M1-Circular 230

Question 1

When a CPA discovers an error in a previously filed return the CPA must promptly notify the client of the error. (true or false)

Answer 1

true

The CPA cannot prepare an amended return without the client’s permission. Furthermore, the CPA is expressly prohibited from notifying the taxing authority of the error without permission of the client, except when required by law.

Question 2

Upon discovery of an error in a previously-filed return or the client’s failure to file a required return, the tax practitioner should promptly notify the client (either orally or in writing) of the error, noncompliance, or omission and advise the client of the appropriate measures to be taken (e.g., advise the client to file the tax return). If the client does not rectify the error, the tax practitioner should consider withdrawing from the engagement. (true or false)

Answer 2

true

Question 3

Circular 230 (does or does not) prohibit a practitioner holding a refund check for safe keeping and awaiting the clients return?

Answer 3

does not

Circular 230 prohibits a practitioner endorsing the check .

Question 4

A preparer is not required to obtain supporting documentation, unless the preparer has reason to suspect the accuracy of the information provided. However, the preparer must make reasonable inquiries if the information provided by the taxpayer appears incorrect or incomplete. (true or false)

Answer 4

true

Question 5

Characteristic of a best practice under Circular 230 in rendering tax advice is establishing in a tax memorandum relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the laws and facts. (true or false)

Answer 5

true

Question 6

Generally, at the request of the client, the practitioner must return all client records. (true or false)

Answer 6

true

An exception is if state law allows the practitioner to retain the records in the case of a fee dispute, the practitioner may do so. However, the practitioner must (1) return to the client those records that must be attached to the tax return, and (2) allow the client to review and copy the practitioner-retained client records related to the client’s federal tax obligation.

Question 7

If the CPA does not have possession or control of the records, the CPA must do what?

Answer 7

notify the IRS of the identity of any person who, according to the CPA’s belief, could have the records.