Chapter 18 - Terms (Ethics)

Question 1

Audit

Answer 1

An IRS examination and verification of a taxpayer’s return or other transactions with tax consequences. A correspondence audit is a tax audit that the IRS performs by mail. An office audit is an audit by the IRS which is conducted in the agent’s office. A field audit is conducted by the IRS on the business premises of the taxpayer or in the office of the tax preparer representing the taxpayer.

Question 2

Circular 230

Answer 2

Regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS.

Question 3

Civil Penalty

Answer 3

A monetary penalty that can be assessed by the IRS or state or local taxing authority. Civil penalties are generally based on the amount of the understated tax, unpaid tax, or tax due.

Question 4

Criminal Penalty

Answer 4

IRS penalty assessed in cases where the taxpayer has willfully engaged in criminal conduct. Penalties may be monetary or incarceration.

Question 5

Disclosure

Answer 5

The release of tax information by an IRS employee.

Question 6

Due Diligence

Answer 6

Reasonable steps taken by a tax professional in order to satisfy compliance with the tax law and ensure that a tax return is correct.

Question 7

Noncompliance

Answer 7

Failure or refusal to comply with the tax code.

Question 8

Nonsigning Return Preparer

Answer 8

Any tax return preparer who is not a signing tax return preparer, but who prepares all or a substantial portion of a return or claim for refund with respect to events that have occurred at the time the advice is rendered.

Question 9

Privilege

Answer 9

Protection from being required to disclose confidential communications between two parties, such as attorney and client.

Question 10

Regulations

Answer 10

Official interpretations of the tax code by the IRS commissioner. They do not have the force of law except in those cases in which the law on a particular subject calls for rules on that subject to be expounded through regulations.

Question 11

Signing Return Preparer

Answer 11

The individual tax return preparer who has the primary responsibility for the overall substantive accuracy of the preparation of the return or claim for refund.

Question 12

Substantial Authority Standard

Answer 12

An objective standard involving an analysis of the law and application of the law to the relevant facts.

Question 13

Unenrolled Tax Preparer

Answer 13

A tax preparer who is not an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary authorized to practice before the IRS.