IRS Ethics and Practice Procedures 2

Question 1

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

Accepted Answer

Promptly advise the client of the error and its consequences

Answer

File an amended return immediately without client consent

Answer

Report the error directly to the IRS without notifying the client

Answer

Withdraw from representation without explanation

Question 2

Which of the following describes 'willful neglect' as used in Circular 230 penalty provisions?

Accepted Answer

A conscious, intentional failure or reckless indifference to a known duty

Answer

An honest mistake made without fraudulent intent

Answer

Negligence caused by an unusually heavy workload

Answer

Any error that results in an underpayment of tax

Question 3

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:

Accepted Answer

May represent the client because preparing the return does not create a conflict

Answer

Must decline because of the conflict between preparer and representative roles

Answer

May represent the client only after obtaining a waiver from the IRS

Answer

Must first obtain consent from the regional IRS director

Question 4

Under Circular 230, a practitioner is generally prohibited from charging a contingent fee for:

Accepted Answer

Preparing an original federal tax return

Answer

Representing a client in an IRS examination

Answer

Preparing a refund claim for an amended return

Answer

Representing a client before the Tax Court

Question 5

Which Circular 230 section governs the duty to exercise due diligence in preparing tax returns and documents?

Accepted Answer

§10.22

Answer

§10.20

Answer

§10.35

Answer

§10.51

Question 6

An enrolled agent's client insists on claiming a deduction the enrolled agent believes is frivolous. The enrolled agent should:

Accepted Answer

Advise the client of the potential penalties and withdraw if the client insists on the frivolous position

Answer

Include the deduction because the client's instructions control

Answer

Refuse to prepare the return at all

Answer

File the return and attach a disclosure to avoid penalty

Question 7

Which statement about the IRS Office of Professional Responsibility (OPR) is correct?

Accepted Answer

OPR enforces Circular 230 standards and can impose censure, suspension, or disbarment

Answer

OPR can only discipline enrolled agents, not CPAs or attorneys

Answer

OPR issues private letter rulings on practitioner conduct

Answer

OPR operates under the Department of Justice, not the Treasury