M3 Circular 230 Flashcards
MCQ-08201
A CPA prepares income tax returns for a client. After the client signs and mails the returns, the CPA discovers an error. According to Treasury Circular 230, the CPA must:
Promptly advise the client of the error.
When a CPA discovers an error in a previously filed return, the CPA must promptly notify the client of the error.
MCQ-07197
Under Circular 230, which of the following actions of a CPA tax advisor is characteristic of a best practice in rendering tax advice?
Establishing relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the law and facts in a tax memorandum.
MCQ-14900
According to Treasury Circular 230, which of the following rules related to the prompt disposition of pending matters before the IRS applies to CPAs?
Practitioners may not unreasonably delay the prompt disposition of matters pending before the IRS.
MCQ-08643
The IRS requested client records from a CPA who does not have possession or control of the records. According to Treasury Circular 230, the CPA must:
Notify the IRS of the identity of any person who, according to the CPA’s belief, could have the records
If the CPA does not have possession or control of the records, the CPA must notify the IRS of the identity of any person who, according to the CPA’s belief, could have the records.
MCQ-06522
Lawson, a CPA, discovers material noncompliance with a specific Internal Revenue Code (IRC) requirement in the prior-year return of a new client. Which of the following actions should Lawson take?
Discuss the requirements of the IRC with the client and recommend that client amend the return.
MCQ-15371
According to Treasury Department Circular 230, a CPA is not allowed to charge a client a contingency fee for services provided in connection with which of the following types of refund claims filed with the IRS for the client?
A claim for refund of income tax paid to the IRS.
Circular 230 provides that practitioners are prohibited from charging an unconscionable fee and are only allowed to charge a contingent fee in certain circumstances. One situation in which a contingent fee is allowed is for a claim solely for a refund of interest and/or penalties assessed by the IRS but not for a claim for any refund of income tax paid to the IRS.
MCQ-08869
Under Treasury Circular 230, the IRS requires that certain records be returned to a client by the tax practitioner even though no payment for services has been received. Records of the client for this purpose do not include:
A schedule prepared by the practitioner that provides mathematical details of a particular amount included in a client’s tax return.
MCQ-08644
Under Treasury Circular 230, which of the following correctly represents the requirements related to the communication of fee information from a tax practitioner to a taxpayer:
It may be communicated in a number of ways, including in professional lists, telephone directories, mailings, and electronic mail.
MCQ-07198
A CPA prepared a tax return for a client who will receive a refund check. The client is traveling abroad and asked the CPA to pick up the check at the client’s home address. Under Treasury Circular 230, any of the following actions, if taken by the CPA relating to the refund check, would be a violation of the rules of practice before the Internal Revenue Service, except:
Holding the check for safe keeping and awaiting the client’s return.
MCQ-12492
Which of the following situations would most likely be a violation of the Treasury Circular 230 solicitation guidelines by a CPA, assuming that there are no violations of federal or state laws or other rules?
The CPA sends unsolicited e-mails to potential clients guaranteeing tax refunds from the Internal Revenue Service.
MCQ-08198
A CPA prepares a client’s tax return containing business travel expenses without inquiring about the existence of documentation for the expenses even though the amounts provided by the client seemed questionable. Which statement best describes the consequence of the CPA’s lack of inquiry?
The CPA may be assessed a tax return preparer penalty.
MCQ-04114
While preparing a tax return for a new client and reviewing the client’s prior-year return, a CPA noticed an error made by the client’s former tax preparer. According to Treasury Department Circular 230, which of the following is the CPA specifically required to do in this case?
Inform the client of the error and advise of the consequences
MCQ-02080
Vee Corp. retained Walter, CPA, to prepare its income tax returns for Years 4–6. During the Year 6 engagement, Walter discovered that he had made a mistake on Vee’s Year 4 income tax return. What is Walter’s professional responsibility under Circular 230 regarding Vee’s incorrect Year 4 income tax return?
Advise Vee of the associated penalties that may be incurred as a result of the error.
MCQ-15785
A client claims to have driven 50,000 miles for business purposes during the preceding year and wishes to deduct all of the mileage. The CPA suspects that the client is overstating the amount of mileage actually driven for business purposes. According to Treasury Department Circular 230, the CPA should do which of the following?
Make reasonable inquiries about the information supplied.
MCQ-06896
Pursuant to Circular 230, which of the following statements about the return of a client’s records is correct?
The practitioner may retain copies of the client’s records.
