Regulatory Framework & Compliance Flashcards

A tax professional who is not an attorney, CPA, or enrolled agent may represent taxpayers before the IRS only:

Answer: During an examination of a return they prepared, before the examining agent only

Unenrolled preparers with limited practice rights may represent taxpayers only in examinations of returns they signed, and only before the IRS examination division.

Which IRS program allows qualifying low-income taxpayers and those with English as a second language to obtain free tax representation?

Answer: Low Income Taxpayer Clinic (LITC)

Low Income Taxpayer Clinics (LITCs) represent qualifying taxpayers in disputes with the IRS and provide education on taxpayer rights.

Under the 'return of client records' provisions of Circular 230, a practitioner who is discharged before completing services must:

Answer: Promptly return all records needed by the client to comply with tax obligations

Circular 230 §10.28 requires that upon termination, a practitioner must return all client records necessary for compliance, regardless of any fee dispute.

The Foreign Account Tax Compliance Act (FATCA) requires U.S. persons to report foreign financial accounts exceeding what threshold on Form 8938?

Answer: $50,000 at year-end or $75,000 at any point during the year (single filers)

For single filers living in the U.S., Form 8938 is required when foreign financial assets exceed $50,000 at year-end or $75,000 at any time during the year.

An IRS Notice of Deficiency (statutory notice) gives a taxpayer how many days to petition the Tax Court?

Answer: 90 days

A taxpayer has 90 days from the date of a Notice of Deficiency (150 days if addressed outside the U.S.) to petition the Tax Court.

Which ethical violation under Circular 230 can result in permanent disbarment from practice before the IRS on the first offense?

Answer: Willful misappropriation of client funds

Willful misappropriation of client funds is among the most serious violations and can result in immediate permanent disbarment under Circular 230.

Under the economic substance doctrine codified in IRC §7701(o), a transaction must have:

Answer: Both meaningful economic substance and a substantial non-tax purpose

IRC §7701(o) requires a transaction to have both meaningful economic substance (objective test) and a substantial non-tax purpose (subjective test) to be respected.