Ethics, Standards & IRS Representation Flashcards

Which IRS program allows a taxpayer to resolve outstanding tax liabilities and avoid criminal prosecution by voluntarily disclosing unreported income before the IRS discovers it?

Answer: Voluntary Disclosure Practice (VDP)

The IRS Voluntary Disclosure Practice (VDP) allows taxpayers with criminal exposure from unreported income to come forward voluntarily in exchange for civil—rather than criminal—treatment.

When a CTC prepares a tax return for a client and suspects the client may have provided false information, what is the appropriate course of action?

Answer: Rely on client information but exercise professional judgment; do not ignore red flags

Circular 230 §10.34(d) permits reliance on client-provided information without independent verification but requires practitioners to not ignore inconsistencies or implausible statements.

Which of the following actions is considered 'practice before the IRS' under Circular 230?

Answer: Representing a taxpayer in an IRS examination

Practice before the IRS includes representing a taxpayer in examinations, conferences, hearings, and appeals—whereas return preparation alone is not covered by Circular 230.

Under IRC §6103, federal tax return information is generally confidential. Which of the following is a permitted disclosure WITHOUT taxpayer consent?

Answer: Disclosure to a state taxing authority for use in civil tax administration

IRC §6103(d) permits the IRS to share return information with state tax agencies for state tax administration purposes without the taxpayer's consent.

A taxpayer receives a Notice of Deficiency (90-Day Letter). What is the deadline to petition the U.S. Tax Court without paying the disputed tax first?

Answer: 90 days from the date of the notice (150 days if outside the U.S.)

IRC §6213(a) gives the taxpayer 90 days (150 days if addressed outside the U.S.) from the notice date to petition the Tax Court, allowing a pre-payment forum for disputing the deficiency.

Which Circular 230 provision prohibits a practitioner from charging fees that are 'unconscionable' in relation to the services rendered?

Answer: §10.27 — Fees

Circular 230 §10.27 expressly prohibits practitioners from charging unconscionable fees and also restricts contingent fees to specific permitted circumstances.

A practitioner receives a written inquiry from the Office of Professional Responsibility (OPR) regarding potential misconduct. Under Circular 230, the practitioner must respond within:

Answer: 30 days of the written inquiry, unless extended for good cause

Circular 230 §10.20(b) requires practitioners to respond to OPR inquiries within 30 days, though extensions may be granted for good cause shown.