Ethical and Professional Responsibilities Flashcards

A CTRS practitioner charges a contingency fee based on the amount of tax saved for a client whose case is before the IRS Appeals Office. Under Circular 230, this fee arrangement is:

Answer: Generally prohibited for matters before the IRS

Circular 230 generally prohibits contingency fees for matters before the IRS, including representation in Appeals proceedings.

When is a CTRS practitioner permitted to charge a contingency fee for federal tax matters?

Answer: When the claim is for a refund filed solely for a return already filed and not under examination

Contingency fees are permitted for refund claims for returns already filed that are not currently under IRS examination.

A practitioner's client confides that they committed tax fraud in a prior year that is not currently under examination. What is the practitioner's obligation?

Answer: Advise the client of the potential consequences and the option to file amended returns

The practitioner should advise the client of consequences and options, including amended returns, but is not required to unilaterally report past fraud not currently under examination.

Which of the following actions by a CTRS practitioner would constitute a violation of the duty of competence?

Answer: Accepting representation in an area outside their expertise without adequate preparation

Accepting representation in an area where one lacks expertise without taking steps to become competent violates the duty of competence under Circular 230.

A CTRS practitioner learns that a colleague at their firm has been submitting returns with fabricated deductions. The practitioner's responsibility is to:

Answer: Take immediate steps to stop the conduct and correct any noncompliance within their authority

A practitioner who becomes aware of a colleague's noncompliance must take reasonable steps to stop the conduct and correct it within the scope of their authority.

Under Circular 230, a practitioner must promptly submit client documents to the IRS unless:

Answer: The documents are subject to a valid legal privilege or withholding is otherwise authorized by law

Practitioners may withhold documents from the IRS only when they are subject to a valid legal privilege or another legal basis for withholding exists.

A CTRS practitioner advertises that they can 'guarantee' a specific tax debt reduction for any client. This advertising claim is:

Answer: A violation of Circular 230 because guarantees of outcomes are prohibited

Circular 230 prohibits misleading advertising, including guarantees of specific outcomes, because tax resolution results depend on individual facts and IRS discretion.