Ethics&Resp., License&Disp, Fed tax

Question 1

Who Can Practice Before the IRS?

Answer 1

CPAs, Attorneys, Enrolled Agents, Enrolled Actuaries, and other qualified individuals under certain circumstances

Question 2

TRP Penalty
If a TPR knowingly understates a clients liability by giving them credits or deductions they are not entitled to

Answer 2

greater of $1000 fine or 50% of income from preparing the tax returm
if it was done wilfully/recklessly - greater of $5,000 or 75% of income from preparing the tax

Question 3

different scenarios - TRP Penalty if tax preparer :
1.Fails to give copy of tax return to the client
2.Tax preparer neglects to sign a return / refund claim
3.Omits tax ID nummer (PTIN) on a return
4. Tax preparer does not retain a copy or list of each return they prepare
5. neglects to file correct info on the return

Answer 3

In all scenarios, Penalty : $60 for each return at a max of $30000 in each circumstance for the calender year

Question 4

What is the TRP Penalty if
1. TRP endorses or negotiates any check payable to another person
2. TRP is not dilient in determining taxpayers eligibility for diff tax benefits, e.g. filing status, tax credits

Answer 4

$600 each

Question 5

TRP Penalty if you Abuse or buy tax shelters

Answer 5

50% of income earned
gross valuation overstatement = lesser of $1,000 or 100% of the gross income

Question 6

TRP assist in underestimating tax liability

Answer 6

$1,000 for regular returns
$10,000 for corporate returns

Question 7

An individual makes an unauthorized disclosure or use of information provided for preparing a tax return after July 1, 2019.

Answer 7

Penalty: $250 for each unauthorized disclosure or use, capped at $10,000 per year.
If the unauthorized disclosure or use is linked to an identity theft crime, the penalty is $1,000 for each instance, with a maximum annual penalty of $50,000.

Question 8

Scenario: An individual commits fraud or makes false statements on tax returns.
Penalty:

Answer 8

The individual can be fined up to $100,000 ($500,000 for corporations),
face imprisonment for up to 3 years, and may be required to cover the costs of prosecution.

This also applies to fraudulent activities associated with offers in compromise or closing agreements

Question 9

Scenario: An individual prepares fraudulent tax returns, statements, or other documents.

Answer 9

Penalty: The individual can be fined up to $10,000 ($50,000 for corporations) and imprisoned for up to 1 year.

Question 10

Scenario: A tax preparer knowingly or recklessly discloses or uses information provided to prepare a tax return for purposes other than its preparation.

Answer 10

Penalty: The tax preparer can be fined up to $1,000, imprisoned for up to 1 year, and may also be required to pay for the costs of prosecution.

Question 11

Scenario: An individual engages in unlawful conduct concerning tax shelters and reportable transactions.

Answer 11

Penalty: The U.S. government can initiate legal action in a federal district court to cease the individual’s unlawful actions. This might relate to violations in Circular 230 and other rules about practicing before the IRS.

Question 12

U.S. Tax Court:
Purpose: This is the most common venue for taxpayers to dispute
an IRS deficiency notice. Unlike other courts, taxpayers don’t
need to pay the disputed amount before suing.
Decision: Decisions can be appealed to the relevant U.S. Court of
Appeals

Question 13

Federal District Court:
Purpose: If a taxpayer wishes to dispute the IRS after paying the
tax in question, they can sue for a refund in their local federal
district court.
Decisions can be appealed to the relevant U.S. Court of
Appeals

Question 14

U.S. Court of Federal Claims:
Purpose: This court, located in Washington, D.C., is another
venue for taxpayers seeking refunds after paying disputed taxes.
Decision: Decisions can be appealed to the U.S. Court of Appeals
for the Federal Circuit.

Question 15

U.S. Court of Appeals:
Purpose: This is the intermediate appellate level. If a taxpayer or the IRS is dissatisfied with the decision from the U.S. Tax Court,
Federal District Court, or Court of Federal Claims, they can
appeal to the U.S. Court of Appeals.

Decision: Decisions can be appealed to the U.S. Supreme Court,
but that court hears very few tax cases.

Question 16

U.S. Supreme Court:
Purpose: This is the highest court in the U.S., and it has
discretionary jurisdiction, meaning it can choose which cases it
wants to hear.
Decisions: The court’s decisions are final, with implications for all
taxpayers, not just the parties involved in the case.

Question 17

Reasonable basis - 20%
Realistic Possibility - 1/3 chance (33%)
Substantial Authority - 40%
More likely than not - 50%

Answer 18

Internal Revenue Code (IRC):
Often referred to as the “Tax Code,” the IRC is the cornerstone of federal taxation. It’s a comprehensive law that defines how federal
taxes are levied, administered, and collected.
The IRC, enacted by Congress, has the highest authority in tax
law.

Question 19

• IRC
• TReasury Regulations’
• Revenue rulings and revenue procedures
• IRS Private Letter Rulings
• US Supreme court decisions
• Lower Federal Court decisions
• IRS Publications, notices and forms
• Other Sources: like treatises, articles, and tax journals, provide interpretations, analysis, and opinions on tax issues

Answer 20

Treasury Regulations:
These are official interpretations of the IRC issued by the
Department of the Treasury.
Treasury Regulations provide the IRS’s official interpretation of
the IRC and give detailed guidance on its application. They can
be either “final,” “temporary,” or “proposed”

Answer 21

U.S. Supreme Court Decisions:
The U.S. Supreme Court is the highest court in the land and its
decisions have broad implications.
When the Court makes a ruling on a tax matter, it provides a
binding interpretation of the law.

Answer 22

Lower Federal Court Decisions:
These include decisions from the U.S. Tax Court, U.S. District
Courts, and the U.S. Court of Federal Claims.
These courts handle many tax-related cases, and their decisions
serve as precedents, unless overturned by higher courts.

Answer 23

IRS Publications, Notices, and Forms:
These provide practical guidance to taxpayers on various tax
issues.
Though not legally authoritative, these materials are helpful for
understanding the IRS’s interpretation and application of tax laws.

Question 24

Circular 230 addresses the
following (mnemonic)

Answer 24

ADS Rules -
● A - Authority to practice before IRS
● D - Duties and restrictions relating
to practice
● S - Sanctions for violations
● Rules applicable to disciplinary
hearings.