CTC Ethics, Standards & IRS Representation 2

Question 1

Under Circular 230, which practitioner action constitutes a violation of the duty of confidentiality?

Accepted Answer

Sharing client tax information with a third-party marketer without client consent

Answer

Sharing client tax information with third-party marketers without client consent violates Circular 230's confidentiality requirements and tax privacy rules under IRC §7216.

Question 2

A CTC discovers a client overstated deductions on a prior-year return. What is the practitioner's FIRST obligation?

Accepted Answer

Advise the client of the error and its potential consequences

Answer

Circular 230 §10.21 requires practitioners to promptly advise the client of errors or omissions on previously filed returns and the consequences of correcting them.

Question 3

Which standard governs the level of confidence a CTC must have before recommending a tax position to a client?

Accepted Answer

The position must have a reasonable basis and be disclosed or have substantial authority

Answer

Under Circular 230 §10.34, a practitioner may not sign a return unless the position has substantial authority or a reasonable basis with proper disclosure.

Question 4

An enrolled agent is representing a client in an IRS audit. The agent learns the client has submitted a fraudulent document. What must the agent do?

Accepted Answer

Advise the client to correct the submission and withdraw if the client refuses

Answer

Circular 230 prohibits assisting in fraud; the practitioner must counsel the client to correct the record and must withdraw if the client refuses.

Question 5

Under IRS Form 2848 (Power of Attorney), how long does a taxpayer's representative authority remain valid for a specific tax year?

Accepted Answer

It remains valid until the tax matter is resolved or the POA is revoked

Answer

A Form 2848 POA for a specific tax year stays effective until the matter is resolved, the taxpayer revokes it, or the representative withdraws.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Ethics, Standards & IRS Representation 2