1. Tax compliance is the process of:
a. filing necessary tax returns
b. gathering the financial information necessary to report taxable income
c. representing a taxpayer at an IRS audit
d. all of these are correct
ANSWER: d
2. Tax evasion is:
a. a fraudulent act involving illegal nonpayment of taxes
b. one of the objectives of tax planning
c. an act of deferring tax payments to future periods
d. the same as tax avoidance as both of them result in nonpayment of taxes
ANSWER: a
3. Tax litigation is a process of:
a. participating in an administrative audit
b. settling tax-related disputes in a court of law
c. filing amended tax returns as prescribed by tax laws
d. arranging a taxpayer’s affairs to minimize tax liabilities
ANSWER: b
4. Regarding open transactions, which of the following statements is INCORRECT?
a. The transaction is not yet completed.
b. The practitioner can suggest changes to achieve a better tax result.
c. A tax practitioner has some degree of control over the client’s tax liability.
d. The practitioner can fix the problem by amending the client’s tax return.
ANSWER: d
5. Which of the following statements best describes Circular 230?
a. Circular 230 has been adopted by the AICPA as its set of rules of practice for CPAs.
b. Circular 230 is a set of Treasury Department ethical and legal standards for those engaging in practice before the IRS.
c. Circular 230 is a set of internal rules at the IRS designed to protect tax practitioners from unfair discipline by the IRS.
d. Circular 230 is a set of ethical rules for taxpayers.
ANSWER: b
6. Who can represent a taxpayer before the IRS Appeals Office under Circular 230?
a. a CPA
b. an officer of a corporation may represent the corporation
c. an attorney
d. all of these are correct
e. both a CPA and an attorney
ANSWER: d
7. In a closed transaction, the scope of tax planning is:
a. more limited as compared to an open transaction
b. limited by the IRS rules of practice
c. limited to presenting the taxpayer’s facts to the government in the most favorable, legal manner
d. more limited as compared to an open transaction and limited to presenting the taxpayer’s facts to the government in the most favorable, legal manner
ANSWER: d
8. Circular 230 includes rules on all of the following topics EXCEPT:
a. who is authorized to practice before the IRS
b. standards for “covered opinions”
c. compliance with state ethical requirements
d. a set of best practices to guide practitioners
ANSWER: c
9. Statements on Standards for Tax Services (SSTS) contain advisory guidelines for:
a. members of the AICPA
b. enrolled agents
c. attorneys
d. IRS authorities
e. all of these are correct
ANSWER: a
10. An EA must renew his or her enrollment card on a:
a. 5-year cycle
b. 3-year cycle
c. 2-year cycle
d. Renewal is not required once an EA gets a card
ANSWER: b
11. Under Section 10.3, Subpart A, of Circular 230, the following individuals may practice before the IRS EXCEPT:
a. unenrolled agents
b. enrolled agents
c. enrolled actuaries
d. enrolled retirement plan agents
ANSWER: a
12. Due diligence, in essence, means a tax practitioner:
a. must be efficient in performing his duties
b. must give due respect to IRS officials
c. should use reasonable effort to comply with the tax laws
d. should charge reasonable fees for work performed for a client
ANSWER: c
13. A contingent fee is:
a. always allowed by Circular 230
b. a fee that is out of line with the value of the service provided
c. a fee based on a percentage of a taxpayer’s refund on a tax return
a. filing necessary tax returns
b. gathering the financial information necessary to report taxable income
c. representing a taxpayer at an IRS audit
d. all of these are correct
ANSWER: d
2. Tax evasion is:
a. a fraudulent act involving illegal nonpayment of taxes
b. one of the objectives of tax planning
c. an act of deferring tax payments to future periods
d. the same as tax avoidance as both of them result in nonpayment of taxes
ANSWER: a
3. Tax litigation is a process of:
a. participating in an administrative audit
b. settling tax-related disputes in a court of law
c. filing amended tax returns as prescribed by tax laws
d. arranging a taxpayer’s affairs to minimize tax liabilities
ANSWER: b
4. Regarding open transactions, which of the following statements is INCORRECT?
a. The transaction is not yet completed.
b. The practitioner can suggest changes to achieve a better tax result.
c. A tax practitioner has some degree of control over the client’s tax liability.
d. The practitioner can fix the problem by amending the client’s tax return.
ANSWER: d
5. Which of the following statements best describes Circular 230?
a. Circular 230 has been adopted by the AICPA as its set of rules of practice for CPAs.
b. Circular 230 is a set of Treasury Department ethical and legal standards for those engaging in practice before the IRS.
c. Circular 230 is a set of internal rules at the IRS designed to protect tax practitioners from unfair discipline by the IRS.
d. Circular 230 is a set of ethical rules for taxpayers.
ANSWER: b
6. Who can represent a taxpayer before the IRS Appeals Office under Circular 230?
a. a CPA
b. an officer of a corporation may represent the corporation
c. an attorney
d. all of these are correct
e. both a CPA and an attorney
ANSWER: d
7. In a closed transaction, the scope of tax planning is:
a. more limited as compared to an open transaction
b. limited by the IRS rules of practice
c. limited to presenting the taxpayer’s facts to the government in the most favorable, legal manner
d. more limited as compared to an open transaction and limited to presenting the taxpayer’s facts to the government in the most favorable, legal manner
ANSWER: d
8. Circular 230 includes rules on all of the following topics EXCEPT:
a. who is authorized to practice before the IRS
b. standards for “covered opinions”
c. compliance with state ethical requirements
d. a set of best practices to guide practitioners
ANSWER: c
9. Statements on Standards for Tax Services (SSTS) contain advisory guidelines for:
a. members of the AICPA
b. enrolled agents
c. attorneys
d. IRS authorities
e. all of these are correct
ANSWER: a
10. An EA must renew his or her enrollment card on a:
a. 5-year cycle
b. 3-year cycle
c. 2-year cycle
d. Renewal is not required once an EA gets a card
ANSWER: b
11. Under Section 10.3, Subpart A, of Circular 230, the following individuals may practice before the IRS EXCEPT:
a. unenrolled agents
b. enrolled agents
c. enrolled actuaries
d. enrolled retirement plan agents
ANSWER: a
12. Due diligence, in essence, means a tax practitioner:
a. must be efficient in performing his duties
b. must give due respect to IRS officials
c. should use reasonable effort to comply with the tax laws
d. should charge reasonable fees for work performed for a client
ANSWER: c
13. A contingent fee is:
a. always allowed by Circular 230
b. a fee that is out of line with the value of the service provided
c. a fee based on a percentage of a taxpayer’s refund on a tax return