Tax Consulting Tax Ethics and Professional Standards 2

Question 1

Under Circular 230, a tax practitioner must generally respond to IRS requests for records or information within:

Accepted Answer

A reasonable time

Answer

Circular 230 requires practitioners to promptly submit records or information requested by the IRS unless the practitioner believes in good faith and on reasonable grounds that they are not required to provide the information.

Question 2

What is a 'covered opinion' under Circular 230, and what is its significance?

Accepted Answer

A formal written tax opinion on listed transactions or principal-purpose transactions subject to enhanced standards

Answer

A covered opinion is written advice on listed transactions or principal-purpose transactions that must comply with Circular 230's enhanced requirements for thoroughness, disclosure, and standards of review.

Question 3

Which of the following constitutes a conflict of interest that requires disclosure or withdrawal under professional ethics rules?

Accepted Answer

Representing both spouses in a joint return when their interests diverge on allocation of liability

Answer

When spouses have conflicting interests—such as disputes over tax liability allocation—representing both creates a conflict that requires disclosure, consent, or in some cases withdrawal.

Question 4

Under Circular 230, what is a practitioner's obligation when learning that a client has made an error in a previously filed return that resulted in underpayment?

Accepted Answer

Promptly advise the client of the error and the potential consequences

Answer

Circular 230 requires the practitioner to promptly advise the client of the error and its potential consequences, but the decision to file an amended return belongs to the client.

Question 5

The IRS's Office of Professional Responsibility (OPR) can sanction practitioners for Circular 230 violations by:

Accepted Answer

Imposing monetary penalties, suspension, or disbarment from practice before the IRS

Answer

OPR can sanction practitioners through censure (public or private), suspension for a defined period, disbarment from IRS practice, or monetary penalties for Circular 230 violations.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting Tax Ethics and Professional Standards 2