EA:Part 3 EX3 Questions and Correct
Answers Grade A+
1. The Annual Filing Season Program is _______
A. Mandatory program.
B. Voluntary program.
C. Volunteer program.
D. Charitable program. - Answer - ✔✔1. The answer is B. The Annual Filing Season
Program is a voluntary program. Return preparers who complete the requirements for
the Annual Filing Season Program will be issued a Record of Completion that they can
display and use to differentiate themselves in the marketplace if desired. The IRS
encourages non-credentialed tax return preparers to participate.
2. Geena is expecting a tax refund of $5,400 this year. She chooses to direct deposit
her refund. With regard to direct deposit, which of the following options is not permitted?
A. She may split the refund between two savings accounts.
B. She can purchase up to $5,000 in U.S. savings bonds. The remaining amount can be
sent to her as a paper check.
C. She can have her refund directly deposited to a foreign bank account.
D. She can have her refund deposited onto a prepaid debit card. - Answer - ✔✔2. The
answer is C. Geena cannot have her refund directly deposited into a foreign bank
account. Refunds can be deposited into a U.S. financial account or prepaid debit card.
Taxpayers can also choose to split their refund into separate bank accounts (but no
more than three).
3. Which of the following is NOT an acceptable method for a taxpayer to sign his
completed tax return?
A. Handwritten signature on a paper-filed return.
B. Self-select PIN.
C. Practitioner PIN.
D. Identity Protection (IP) PIN. - Answer - ✔✔3. The answer is D. The IP PIN is not
used in place of a taxpayer's signature. The IP PIN is a 6digit number assigned to
eligible taxpayers to help prevent the misuse of their Social Security number on
fraudulent federal income tax returns. The IP PIN helps the IRS verify a taxpayer's
identity and accept their electronic or paper tax return.
4. Married Filing Jointly means that the spouses
A. Report their own incomes and deductions on separate returns.
B. Combine their income and deductions on the same return.
C. Combine their income, but not their deductions, on the same return.
,D. Report their respective income as a qualified joint venture. - Answer - ✔✔4. The
answer is B. "Married Filing Jointly/' means that both spouses complete and sign the
same tax return, combining their income and deductions on a single return. Both
spouses are responsible for any tax owed on the return.
5. Harmony is a tax preparer. She has a new client that does not have a Social Security
card and is not eligible for a Social Security number. What type of documentation
should she request from the taxpayer in this case?
A. A driver's license.
B. An ITIN card or letter.
C. A passport.
D. None of these documents are acceptable. - Answer - ✔✔5. The answer is B. For
individuals without a valid SSN; a tax professional should explain that they must have a
taxpayer identification number. If the taxpayer has an existing IT IN, the tax professional
should request a copy of the ITIN card or letter. If a taxpayer does not have an ITIN but
needs to request one, an ITIN can be requested by filing Form W-7, Application for IRS
Individual Taxpayer Identification Number (ITIN), with the taxpayer's federal income tax
return.
6. On May 6, 2019, Niecy discovered an error on her 2016 tax return, which had been
filed on time on April 3, 2017. All tax payments were via wage withholding. She forgot to
claim an education credit, and correction of this error would result in a refund. She mails
an amended return on May 6, 2020. Is it too late for Brenda to claim a refund?
A. Yes, it is too late for her to receive a refund.
B. No, she can receive a refund.
C. She can receive a credit against future tax.
D. None of the answers are correct. - Answer - ✔✔6. The answer is A. It is too late for
Niecy to receive a refund. The postmark must be three years from the original due date
of the return. The IRS will disallow Niecy's amended return requesting a refund because
it was filed more than three years after the original due date of the return.
7. Louie is a tax preparer. His new client, Minerva, wants to claim the Earned Income
Tax Credit. Which of the following issues would automatically disqualify Minerva from
claiming the Earned Income Tax Credit for the 2019 tax year?
A. Investment income of $3,500.
B. Minerva files as Married Filing Separately.
C. Minerva files her tax return on paper.
D. Minerva is single and does not have a qualifying child. - Answer - ✔✔7. The answer
is B. A taxpayer filing MFS (Married Filing Separately) cannot claim the Earned Income
Tax Credit. Answer "A" is incorrect because taxpayers whose investment income is
more than $3,600 in 2019 cannot claim the ElTC (not $3,500, as the question states).
Taxpayers who file MFS cannot claim the credit. Answer "C" is incorrect because filing a
tax return on paper does not have any bearing on a taxpayers eligibility for EITC.
,Answer "D" is incorrect because some taxpayers may be able to get the ElTC if they do
not have a qualifying child but meet the income requirements for their filing status.
8. In order to determine if a taxpayer has a filing requirement, what information is
required?
A. The taxpayer's income, filing status, and age.
B. The taxpayer's income, filing status, and place of birth.
C. The taxpayer's filing status and age.
D. The taxpayer's income and age. - Answer - ✔✔8. The answer is A. To determine
whether a taxpayer has a filing requirement, a preparer needs to know the taxpayer's
income, filing status, and age.
9. Some refund claims include extra due diligence requirements for tax preparers.
Which of the following credits or tax situations do not require additional due diligence
requirements?
A. Premium Tax Credit.
B. American Opportunity Tax Credit.
C. Additional Child Tax Credit.
D. Head of Household filing status. - Answer - ✔✔9. A. A tax preparer has four due
diligence requirements related to EITC, AOTC, and ACTC claims. The Tax Cuts and
Jobs Act amended IRC section 6695 to add due diligence requirements for the head of
household (HOH) filing. A preparer must complete and submit to the IRS Form 8867,
Paid Preparer's Due Diligence Checklist. Only the Premium Tax Credit does not have
these "additional" due diligence requirements, although a tax preparer must always use
reasonable care when preparing a tax return.
10. All of the following are types of relief from "joint and several liability" except:
A. Separation of liability relief.
B. Equitable relief.
C. Equivalent relief.
D. Innocent spouse relief. - Answer - ✔✔10. The answer is C. "Equivalent" relief does
not exist. There are three types of relief from joint and several liability: (1) innocent
spouse relief, (2) separation of liability relief, and (3) equitable relief. This is not the
same as an "injured spouse" claim. An "injured spouse" claim is for allocation of a
refund of a joint refund when the other spouse has a separate past-due federal tax,
state tax, child or spousal support, or federal non-tax debt (such as a student loan).
11. Andrew's total tax for 2019 is $1,600. He had $400 in withholding on his Form W-2.
Andrew owes $1,200 when he files his return. His prior year's tax was $2,000. Will
Andrew be charged an estimated tax penalty?
A. Yes. He will owe a penalty.
B. No. He will not owe a penalty.
, C. Not enough information to make a determination.
D. He will not be charged a penalty as long as he pays all the tax owed when he files
his return. - Answer - ✔✔11. The answer is A. Andrew will probably be charged an
estimated tax penalty because the amount he owes is over $1,000 and his withholding
and credits are less than 90% of his current year tax or 100% of his prior year tax.
12. Leonard was referred to the Office of Professional Responsibility for possible
preparer misconduct. What type of sanction will not be imposed by the OPR?
A. Disbarment.
B. Suspension.
C. Incarceration.
D. Censure. - Answer - ✔✔12. The answer is C. OPR sanctions include disbarment,
suspension, and censure. Although a tax preparer may be subject to criminal
prosecution and even incarceration in some cases, the Office of Professional
Responsibility would not be responsible for applying any criminal penalties.
13. Which IRS office administers the preparer tax identification number (PTIN)
program?
A. The examination division.
B. The Office of Professional Responsibility.
C. The Taxpayer Advocate's Office.
D. The Return Preparer Office. - Answer - ✔✔13. The answer is D. The Return Preparer
Office (RPO) administers the preparer tax identification number (PTIN) program;
continuing education requirements; the Annual Filing Season Program; and the
enrollment of Enrolled Agents.
14. A tax professional is required to determine a taxpayer's correct filing status. A
taxpayer's filing status generally depends on whether the taxpayer is single or married.
Whether a taxpayer is single or married is typically determined by
A. The taxpayer's marital status at the beginning of the tax year.
B. The taxpayer's marital status at the end of the tax year.
C. The taxpayer's marital status in the middle of the year.
D. The taxpayer's marital status as determined by the courts. - Answer - ✔✔14. The
answer is B. A taxpayer's filing status generally depends on whether the taxpayer is
single or married at the end of the year.
15. Which of the following is an offense that could lead to practitioner sanctions by the
OPR, according to Circular 230?
A. "Gross neglect€'.
B. "Gross recklessness".
C. "Gross incompetence".
Answers Grade A+
1. The Annual Filing Season Program is _______
A. Mandatory program.
B. Voluntary program.
C. Volunteer program.
D. Charitable program. - Answer - ✔✔1. The answer is B. The Annual Filing Season
Program is a voluntary program. Return preparers who complete the requirements for
the Annual Filing Season Program will be issued a Record of Completion that they can
display and use to differentiate themselves in the marketplace if desired. The IRS
encourages non-credentialed tax return preparers to participate.
2. Geena is expecting a tax refund of $5,400 this year. She chooses to direct deposit
her refund. With regard to direct deposit, which of the following options is not permitted?
A. She may split the refund between two savings accounts.
B. She can purchase up to $5,000 in U.S. savings bonds. The remaining amount can be
sent to her as a paper check.
C. She can have her refund directly deposited to a foreign bank account.
D. She can have her refund deposited onto a prepaid debit card. - Answer - ✔✔2. The
answer is C. Geena cannot have her refund directly deposited into a foreign bank
account. Refunds can be deposited into a U.S. financial account or prepaid debit card.
Taxpayers can also choose to split their refund into separate bank accounts (but no
more than three).
3. Which of the following is NOT an acceptable method for a taxpayer to sign his
completed tax return?
A. Handwritten signature on a paper-filed return.
B. Self-select PIN.
C. Practitioner PIN.
D. Identity Protection (IP) PIN. - Answer - ✔✔3. The answer is D. The IP PIN is not
used in place of a taxpayer's signature. The IP PIN is a 6digit number assigned to
eligible taxpayers to help prevent the misuse of their Social Security number on
fraudulent federal income tax returns. The IP PIN helps the IRS verify a taxpayer's
identity and accept their electronic or paper tax return.
4. Married Filing Jointly means that the spouses
A. Report their own incomes and deductions on separate returns.
B. Combine their income and deductions on the same return.
C. Combine their income, but not their deductions, on the same return.
,D. Report their respective income as a qualified joint venture. - Answer - ✔✔4. The
answer is B. "Married Filing Jointly/' means that both spouses complete and sign the
same tax return, combining their income and deductions on a single return. Both
spouses are responsible for any tax owed on the return.
5. Harmony is a tax preparer. She has a new client that does not have a Social Security
card and is not eligible for a Social Security number. What type of documentation
should she request from the taxpayer in this case?
A. A driver's license.
B. An ITIN card or letter.
C. A passport.
D. None of these documents are acceptable. - Answer - ✔✔5. The answer is B. For
individuals without a valid SSN; a tax professional should explain that they must have a
taxpayer identification number. If the taxpayer has an existing IT IN, the tax professional
should request a copy of the ITIN card or letter. If a taxpayer does not have an ITIN but
needs to request one, an ITIN can be requested by filing Form W-7, Application for IRS
Individual Taxpayer Identification Number (ITIN), with the taxpayer's federal income tax
return.
6. On May 6, 2019, Niecy discovered an error on her 2016 tax return, which had been
filed on time on April 3, 2017. All tax payments were via wage withholding. She forgot to
claim an education credit, and correction of this error would result in a refund. She mails
an amended return on May 6, 2020. Is it too late for Brenda to claim a refund?
A. Yes, it is too late for her to receive a refund.
B. No, she can receive a refund.
C. She can receive a credit against future tax.
D. None of the answers are correct. - Answer - ✔✔6. The answer is A. It is too late for
Niecy to receive a refund. The postmark must be three years from the original due date
of the return. The IRS will disallow Niecy's amended return requesting a refund because
it was filed more than three years after the original due date of the return.
7. Louie is a tax preparer. His new client, Minerva, wants to claim the Earned Income
Tax Credit. Which of the following issues would automatically disqualify Minerva from
claiming the Earned Income Tax Credit for the 2019 tax year?
A. Investment income of $3,500.
B. Minerva files as Married Filing Separately.
C. Minerva files her tax return on paper.
D. Minerva is single and does not have a qualifying child. - Answer - ✔✔7. The answer
is B. A taxpayer filing MFS (Married Filing Separately) cannot claim the Earned Income
Tax Credit. Answer "A" is incorrect because taxpayers whose investment income is
more than $3,600 in 2019 cannot claim the ElTC (not $3,500, as the question states).
Taxpayers who file MFS cannot claim the credit. Answer "C" is incorrect because filing a
tax return on paper does not have any bearing on a taxpayers eligibility for EITC.
,Answer "D" is incorrect because some taxpayers may be able to get the ElTC if they do
not have a qualifying child but meet the income requirements for their filing status.
8. In order to determine if a taxpayer has a filing requirement, what information is
required?
A. The taxpayer's income, filing status, and age.
B. The taxpayer's income, filing status, and place of birth.
C. The taxpayer's filing status and age.
D. The taxpayer's income and age. - Answer - ✔✔8. The answer is A. To determine
whether a taxpayer has a filing requirement, a preparer needs to know the taxpayer's
income, filing status, and age.
9. Some refund claims include extra due diligence requirements for tax preparers.
Which of the following credits or tax situations do not require additional due diligence
requirements?
A. Premium Tax Credit.
B. American Opportunity Tax Credit.
C. Additional Child Tax Credit.
D. Head of Household filing status. - Answer - ✔✔9. A. A tax preparer has four due
diligence requirements related to EITC, AOTC, and ACTC claims. The Tax Cuts and
Jobs Act amended IRC section 6695 to add due diligence requirements for the head of
household (HOH) filing. A preparer must complete and submit to the IRS Form 8867,
Paid Preparer's Due Diligence Checklist. Only the Premium Tax Credit does not have
these "additional" due diligence requirements, although a tax preparer must always use
reasonable care when preparing a tax return.
10. All of the following are types of relief from "joint and several liability" except:
A. Separation of liability relief.
B. Equitable relief.
C. Equivalent relief.
D. Innocent spouse relief. - Answer - ✔✔10. The answer is C. "Equivalent" relief does
not exist. There are three types of relief from joint and several liability: (1) innocent
spouse relief, (2) separation of liability relief, and (3) equitable relief. This is not the
same as an "injured spouse" claim. An "injured spouse" claim is for allocation of a
refund of a joint refund when the other spouse has a separate past-due federal tax,
state tax, child or spousal support, or federal non-tax debt (such as a student loan).
11. Andrew's total tax for 2019 is $1,600. He had $400 in withholding on his Form W-2.
Andrew owes $1,200 when he files his return. His prior year's tax was $2,000. Will
Andrew be charged an estimated tax penalty?
A. Yes. He will owe a penalty.
B. No. He will not owe a penalty.
, C. Not enough information to make a determination.
D. He will not be charged a penalty as long as he pays all the tax owed when he files
his return. - Answer - ✔✔11. The answer is A. Andrew will probably be charged an
estimated tax penalty because the amount he owes is over $1,000 and his withholding
and credits are less than 90% of his current year tax or 100% of his prior year tax.
12. Leonard was referred to the Office of Professional Responsibility for possible
preparer misconduct. What type of sanction will not be imposed by the OPR?
A. Disbarment.
B. Suspension.
C. Incarceration.
D. Censure. - Answer - ✔✔12. The answer is C. OPR sanctions include disbarment,
suspension, and censure. Although a tax preparer may be subject to criminal
prosecution and even incarceration in some cases, the Office of Professional
Responsibility would not be responsible for applying any criminal penalties.
13. Which IRS office administers the preparer tax identification number (PTIN)
program?
A. The examination division.
B. The Office of Professional Responsibility.
C. The Taxpayer Advocate's Office.
D. The Return Preparer Office. - Answer - ✔✔13. The answer is D. The Return Preparer
Office (RPO) administers the preparer tax identification number (PTIN) program;
continuing education requirements; the Annual Filing Season Program; and the
enrollment of Enrolled Agents.
14. A tax professional is required to determine a taxpayer's correct filing status. A
taxpayer's filing status generally depends on whether the taxpayer is single or married.
Whether a taxpayer is single or married is typically determined by
A. The taxpayer's marital status at the beginning of the tax year.
B. The taxpayer's marital status at the end of the tax year.
C. The taxpayer's marital status in the middle of the year.
D. The taxpayer's marital status as determined by the courts. - Answer - ✔✔14. The
answer is B. A taxpayer's filing status generally depends on whether the taxpayer is
single or married at the end of the year.
15. Which of the following is an offense that could lead to practitioner sanctions by the
OPR, according to Circular 230?
A. "Gross neglect€'.
B. "Gross recklessness".
C. "Gross incompetence".
