CTP Ethical Standards & Professional Conduct 4

Question 1

A tax preparer signs a return without reviewing it, relying entirely on the client's word. This behavior may violate which standard?

Accepted Answer

The due diligence requirements under Circular 230 §10.22

Answer

Circular 230 §10.22 requires practitioners to exercise due diligence in preparing, approving, and filing tax returns.

Question 2

Which of the following creates a disqualifying conflict of interest for a tax practitioner under Circular 230?

Accepted Answer

Representing both spouses in a joint return when they have adverse financial interests

Answer

Representing spouses with conflicting interests (such as in a divorce context) creates a conflict under Circular 230 §10.29.

Question 3

The IRS Office of Professional Responsibility (OPR) has authority over:

Accepted Answer

All practitioners who practice before the IRS, including CPAs, attorneys, and enrolled agents

Answer

The OPR has jurisdiction over all practitioners authorized to practice before the IRS, including CPAs, attorneys, enrolled agents, and enrolled actuaries.

Question 4

A tax professional who discovers that a client's return, which the professional prepared, contains a material understatement due to the client's error should first:

Accepted Answer

Advise the client of the error and recommend filing an amended return

Answer

The practitioner must promptly advise the client of the error and the consequences, as required by Circular 230 §10.21.

Question 5

Which of the following disclosures is required on a tax return when taking a position with only a 'reasonable basis' (not more likely than not)?

Accepted Answer

Form 8275 should be filed to disclose the position

Answer

Positions that lack a realistic possibility of being sustained but have at least a reasonable basis must be disclosed on Form 8275 to avoid certain penalties.

(CTP) Certified Tax Professional Practice Test

(CTP) Certified Tax Professional Practice Test

CTP Ethical Standards & Professional Conduct 4