Ethics & Professional Conduct Flashcards

A preparer knowingly discloses client return information to a marketing firm without consent. Which statute imposes criminal penalties?

Answer: IRC §7216

IRC §7216 makes knowing or reckless unauthorized disclosure a misdemeanor; §6713 is the civil counterpart.

What is the maximum criminal penalty for a §7216 violation (outside identity-theft cases)?

Answer: A fine up to $1,000 and/or up to 1 year in prison

A §7216 violation is a misdemeanor punishable by up to $1,000 in fines, up to one year in prison, or both, plus prosecution costs.

Under Circular 230 §10.34, a practitioner may not willfully, recklessly, or through gross incompetence sign a return taking a position that:

Answer: Lacks a reasonable basis

Section 10.34(a) bars signing a return that takes a position without a reasonable basis or an unreasonable position under §6694.

A tax coach recommends a position that has a reasonable basis but not substantial authority. How can the client generally avoid the accuracy-related penalty?

Answer: Adequately disclose the position on Form 8275

Adequate disclosure on Form 8275 (or 8275-R) generally protects a reasonable-basis position from the substantial-understatement penalty, except for tax shelters.

When giving written tax advice under §10.37, which factor is a practitioner prohibited from considering?

Answer: The chance that the return won't be audited or the issue won't be raised

Section 10.37 bars weighing the 'audit lottery' when evaluating a federal tax matter.

Which sanction is NOT available to the IRS Office of Professional Responsibility under Circular 230 §10.50?

Answer: Imprisonment

OPR can censure, suspend, disbar, or impose monetary penalties, but imprisonment needs a criminal prosecution.

Under IRC §6107, how long must a paid preparer keep a copy of each return, or a list of clients and returns?

Answer: 3 years after the close of the return period

Section 6107(b) requires keeping copies or a list for 3 years after the close of the return period.