Ethics and Practice Procedures Flashcards
7 cards from real IRS 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 and Practice Procedures flashcards as text
Under Circular 230, a practitioner who discovers a client error on a prior year return must:
Answer: Promptly advise the client of the error and its consequences
Circular 230 §10.21 requires practitioners to promptly advise clients of errors or omissions and the consequences, but does not require filing an amended return.
Which of the following describes 'willful neglect' as used in Circular 230 penalty provisions?
Answer: A conscious, intentional failure or reckless indifference to a known duty
Willful neglect means a conscious, intentional failure to comply with a legal duty or reckless indifference to it, which is a higher standard than ordinary negligence.
A CPA prepares a return and signs it as the paid preparer. The client later asks the CPA to represent them in an examination of that return. Under Circular 230, the CPA:
Answer: May represent the client because preparing the return does not create a conflict
Preparing and signing a return does not disqualify a CPA from representing the same client in an audit of that return; there is no inherent Circular 230 conflict.
Under Circular 230, a practitioner is generally prohibited from charging a contingent fee for:
Answer: Preparing an original federal tax return
Circular 230 §10.27 prohibits contingent fees for preparing an original tax return; contingent fees are permitted in limited circumstances such as representation in examination or refund claims.
Which Circular 230 section governs the duty to exercise due diligence in preparing tax returns and documents?
Answer: §10.22
Circular 230 §10.22 imposes the duty of due diligence on practitioners in preparing returns, submissions, and documents for the IRS.
An enrolled agent's client insists on claiming a deduction the enrolled agent believes is frivolous. The enrolled agent should:
Answer: Advise the client of the potential penalties and withdraw if the client insists on the frivolous position
A practitioner must advise the client of penalty risks associated with a frivolous position and may withdraw from representation if the client insists on taking it.
Which statement about the IRS Office of Professional Responsibility (OPR) is correct?
Answer: OPR enforces Circular 230 standards and can impose censure, suspension, or disbarment
The OPR administers and enforces Circular 230, and its sanctions include reprimand, censure, suspension, and disbarment from practice before the IRS.