Week 13 Tax Return Preparer Exam
Questions and Answers
"With regard to the reporting requirements for tax return preparers under Sec. 6060,
which of the following statements is false?" - Answer-Answer: The provisions in this
section only apply to preparers who employ five or more tax preparers.
These statements are true:
-"For purposes of this section, a sole proprietor shall retain and make available a
record with respect to himself or herself."
-"For purposes of this section, a partnership is treated as the employer of the
partners and shall retain and make available a record with respect to the partners
and other tax return preparers employed or engaged by the partnership."
-"For purposes of this section, the term return period means the 12-month period
beginning on July 1 of each year."
What is the amount of the penalty imposed on a return preparer for negotiating a
taxpayers refund check? - Answer-$500.00
"For the current year, Mr. Dixon, a tax preparer, prepared for compensation an
income tax return for Mr. Hatfield. Mr. Hatfield purchased furniture in the current year
that required depreciation using the MACRS method. Mr. Dixon explained to Mr.
Hatfield that the furniture should be depreciated using a certain class life. However,
Mr. Hatfield insisted that a different class life be used for the depreciation calculation.
At Mr. Hatfield s insistence, Mr. Dixon relented and used that class life. This position
was not disclosed on the tax return, and it resulted in an understatement of tax.
Since Mr. Dixon used the incorrect class life due to Mr. Hatfield s insistence, what is
the amount of the return preparer penalty that may be imposed on Mr. Dixon?" -
Answer-"$5,000 or 50% of fee, whichever is greater."
"The IRS has begun an examination of Mark's 2012 income tax return. The IRS
would like to ask Mark's neighbors questions with respect to that examination. There
is no pending criminal investigation into the matter, and there is no evidence that
such contact will result in reprisals against the neighbors or jeopardize collection of
the tax liability. Before the IRS contacts the neighbors, the IRS must" - Answer-
Provide Mark with reasonable notice of the contact.
"The IRS began an examination of Mr. Honeycutt s Year 1 income tax return. Mr.
Honeycutt hired Tyler, an enrolled agent and former IRS employee, to represent him
before the IRS. Tyler wrote a memorandum to Mr. Honeycutt outlining the issues that
might be raised by the IRS and how to address these issues. Tyler correctly marked
this memorandum as confidential and privileged under Sec. 7525 of the Internal
Revenue Code. During the examination, the Revenue Officer assigned to the case
asked Tyler for a copy of the memorandum. Mr. Honeycutt, invoking the Sec. 7525
privilege, told Tyler not to disclose it to the Revenue Officer. Tyler is not required to
provide the Revenue Officer with a copy of the memorandum because" - Answer-
, Sec. 7525 extends the attorney-client privilege to federally authorized tax
practitioners.
Which of the following is not a tax return preparer? - Answer-Answer: Someone who
prepares a return or claim for refund for his or her employer.
The following are tax return preparers:
-A firm who offers computer tax preparation services if the program makes
substantive tax determinations.
-Someone who does not physically prepare a tax return but offers enough advice
that completion of the return is largely a mechanical matter.
-Someone who prepares a substantial portion of a return or claim for refund under
Title 26.
"A taxpayer may choose to pay a disputed deficiency and then file a claim for refund.
If the claim is denied by the Internal Revenue Service or if no decision is made in 6
months, the taxpayer may petition" - Answer-Either the appropriate U.S. District
Court or the U.S. Court of Federal Claims.
Appeal from the U.S. Court of Federal Claims is to the - Answer-U.S. Court of
Appeals for the Federal Circuit.
All of the following are tax return preparers except - Answer-Answer: A person who
gives an opinion about theoretical events that have not occurred.
These are tax return preparers:
-A person who prepares a United States return for a fee outside of the United States.
-A person who prepares a substantial portion of the return for a fee.
-A person who prepares a claim for a refund for a fee.
"When a prepared return claims the earned income credit, which of the following is
false?" - Answer-Answer: No special requirements apply to returns claiming earned
income credit.
These statements are true:
-The preparer must take additional steps to ensure that a client is eligible for earned
income credit.
-The preparer may be penalized $500 if no attempt is made to determine eligibility
for the credit.
-Due diligence requirements apply.
Identify the false statement below. - Answer-Answer: "Thuy is the paid preparer of
Form 1065 for Winter Wiggles, a partnership. She does not prepare the individual
return for Thelma, who owns a partnership interest in Winter Wiggles. Thelma s
individual return includes pass-through earnings of $26,000 from Winter Wiggles.
Thelma s return also includes income from other sources consisting of $38,000
wages and $3,000 alimony. Thuy is not a tax preparer with respect to Thelma s
return."
These statements are true:
Questions and Answers
"With regard to the reporting requirements for tax return preparers under Sec. 6060,
which of the following statements is false?" - Answer-Answer: The provisions in this
section only apply to preparers who employ five or more tax preparers.
These statements are true:
-"For purposes of this section, a sole proprietor shall retain and make available a
record with respect to himself or herself."
-"For purposes of this section, a partnership is treated as the employer of the
partners and shall retain and make available a record with respect to the partners
and other tax return preparers employed or engaged by the partnership."
-"For purposes of this section, the term return period means the 12-month period
beginning on July 1 of each year."
What is the amount of the penalty imposed on a return preparer for negotiating a
taxpayers refund check? - Answer-$500.00
"For the current year, Mr. Dixon, a tax preparer, prepared for compensation an
income tax return for Mr. Hatfield. Mr. Hatfield purchased furniture in the current year
that required depreciation using the MACRS method. Mr. Dixon explained to Mr.
Hatfield that the furniture should be depreciated using a certain class life. However,
Mr. Hatfield insisted that a different class life be used for the depreciation calculation.
At Mr. Hatfield s insistence, Mr. Dixon relented and used that class life. This position
was not disclosed on the tax return, and it resulted in an understatement of tax.
Since Mr. Dixon used the incorrect class life due to Mr. Hatfield s insistence, what is
the amount of the return preparer penalty that may be imposed on Mr. Dixon?" -
Answer-"$5,000 or 50% of fee, whichever is greater."
"The IRS has begun an examination of Mark's 2012 income tax return. The IRS
would like to ask Mark's neighbors questions with respect to that examination. There
is no pending criminal investigation into the matter, and there is no evidence that
such contact will result in reprisals against the neighbors or jeopardize collection of
the tax liability. Before the IRS contacts the neighbors, the IRS must" - Answer-
Provide Mark with reasonable notice of the contact.
"The IRS began an examination of Mr. Honeycutt s Year 1 income tax return. Mr.
Honeycutt hired Tyler, an enrolled agent and former IRS employee, to represent him
before the IRS. Tyler wrote a memorandum to Mr. Honeycutt outlining the issues that
might be raised by the IRS and how to address these issues. Tyler correctly marked
this memorandum as confidential and privileged under Sec. 7525 of the Internal
Revenue Code. During the examination, the Revenue Officer assigned to the case
asked Tyler for a copy of the memorandum. Mr. Honeycutt, invoking the Sec. 7525
privilege, told Tyler not to disclose it to the Revenue Officer. Tyler is not required to
provide the Revenue Officer with a copy of the memorandum because" - Answer-
, Sec. 7525 extends the attorney-client privilege to federally authorized tax
practitioners.
Which of the following is not a tax return preparer? - Answer-Answer: Someone who
prepares a return or claim for refund for his or her employer.
The following are tax return preparers:
-A firm who offers computer tax preparation services if the program makes
substantive tax determinations.
-Someone who does not physically prepare a tax return but offers enough advice
that completion of the return is largely a mechanical matter.
-Someone who prepares a substantial portion of a return or claim for refund under
Title 26.
"A taxpayer may choose to pay a disputed deficiency and then file a claim for refund.
If the claim is denied by the Internal Revenue Service or if no decision is made in 6
months, the taxpayer may petition" - Answer-Either the appropriate U.S. District
Court or the U.S. Court of Federal Claims.
Appeal from the U.S. Court of Federal Claims is to the - Answer-U.S. Court of
Appeals for the Federal Circuit.
All of the following are tax return preparers except - Answer-Answer: A person who
gives an opinion about theoretical events that have not occurred.
These are tax return preparers:
-A person who prepares a United States return for a fee outside of the United States.
-A person who prepares a substantial portion of the return for a fee.
-A person who prepares a claim for a refund for a fee.
"When a prepared return claims the earned income credit, which of the following is
false?" - Answer-Answer: No special requirements apply to returns claiming earned
income credit.
These statements are true:
-The preparer must take additional steps to ensure that a client is eligible for earned
income credit.
-The preparer may be penalized $500 if no attempt is made to determine eligibility
for the credit.
-Due diligence requirements apply.
Identify the false statement below. - Answer-Answer: "Thuy is the paid preparer of
Form 1065 for Winter Wiggles, a partnership. She does not prepare the individual
return for Thelma, who owns a partnership interest in Winter Wiggles. Thelma s
individual return includes pass-through earnings of $26,000 from Winter Wiggles.
Thelma s return also includes income from other sources consisting of $38,000
wages and $3,000 alimony. Thuy is not a tax preparer with respect to Thelma s
return."
These statements are true:
