Practice Test Geeks(CTP) Certified Tax Professional Practice Test
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Ethics & Professional Responsibilities Flashcards

7 cards from real CTP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Ethics & Professional Responsibilities flashcards as text

  1. Circular 230 prohibits practitioners from charging 'unconscionable fees.' Which factor is LEAST relevant in determining whether a fee is unconscionable?

    Answer: The result obtained for the client

    Circular 230 focuses on the nature of the work and effort involved; while results may be a consideration, a contingent fee based purely on outcome is separately restricted.

  2. A client asks their CTP to use an aggressive valuation for donated property that the CTP believes is inflated. Under Circular 230, the CTP may:

    Answer: Use the valuation only if there is a reasonable basis for it

    Practitioners may take a position only if there is a reasonable basis for it; a client-provided appraisal alone does not override the practitioner's duty of due diligence.

  3. Which of the following is a permissible contingent fee arrangement for a CTP under Circular 230?

    Answer: A fee contingent on the size of a refund generated through an amended return for an IRS examination

    Circular 230 §10.27 permits contingent fees in connection with IRS examinations or proceedings, including amended returns filed in response to such examinations.

  4. A CTP who solicits a former client's business six months after the representation ended:

    Answer: May solicit if the contact is not false, misleading, or coercive

    Circular 230 §10.30 permits solicitation of former clients as long as it is truthful, not misleading, and not coercive—there is no mandatory waiting period.

  5. If a CTP learns that a client has failed to file tax returns for three prior years, the practitioner's primary obligation is to:

    Answer: Advise the client to file the delinquent returns and explain the consequences of not doing so

    Under Circular 230 §10.21, the practitioner must promptly advise the client of the noncompliance and its consequences; they cannot unilaterally report the client to the IRS.

  6. A tax professional advertises a guaranteed refund for all clients. This advertisement most likely violates Circular 230 because it:

    Answer: Is misleading since refund outcomes depend on individual circumstances

    Guaranteeing refunds is misleading advertising under Circular 230 §10.30 because tax outcomes are inherently dependent on each client's unique facts.

  7. Under the 'best practices' provisions of Circular 230, a CTP communicating with clients about tax advice should:

    Answer: Clearly identify the assumptions and limitations of the advice

    Circular 230 §10.33 best practices call for clearly communicating the scope, assumptions, and limitations of advice so clients can make informed decisions.