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

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.

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

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.

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

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.

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

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.

Question 5

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

Accepted Answer

§10.22

Answer

Circular 230 §10.22 imposes the duty of due diligence on practitioners in preparing returns, submissions, and documents for the IRS.

(IRS) Internal Revenue Service Certified Practice Test

(IRS) Internal Revenue Service Certified Practice Test

IRS Ethics and Practice Procedures 2