxing authority. It is more serious than negligence
or an inadvertent computational error.
9.
(CPA) Regulation (REG) Questions
And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
Instant Download Pdf
1.
A tax practitioner is subject to Treasury Circular 230 when representing
taxpayers before which federal agency?
A. Securities and Exchange Commission
B. Internal Revenue Service
C. Department of Labor
D. Federal Trade Commission
Answer: B. Internal Revenue Service
Rationale: Treasury Circular 230 governs practice before the Internal
Revenue Service and establishes standards for eligible practitioners,
including CPAs, attorneys, enrolled agents, and other authorized
representatives.
2.
Under Circular 230, a practitioner generally may not knowingly assist a
client in which activity?
A. Filing an amended return
B. Requesting an extension
,C. Presenting a frivolous tax position
D. Requesting an IRS transcript
Answer: C. Presenting a frivolous tax position
Rationale: A practitioner must not knowingly take or assist in taking a
position that is frivolous or lacks the required reasonable basis and
appropriate support.
3.
A CPA discovers that a client previously submitted a tax return
containing a material error. What is generally the CPA's appropriate
response?
A. Ignore the error because the return was already filed
B. Advise the client promptly of the error and its consequences
C. Automatically notify the IRS without informing the client
D. Destroy the workpapers relating to the return
Answer: B. Advise the client promptly of the error and its
consequences
Rationale: Professional responsibilities generally require the
practitioner to advise the client promptly of an error or noncompliance
and explain the potential consequences. The practitioner should not
conceal the error.
4.
Which source generally has the highest authority in federal tax matters?
A. Treasury regulation
B. IRS revenue procedure
C. Internal Revenue Code
D. IRS private letter ruling
,Answer: C. Internal Revenue Code
Rationale: The Internal Revenue Code is enacted by Congress and
generally occupies a higher position in the federal tax authority
hierarchy than administrative guidance such as regulations, revenue
procedures, and private letter rulings.
5.
A taxpayer wants to challenge an IRS deficiency. Which court generally
allows a taxpayer to litigate the deficiency before paying it?
A. U.S. Tax Court
B. U.S. District Court
C. Court of Federal Claims
D. Supreme Court
Answer: A. U.S. Tax Court
Rationale: The U.S. Tax Court generally provides a prepayment forum
for taxpayers contesting federal income tax deficiencies. District courts
and the Court of Federal Claims generally require payment before
suit.
6.
A taxpayer receives a statutory notice of deficiency. The taxpayer
generally has what period to petition the Tax Court?
A. 10 days
B. 30 days
C. 90 days
D. 180 days
Answer: C. 90 days
, Rationale: A taxpayer generally has 90 days from the mailing of a
notice of deficiency to petition the Tax Court, subject to special rules
such as certain notices involving taxpayers outside the United States.
7.
Which federal tax court generally hears cases involving federal tax
disputes but does not use juries?
A. U.S. Tax Court
B. U.S. District Court
C. State superior court
D. Bankruptcy court exclusively
Answer: A. U.S. Tax Court
Rationale: The U.S. Tax Court is a specialized federal court for federal
tax disputes and generally decides cases without juries.
8.
A taxpayer deliberately understates taxable income on a return with the
intent to evade tax. Which type of conduct is most likely involved?
A. Mathematical error
B. Negligence
C. Fraud
D. Reasonable cause
Answer: C. Fraud
Rationale: Fraud involves intentional wrongdoing designed to evade
tax or deceive the taxing authority. It is more serious than negligence
or an inadvertent computational error.
9.
