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
A CTP who becomes aware that a client is using their tax advice to facilitate tax fraud should:
Answer: Withdraw from the representation promptly
When a practitioner learns their services are being used to further fraud, Circular 230 and professional ethics require withdrawal from the representation.
Which of the following describes the 'substantial authority' standard under IRC §6662?
Answer: The weight of authorities in support exceeds the weight against, at approximately a 40% or more chance of success
Substantial authority exists when the weight of authorities supporting the position is substantial—often described as roughly a 40% or better chance of being sustained—even if not a majority.
A CTP signs a return that understates tax due to a client's intentional omission of income the client told the practitioner was 'not important.' The practitioner is most likely to face penalties because they:
Answer: Ignored a red flag that should have prompted further inquiry
When clients make statements that raise red flags—like dismissing income sources—due diligence requires the practitioner to make further inquiries before signing.
An Enrolled Agent (EA) whose IRS enrollment has been suspended may still lawfully:
Answer: Prepare tax returns for compensation
A suspended EA loses the right to practice before the IRS but may still prepare tax returns for compensation, as return preparation does not require Circular 230 authorization.
A CTP is asked to provide a 'covered opinion' on a tax shelter. Under Circular 230, a covered opinion must:
Answer: Identify and address all significant Federal tax issues
Circular 230 §10.35 requires covered opinions to identify and analyze all significant Federal tax issues presented, ensuring comprehensive disclosure rather than selective analysis.
Under the IRC §6695 preparer penalties, a paid preparer who fails to provide the client with a copy of a completed return can be penalized:
Answer: $50 per return, up to $25,000 per calendar year
IRC §6695(a) imposes a $50 penalty per failure to furnish a copy of the return to the taxpayer, with a maximum of $25,000 per calendar year.
Which of the following taxpayer rights must a CTP communicate to clients who are under IRS examination?
Answer: The right to be represented by a qualified practitioner
Clients have the right under the Taxpayer Bill of Rights to be represented by a qualified practitioner during IRS examinations, and CTPs should inform clients of this right.