Term
| Rules Governing Authority to Practice |
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Definition
Practice before the Internal Revenue Service (IRS) includes presenting to the IRS or
any of its officers or employees all matters relating to a client’s rights, privileges, or
liabilities. Matters before the IRS include tax planning and advice, preparing, filing, or
assisting in preparing or filing returns or claims for refund or credit, etc. |
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Term
| A person is practicing before the IRS if |
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Definition
a) Prepares all or substantially all of a tax return, an amended return, or a
claim for refund
b) Communicates with the IRS for a taxpayer regarding taxpayer rights under
laws and regulations administered by the IRS
c) Represents a taxpayer at conferences, hearings, or meetings with the IRS
d) Prepares necessary documents and files them with the IRS for a taxpayer
e) Renders written advice with respect to any entity, transaction, plan, or
arrangement or other plan or arrangement having a potential for tax
avoidance or evasion |
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Term
| The following persons may practice before the IRS |
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Definition
Attorneys
CPAs
Enrolled agents and others specifically permitted
Registered tax return preparers (RTRPs)
Also authorized to practice before the IRS are enrolled actuaries and enrolled
retirement plan agents (for limited purposes) |
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Term
Rules for conduct of an attorney, a CPA, an enrolled agent, or a registered tax return
preparer practicing before the IRS are provided in Part 10 of Circular 230. |
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Definition
a. The person representing a taxpayer before the IRS must be qualified, e.g., a CPA.
b. Conflict of Interest (limited)
c. Diligence must be exercised in preparing and in assisting in preparing, approving, and
filing returns, documents, and other papers relating to IRS matters.
d. Information or records properly and lawfully requested by a duly authorized officer or
employee of the IRS must be promptly submitted.
e. A practitioner must not negotiate, including by endorsement, any income tax refund
check issued to a client.
f. A practitioner who knows that a client has not complied with the revenue laws of the
U.S. or has made an error or omission is required to promptly advise the client of
noncompliance as well as the consequences of such noncompliance, error, or
omission under the Code and regulations.
g. A practitioner may not charge an unconscionable fee in connection with any matter
before the IRS
h. A practitioner must return a client’s records on request, regardless of any fee dispute.
i. Circular 230 allows advertising and solicitation. |
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Term
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Definition
a. When a CPA provides advice to a client concerning certain topics such as tax shelters,
the advice is considered a “covered opinion” and is subject to specific guidelines.
b. The proper definition of a covered opinion is written advice (including electronic
communications) by a practitioner concerning one or more federal tax issues arising
from
1) A transaction the IRS has determined is a tax-avoidance transaction;
2) A partnership or other entity or investment plan, or any other plan or
arrangement, that has tax avoidance or evasion as a principal purpose; or
3) The same as 2), but avoidance/evasion is a significant purpose and the written
advice is a “reliance opinion,” or marketed opinion |
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Term
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Definition
Reliance opinions
conclude it is more likely than not that one or more significant
federal tax issues would be resolved in the taxpayer’s favor in the event of an IRS
challenge.
1) It is called a reliance opinion because a taxpayer normally relies on it to establish
reasonable cause to avoid tax penalties that may later arise.
2) If the CPA does not want the taxpayer to rely on the opinion to avoid penalties,
(s)he can provide a disclaimer of opinion. |
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Term
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Definition
Marketed opinions
are those used by a promoter to market an investment |
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Term
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Definition
An attorney, CPA, enrolled agent, or registered tax return preparer may be censured
(public reprimand), suspended, or disbarred from practice before the IRS for willful
violations of any of the regulations contained in Circular 230. |
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Term
The Secretary of the Treasury may censure, suspend, or disbar from practice before
the IRS any attorney, CPA, enrolled agent, or registered tax return preparer who |
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Definition
1) Is shown to be incompetent or disreputable
2) Refuses to comply with the rules and regulations relating to practice before the
IRS
3) Willfully and knowingly, with intent to defraud, deceives, misleads, or threatens
any claimant or potential claimant |
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Term
Circular 230
lists conduct that may result in suspension or disbarment. Examples Include: |
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Definition
Being convicted of an offense involving dishonesty or breach of trust
Providing false or misleading information to the Treasury Department, including
the IRS
Negotiating a client’s refund check or not promptly remitting a refund check
Circulating or publishing matter related to practice before the IRS that is deemed
libelous or malicious; using abusive language
Suspension from practice as a certified public accountant by any state licensing
authority, any Federal court of record, or any Federal agency, body, or board
Conviction of any felony involving conduct that renders the practitioner unfit to
practice before the IRS
Attempting to influence the official action of any IRS employee by bestowing a
gift, favor, or anything of value |
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Term
A notice of disbarment or suspension of a certified public accountant from practice
before the Internal Revenue Service is issued to |
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Definition
IRS employees, interested
departments and agencies of the federal government, and state licensing authorities |
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Term
Tax Return Positions:
A position will be treated as unreasonable unless... |
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Definition
a) There is or was substantial authority for the position, or
b) The position was properly disclosed and had a reasonable basis. |
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Term
Tax Return Positions:
For tax shelters, a position is treated as unreasonable unless... |
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Definition
For tax shelters, a position is treated as unreasonable unless it is reasonable to
believe that the position would more likely than not be sustained on its merits. |
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Term
| An AICPA member should advise the taxpayer of penalties associated... |
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Definition
with a
recommended position. |
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Term
| A member should not recommend a position that... |
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Definition
1) Exploits the taxing authority’s audit selection process or
2) Is advanced solely to obtain leverage in the bargaining process. |
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Term
| A member has the right and responsibility to be... |
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Definition
| an advocate for the taxpayer. |
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Term
| When the standards of a taxing authority differ from AICPA standards... |
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Definition
the member
should comply with the more stringent standard |
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Term
| Answers to Questions on Returns |
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Definition
A member should make a
reasonable effort
to obtain from the taxpayer appropriate
answers to all questions on a tax return before signing as preparer. |
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Term
| Reasonable grounds for omitting an answer include |
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Definition
1) Information is not readily available, and the answer is insignificant with respect to
taxable income or loss or the tax liability.
2) Uncertainty exists as to the meaning of the question in relation to the return.
3) The answer to the question is extensive, and the return states that the data will
be supplied upon examination |
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Term
A member may in good faith
rely, without verification,
on information provided by the
taxpayer or third parties. BUT... |
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Definition
Reasonable inquiries
should be made if information appears to be incorrect,
incomplete, or inconsistent on its face or on the basis of other facts known. |
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Term
A member who prepares a return should consider information known from
another
taxpayer’s return
if |
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Definition
1) It is relevant,
2) Its consideration is necessary, and
3) Its use does not violate any law or rule of confidentiality. |
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Term
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Definition
A member may use the taxpayer’s estimates if it is
impracticable to obtain exact
data
and the estimates are reasonable under the facts |
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Term
Knowledge of Error:
The member should inform the taxpayer upon becoming aware of... |
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Definition
(1) of an error in a
previously filed return
, (2) of an error in a return subject to an administrative
proceeding, or (3) that the taxpayer
did not file
a required return |
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Term
Knowledge of Error:
The member should advise the taxpayer about... |
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Definition
The member should advise the taxpayer about consequences and recommend
measures to take. |
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Term
Knowledge of Error:
The member is (obligated or not obligated)to inform the taxing authority and may not do so without the taxpayer’s permission, unless required by law. |
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Definition
The member is
not obligated
to inform the taxing authority and may not do so
without the taxpayer’s permission, unless required by law. |
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Term
If the member is requested to prepare a return when the taxpayer has
not corrected a previous year’s error , the member should |
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Definition
consider whether to continue a professional relationship with the taxpayer or withdraw |
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Term
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Definition
A tax return preparer is any person who prepares for compensation, or employs one or
more persons to prepare for compensation, all or a substantial portion of any return of
tax or claim for refund under the IRC. |
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Term
Tax Return Preparer?
Planning. A person who merely gives an opinion about events that have not happened |
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Definition
| Not a Tax Return Preparer |
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Term
Tax return preparer?
Clerical. A person who merely furnishes typing, reproducing, or mechanical
assistance |
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Definition
Clerical. A person who merely furnishes typing, reproducing, or mechanical
assistance is not a preparer. |
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Term
Tax return preparer?
A person who furnishes to a taxpayer or other preparer sufficient information and advice so that completion of the return is simply a mechanical matter... |
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Definition
A person who furnishes to a taxpayer or other preparer sufficient information and
advice so that completion of the return is simply a mechanical matter is
considered a return preparer. |
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Term
Tax Return Preparer?
A person who has primary responsibility for the overall return or claim for refund |
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Definition
A person who has primary responsibility for the overall return or claim for refund
is the
signing tax return preparer
. |
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Term
Tax Return Preparer?
If no compensation is provided for a person (or for his/her employee) to
prepare a return or claim for refund, the person is... |
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Definition
| not subject to the return preparer rules |
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Term
| Not a return preparer according to the tax code... |
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Definition
a) An employee who prepares a return for the employer by whom (s)he is regularly and continuously employed
b) A fiduciary who prepares a return or refund claim for any person (the trust)
c) A person who prepares a refund claim in response to a notice of deficiency
issued to another
d) A person who furnishes typing, reproducing, or other mechanical
assistance |
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Term
True or False?
A tax return preparer may rely, if in good faith, upon information furnished by the taxpayer without having to obtain third-party verification. |
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Definition
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Term
A tax return preparer may rely, if in good faith, upon information furnished by the
taxpayer without having to obtain third-party verification. BUT... |
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Definition
1) However, the preparer may not ignore the implications of the information
furnished.
2) The preparer must make reasonable inquiries if the information appears
inaccurate or incomplete.
3) Deductions. The preparer should make appropriate inquiries of the taxpayer to
determine the existence of facts and circumstances required by an IRC section
or regulations incidental to a deduction (e.g., substantiating documentary
evidence) even if for a minimal amount. |
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Term
| A return preparer may not adopt a position... |
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Definition
| without substantial authority |
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Term
| When is a return preparer required to furnish a completed copy of the return or refund claim to the taxpayer? |
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Definition
A return preparer is required to furnish a completed copy of the return or refund claim
to the taxpayer no later than the time it is presented for the taxpayer’s signature. |
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Term
A return preparer is required to retain a completed copy of each return or claim
prepared for how many years after the close of the return period |
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Definition
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Term
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Definition
The term “negligence” includes any failure to make a reasonable attempt to
comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in the preparation of a return. |
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Term
| In addition to other penalties that may be imposed, there is a penalty for filing a frivolous return. A frivolous return is... |
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Definition
A frivolous return is one that omits information necessary to determine the taxpayer’s tax liability, shows a substantially incorrect tax or
willful understatement of tax liability, is based upon a frivolous position (e.g., that wages are not income), or is based upon the taxpayer’s desire to impede the collection of tax. |
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Term
| The tax code provides that any tax return preparer who endorses or otherwise negotiates any check issued to a taxpayer with respect to taxes imposed by the Internal Revenue Code will be... |
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Definition
| The tax code provides that any tax return preparer who endorses or otherwise negotiates any check issued to a taxpayer with respect to taxes imposed by the Internal Revenue Code will be subject to a penalty. Furthermore, any tax return preparer who operates a check cashing agency that cashes, endorses, or negotiates tax refund checks for returns prepared is also subject to a penalty. |
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Term
Any act that constitutes a
willful attempt to evade federal tax liability , even that of another person, is subject to... |
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Definition
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Term
| Disclosure of Taxpayer Information - Penalties |
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Definition
1) A penalty is imposed on any tax return preparer who discloses or uses any tax return information without the consent of the taxpayer other than for the specific purpose of preparing, assisting in preparing, or providing services in connection with the preparation of any tax return of the taxpayer.
2) The penalty is $250 per disclosure, with a maximum of $10,000 per year.
3) If convicted of knowingly or recklessly disclosing the information, a preparer would be guilty of a misdemeanor and subject to up to $1,000 in fines and up to a year in prison. |
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Term
| Disclosure of Taxpayer Information - Exceptions that will avoid a Penalty |
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Definition
The penalty for disclosure is not imposed if the disclosure was made
a) Pursuant to other provisions of the Code
b) To a related taxpayer, provided the taxpayer had not expressly prohibited
the disclosure
c) Pursuant to a court order
d) To tax return preparers within the same firm
e) For the purpose of a quality or peer review to the extent necessary to
accomplish the review |
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Term
| Disclosure of Taxpayer Information - Consent |
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Definition
1) The taxpayer’s consent must be a written, formal consent authorizing the
disclosure for a specific purpose.
2) The taxpayer must authorize a preparer to
a) Use the taxpayer’s information to solicit additional current business from
the taxpayer in matters not related to the IRS
b) Disclose the information to additional third parties
c) Disclose the information in connection with another person’s return |
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Term
| Disclosure of Taxpayer Information - Confidentiality |
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Definition
1) The confidentiality privilege is extended to certain nonattorneys.
a) The privilege may not be asserted to prevent the disclosure of information
to any regulatory body other than the IRS.
2) In noncriminal tax proceedings before the IRS, a taxpayer is entitled to the same common-law protections of confidentiality, with respect to the tax advice given by any “federally authorized tax practitioner,” as a taxpayer would have if the advising individual were an attorney.
a) A “federally authorized tax practitioner” includes any nonattorney who is authorized to practice before the IRS, such as a CPA.
b) “Tax advice” is defined as advice given by an individual with respect to
matters that are within the scope of the individual’s authority to practice before the IRS.
3) The privilege also applies in any noncriminal tax proceeding in federal court brought by or against the United States. |
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Term
| State Boards of Accountancy |
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Definition
governmental agencies that license accountants to use the designation
“Certified Public Accountant.” |
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Term
| State Boards of Accountancy - Requirements for licensure |
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Definition
Requirements for licensure
vary from state to state. In addition to passing the CPA examination, a candidate may need to satisfy certain educational,
experience, and residency criteria depending on the state |
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Term
True or False?
State boards cannot suspend or revoke licensure |
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Definition
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Term
| AICPA Disciplinary Mechanisms - Professional Ethics Division |
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Definition
1) The Professional Ethics Division investigates ethics violations.
2) It imposes sanctions in less serious cases. For example, it may require an
AICPA member to take additional CPE courses as a remedial measure. |
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Term
| AICPA Disciplinary Mechanisms - Joint Trial Board |
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Definition
More serious infractions come before a joint trial board, which can acquit,
admonish (censure), suspend, or expel a member. |
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Term
| AICPA Disciplinary Mechanisms - Auto matic Expulsion |
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Definition
Upon the member’s exhaustion of legal appeals,
automatic expulsion
without a
hearing results when a member has been convicted of, or has received an
adverse judgment for,
a) Committing a felony
b) Willfully failing to file a tax return
c) Filing a fraudulent tax return on the member’s or a client’s behalf
d) Aiding in preparing a fraudulent tax return for a client |
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Term
| Public Company Accounting Oversight Board (PCAOB) |
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Definition
The PCAOB annually
inspects
registered CPA firms that regularly provide audit reports for more than 100 issuers. It inspects firms at least triennially that regularly provide audit reports for 100 or fewer issuers. Violations are reported to the SEC and state licensing authorities. |
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