CTP Ethical Standards & Professional Conduct 2

Question 1

Under Circular 230, a tax practitioner who discovers a client made an error on a prior year return must:

Accepted Answer

Promptly notify the client of the error and its consequences

Answer

Circular 230 §10.21 requires practitioners to promptly advise the client of the error and the consequences of not correcting it.

Question 2

A CTP is approached by a client who wants to claim a deduction the practitioner believes has no legal basis. The practitioner should:

Accepted Answer

Explain the lack of legal basis and decline to claim it unless there is at least a reasonable basis

Answer

Practitioners may not claim positions that lack at least a reasonable basis, per Circular 230 §10.34.

Question 3

Which action constitutes 'practice before the IRS' under Circular 230?

Accepted Answer

Corresponding with the IRS on behalf of a taxpayer

Answer

Communicating or corresponding with the IRS on behalf of a taxpayer constitutes practice under Circular 230.

Question 4

A tax professional who charges a contingent fee for preparing an original tax return is:

Accepted Answer

Prohibited under Circular 230

Answer

Circular 230 §10.27 generally prohibits contingent fees for preparing original tax returns.

Question 5

A practitioner's duty of confidentiality under IRC §7525 applies to:

Accepted Answer

Tax advice given by practitioners authorized to practice before the IRS in non-criminal proceedings

Answer

IRC §7525 extends a limited privilege to federally authorized tax practitioners for non-criminal tax advice proceedings.

(CTP) Certified Tax Professional Practice Test