CAA Core Concepts and Principles 5 — Questions and Answers
Question 1: What training must a CAA finish before it can authenticate documents?
- IRS forensic document training (Correct answer)
- AFSP continuing education only
- Notary certification
- Circular 230 ethics only
Correct answer: IRS forensic document training
CAAs must complete IRS-mandated forensic document training to authenticate identity documents.
Question 2: A nonresident alien student on an F-1 visa receives a taxable scholarship. Which W-7 reason box usually applies?
- Box d
- Box e
- Box f (Correct answer)
- Box g
Correct answer: Box f
Box f is for nonresident alien students, professors, or researchers filing a U.S. return or claiming an exception.
Question 3: A taxpayer wants an ITIN for a dependent but cannot claim any allowable tax benefit for that dependent. What happens?
- The ITIN is issued anyway
- The dependent ITIN application is generally denied (Correct answer)
- An SSN is issued instead
- The CAA can approve it
Correct answer: The dependent ITIN application is generally denied
Dependent ITINs are issued only when the dependent qualifies the taxpayer for an allowable tax benefit.
Question 4: Which statement about an Acceptance Agent's role is correct?
- The AA makes the final decision on whether an ITIN is issued
- The IRS ITIN Operation makes the final decision; the AA helps prepare and submit the application (Correct answer)
- The AA can give a temporary ITIN while the application is processed
- The AA approves ITIN renewals for its own clients
Correct answer: The IRS ITIN Operation makes the final decision; the AA helps prepare and submit the application
Only the IRS issues ITINs; acceptance agents help applicants and submit their applications.
Question 5: Which ITIN holder is NOT eligible for the Earned Income Tax Credit?
- Every ITIN holder (Correct answer)
- Only nonresident ITIN holders
- Only ITIN holders under 18
- Only ITIN holders with expired numbers
Correct answer: Every ITIN holder
The EITC requires a valid SSN, so no ITIN holder can claim it.
Question 6: If a CAA does not follow the terms of its IRS agreement, what can the IRS do?
- Only send an informal reminder
- Issue a warning, suspend the CAA, or end its participation in the program (Correct answer)
- Fine the CAA's clients
- Nothing until the agreement expires
Correct answer: Issue a warning, suspend the CAA, or end its participation in the program
Sanctions range from warnings to suspension or termination of the acceptance agent agreement.
Question 7: Under the third-party withholding exception for passive income, what does the applicant usually have to show?
- A completed Form 1040
- Evidence of passive income subject to withholding, such as a withholding agent's letter (Correct answer)
- A U.S. employment contract
- A Social Security denial letter only
Correct answer: Evidence of passive income subject to withholding, such as a withholding agent's letter
Exception 1 needs documents showing passive income subject to third-party withholding or treaty benefits, such as a letter from the withholding agent.
CAA Core Concepts and Principles 5
What training must a CAA finish before it can authenticate documents?