Representation Flashcards
Which of the following statements regarding accounting methods is false?
A. A change from the accrual to the cash method of accounting requires consent from the IRS.
B. If inventories are necessary, the accrual method is used for sales and purchases.
C. Under the cash method of accounting, gross income includes all items of income actually or constructively received during the year.
D. A combination (hybrid) method is not an acceptable method of accounting.
A combination (hybrid) method is not an acceptable method of accounting.
Explanation
Under Sec. 446, one or more hybrid methods of accounting may be authorized by regulation. The regulations permit the use of a combination of methods if the combination clearly reflects income and is consistently used.
A Tax Information Authorization (TIA, Form 8821) authorizes an appointee to
A. Receive disclosures of tax return information on behalf of the taxpayer.
B. Advocate the taxpayer’s position with respect to federal tax laws.
C. Receive the taxpayer’s refund check.
D. Execute waivers, consents, or closing agreements.
Receive disclosures of tax return information on behalf of the taxpayer.
Explanation
A representative must file a TIA to receive or inspect confidential tax information on behalf of the taxpayer unless the representative has filed a POA to perform those specific acts. A TIA does not authorize an appointee to advocate the taxpayer’s position with respect to federal tax laws; execute waivers, consents, or closing agreements; or otherwise represent the taxpayer before the IRS.
A properly executed power of attorney must contain all of the following EXCEPT
A. Name of the preparer of the return for the year(s) and period(s) involved.
B. The specific year(s) and period(s) involved.
C. Signature of the appointed representative.
D. Identification number of the taxpayer (i.e., Social Security number or employer identification number).
Name of the preparer of the return for the year(s) and period(s) involved.
Explanation
Form 2848 constitutes the power of attorney and declaration of representative. The identification number of the taxpayer, the specific year(s) and period(s) involved, and the signature of the appointed representatives must appear on a properly executed power of attorney. The name of the preparer of the return for the year(s) and period(s) involved is not included on the POA.
With regard to revoking a power of attorney, which of the following statements is false?
A. A recognized representative may revoke a power of attorney by filing a statement to that effect and sending it to each office of the IRS where the power of attorney was originally filed. The statement must be signed by the representative and the taxpayer.
B. You can revoke a Form 2848 power of attorney by sending a copy of the original Form 2848 to each office of the IRS where you originally filed the form. You must write the word “REVOKE” at the top center of page 1 and sign and date the form at the bottom of page 2.
C. A new power of attorney revokes a prior power of attorney if it is granted by the taxpayer to another recognized representative with respect to the same matter, unless the new power of attorney states otherwise and another condition is met.
D. You can revoke a power of attorney for which a Form 2848 was not filed by writing a letter to that effect and sending it, along with a copy of the original power of attorney, to each office of the IRS where you originally filed it.
A recognized representative may revoke a power of attorney by filing a statement to that effect and sending it to each office of the IRS where the power of attorney was originally filed. The statement must be signed by the representative and the taxpayer.
Explanation
A taxpayer may revoke a power of attorney without authorizing a new representative by filing a statement of revocation with those offices of the Internal Revenue Service where the taxpayer originally filed the power of attorney. The statement of revocation must indicate that the authority of the first power of attorney is revoked and must be signed by the taxpayer, but not by the representative. Also, the name and address of each recognized representative whose authority is revoked must be listed (or a copy of the power of attorney to be revoked must be attached). The representative is not required to sign the statement.
Which one of the following changes requires permission from the Internal Revenue Service?
A. A correction of an error in calculating the tax liability of a previous year.
B. A change from the regular MACRS method to the straight-line MACRS method for personal property acquired in a tax year.
C. A change from the FIFO method to the LIFO method for valuing inventories.
D. A change from the cash method to the accrual method.
A change from the cash method to the accrual method.
Explanation Section 446(e) requires the taxpayer to obtain permission from the IRS to change a method of accounting. A change from the cash method to the accrual method is a change in the method of accounting that requires permission from the IRS [Reg. 1.446-1(e)(2)(ii)(a)].
Which of the following statements with respect to executing a power of attorney is false?
A. In the case of a partnership, a power of attorney must be executed by all partners, or if executed in the name of the partnership, by the partner or partners duly authorized to act for the partnership. The partner or partners must certify that they have such authority.
B. In the case of any matter concerning a joint return in which both husband and wife are not to be represented by the same recognized representative(s), the power of attorney must be executed by the spouse who is to be represented.
C. The Internal Revenue Service will accept a power of attorney other than Form 2848, provided such document satisfies the requirements of Reg. 601.504(a).
D. In the case of a corporation, a power of attorney may be executed only by the officer or employee who signs the return.
In the case of a corporation, a power of attorney may be executed only by the officer or employee who signs the return.
Explanation
Except when Form 2848 (or its equivalent) is executed by an attorney-in-fact under the provisions of Sec. 601.503(b)(3), the individual who must execute a Form 2848 depends on the type of taxpayer involved. In the case of a corporation, a power of attorney must be executed by an officer of the corporation with authority to legally bind the corporation. The officer must certify that (s)he has such authority.
Which of the following statements is incorrect with respect to changes in accounting methods requiring the consent of the IRS?
A. Consent is required when a change in method or basis used to value inventory is made.
B. Consent is necessary when you are required to make a change from the cash to the accrual method of accounting.
C. Consent is required when you change the method of figuring depreciation (except certain changes to straight line).
D. Consent is required to use different methods of accounting for each separate business that you operate.
Consent is required to use different methods of accounting for each separate business that you operate.
Explanation
When a taxpayer has two or more separate businesses and keeps a complete and separate set of books and records for each, the taxpayer may use a different method of accounting for each business so long as such method clearly reflects the income of that particular enterprise.
Which of the following accounting methods is NOT an acceptable method of reporting income and expenses?
A. If an inventory is necessary to account for your income, you must use an accrual method for purchases and sales. You can use the cash method for all other items of income and expenses.
B. Any combination that includes the cash method is treated as the cash method.
C. If you use the cash method for figuring your income, you can use the accrual method for figuring your expenses.
D. You can use different accounting methods for reporting business and personal items.
If you use the cash method for figuring your income, you can use the accrual method for figuring your expenses.
Explanation
If the accrual method is used to report expenses, it must be used to report income items (Publication 538).
Which of the following items is NOT a change in the method of accounting requiring the consent of the IRS?
A. An adjustment in the useful life of a depreciable asset.
B. Change from the cash method to accrual method or vice versa.
C. Change in the method or basis used to value inventories (except the change from the FIFO method to the LIFO method).
D. Change in method of figuring depreciation (except certain changes to the straight-line method).
An adjustment in the useful life of a depreciable asset.
Explanation
To change an accounting method, the taxpayer must generally obtain the permission of the IRS [Sec. 446(e)]. However, the taxpayer is required to notify the Commissioner of a change in the useful life of a depreciable asset only if the taxpayer and the Commissioner had entered into a written agreement specifying the useful life. Note that most assets have fixed periods over which to compute depreciation under ACRS and MACRS. This rule does not apply to intangible property acquired before August 6, 1993, that is not eligible for amortization under Sec. 197 and for which the useful life is relevant or to property placed in service prior to 1981.
A power of attorney (POA) does NOT have to include
A. The employee plan number.
B. The taxpayer’s address.
C. The name of the taxpayer.
D. The identification number of the representative.
The identification number of the representative.
Explanation
A POA is a document signed by the taxpayer, as principal, by which an individual is appointed to perform certain specified acts on behalf of the principal. The identification number of the taxpayer, not the representative, must be included in the POA.
How many years in the future can an authorization on a Form 2848 be recorded to the Centralized Authentication File (CAF)?
A. Current year + 3.
B. Current year + 4.
C. Current year + 2.
D. Current year + 1.
Current year + 3.
Explanation
Form 2848 instructions stipulate that “the IRS will not record on the CAF system future tax years or periods listed that exceed 3 years from December 31 of the year that the IRS receives the power of attorney.”
A power of attorney must contain all of the following information EXCEPT the
A. Type of tax involved.
B. Identification number of the representative (i.e., Social Security number and/or employer identification number).
C. Name and mailing address of the recognized representative(s).
D. Specific year(s)/period(s) involved.
Identification number of the representative (i.e., Social Security number and/or employer identification number).
Explanation
A power of attorney must contain the following information:
Name and mailing address of the taxpayer
Identification number of the taxpayer (i.e., Social Security number and/or employer identification number)
Employee plan number (if applicable)
Name and mailing address of the recognized representative(s)
The state in which the representative is admitted to practice, if the representative is an attorney or a CPA
Description of the matter(s) for which representation is authorized, which, if applicable, must include
a. The type of tax involved
b. The federal tax form number
c. The specific year(s)/period(s) involved
A clear expression of the taxpayer’s intention concerning the scope of authority granted to the recognized representative(s)
Signature of the appointed representative
With respect to disclosure, a Tax Information Authorization (TIA, Form 8821) or power of attorney (POA) is not required for the representative of an administrator at a conference on an estate tax case if the representative meets three requirements. Which of the following is one of the three requirements? The representative
A. Is recognized to practice before the IRS.
B. Is not the attorney of record for the administrator where the estate is administered.
C. Did not prepare the estate tax return involved in the estate tax case.
D. None of the answers are correct.
Is recognized to practice before the IRS.
Explanation
A representative must file a TIA to receive or inspect confidential tax information on behalf of the taxpayer unless the representative has filed a POA to perform those specific acts. However, in certain instances, a TIA or POA is not required of a representative with respect to disclosure. One of these instances concerns a representative of an administrator at a conference on an estate tax case. A TIA or POA is not required of a representative who represents an executor or administrator at a conference on an estate tax case if the representative presents evidence that (s)he (1) prepared the estate tax return on behalf of the executor or administrator; (2) is recognized to practice before the IRS; and (3) is the attorney of record for the executor or administrator before the court where the will is probated or the estate is administered.
Which of the following statements is false concerning the filing of Form 8821 (Taxpayer Information Authorization)?
A. Form 8821 revokes a power of attorney that is in effect.
B. Form 8821 authorizes a representative to receive or inspect confidential tax information on behalf of the taxpayer.
C. Form 8821 does not authorize an appointee to execute waivers, consents, or closing agreements.
D. Form 8821 does not authorize an appointee to represent the taxpayer before the IRS.
Form 8821 revokes a power of attorney that is in effect.
Explanation
A representative must file Form 8821 to receive or inspect confidential tax information on behalf of the taxpayer unless the representative has filed a power of attorney (Form 2848) to perform those specific acts. A Form 8821 does not revoke a power of attorney.
Which of the following is NOT a proper execution of a power of attorney or tax information authorization?
A. For a taxpayer with a court-appointed guardian, by the one appointed.
B. For a deceased taxpayer, by the executor or administrator.
C. For a corporation, by an officer having authority to bind the corporation.
D. For a partnership, by any partner.
For a partnership, by any partner.
Explanation
Rules for execution of a power of attorney and a tax information authorization are contained in 26 CFR 601.503 and 601.504. If the power of attorney is for a partnership, either all partners must sign or a duly authorized partner may sign.
All of the following statements concerning the IRS’s Centralized Authorization File (CAF) number are true EXCEPT
A. A CAF number is a unique number that will be assigned to any person who files with the IRS a power of attorney and a written declaration that (s)he is currently appointed under powers of attorney or designated under the tax information authorization system.
B. A CAF number is a unique number that will be assigned to any person who files with the IRS a tax information authorization.
C. The CAF number entitles the person to whom it is assigned to practice before any office of the IRS except a regional appeals office.
D. The CAF allows IRS personnel to identify representatives and the scope of their authority and will automatically direct copies of notices and correspondence to the person authorized by the taxpayer.
The CAF number entitles the person to whom it is assigned to practice before any office of the IRS except a regional appeals office.
Explanation
The CAF number is the unique number that the Internal Revenue Service will assign to a representative after (s)he has filed a power of attorney or tax information authorization with an IRS office that is using the CAF system. The issuance of a CAF number does not indicate that a person is either recognized or authorized to practice before the IRS. That determination is made under the provisions of Circular 230 [26 CFR 601.506(d)].
You have a durable power of attorney–not a Form 2848–that contains all information required for validity under the Conference and Practice Requirements. In order to have the IRS enter this durable power of attorney on the Centralized Authorization File, you must submit
A. The durable power of attorney and Form 8821, Tax Information Authorization.
B. The durable power of attorney and Form 8821, Tax Information Authorization AND the durable power of attorney and your Social Security number.
C. The durable power of attorney and a completed Form 2848.
D. The durable power of attorney and your Social Security number.
The durable power of attorney and a completed Form 2848.
Explanation
The IRS will accept a power of attorney other than one on Form 2848, provided that it includes all of the information required by the official form. However, for purposes of processing on the Centralized Authorization File, a Form 2848 must be attached to the nonstandard form. The Form 2848 must be completed, but it does not need to be signed by the taxpayer.
Which of the following is false regarding the execution of a power of attorney?
A. If a joint return is involved in which both the husband and wife are to be represented by the same representative(s), either the husband or the wife alone can execute the power of attorney.
B. In the case of a partnership (that is not dissolved), the power of attorney must be executed by the partner or partners duly authorized to act for the partnership. The partner or partners must certify that they have such authority.
C. If a dissolved partnership is involved, each of the former living partners must execute a power of attorney.
D. If a corporation is involved, the power of attorney must be executed by an officer of the corporation having authority to legally bind the corporation. The officer must certify that (s)he has such authority.
If a joint return is involved in which both the husband and wife are to be represented by the same representative(s), either the husband or the wife alone can execute the power of attorney.
Explanation
According to 26 CFR 601.503(c)(2), if a joint return is involved and the husband and wife are to be represented by the same representative, the power of attorney must be signed by both spouses.
Identify the true statement regarding partnership audits.
A. Determination of the tax treatment of partnership items is made by individualized proceedings.
B. The partnership audit provisions apply only to partnership items.
C. Notice of the beginning of administrative proceedings must be given to all partners.
D. A partnership representative receives notice on behalf of all partners.
The partnership audit provisions apply only to partnership items.
Explanation
In an administrative or judicial proceeding concerning partnership items, the determination of the tax treatment of partnership items is made at the partnership level in a single administrative proceeding, rather than in individualized proceedings.
Identify the true statement regarding the scope of authority of a power of attorney (POA).
A. “In all tax matters” may be used to describe the representative’s scope of authority.
B. The scope of authority should specifically state the type of tax and years involved.
C. The scope of authority must list the divisions of the IRS involved in the matter.
D. Technical language is necessary to describe the representative’s scope of authority.
The scope of authority should specifically state the type of tax and years involved.
Explanation
A POA is a written authorization for an individual to act on behalf of another individual before the IRS. If the authorization is not limited, the individual can generally perform all acts that the taxpayer can perform. Technical language is not necessary, but the POA must clearly specify which acts the representative is authorized to perform. The scope of authority should be specific as to the tax matters, e.g., type of tax, and the years or periods involved.
What is the purpose of the Centralized Authorization File (CAF) number?
A. This is the number a preparer would use to sign an electronically filed return.
B. Use of the CAF number allows the IRS to verify an individual’s authority to practice before the IRS.
C. The CAF number is another means of tracing enrolled agents.
D. None of the answers are correct.
None of the answers are correct.
Explanation
The CAF system is a computer file containing information regarding individuals appointed under powers of attorney or designated under the tax information authorization system. The CAF system gives IRS personnel quicker access to authorization information. The CAF does not indicate that a person is either recognized or authorized to practice before the IRS.
A representative who signs a Form 2848, Power of Attorney and Declaration of Representative, declares under penalty of perjury that (s)he is aware of which of the following?
A. The federal income tax regulations.
B. All of the answers are correct.
C. The regulations in Treasury Department Circular No. 230.
D. Recent tax law developments that relate to the tax matter(s) listed on line 3 of the Form 2848.
The regulations in Treasury Department Circular No. 230.
Explanation
The declaration of representative states that the representative is subject to regulations contained in Circular 230 (31 CFR, Subtitle A, Part 10), as amended, governing practice before the IRS.
With respect to powers of attorney, which of the following statements is false?
A. IRS Form 2848, Power of Attorney and Declaration of Representative, cannot be used by a taxpayer to appoint an Annual Filing Season Program participant to act as the taxpayer’s representative before agents and examining officers of the Examination Division of the Internal Revenue Service.
B. A taxpayer can execute a durable power of attorney, which specifies that the appointment of the attorney-in-fact will not end due to the incapacity or incompetency of the taxpayer.
C. The IRS will accept a copy of a power of attorney.
D. A taxpayer’s signature on a power of attorney does not have to be notarized or witnessed.
IRS Form 2848, Power of Attorney and Declaration of Representative, cannot be used by a taxpayer to appoint an Annual Filing Season Program participant to act as the taxpayer’s representative before agents and examining officers of the Examination Division of the Internal Revenue Service.
Explanation
A recognized representative is defined in 26 CFR 601.502 as an individual who is appointed under a power of attorney, who files a declaration of representative, and who is a member of certain specified categories. One category is an enrolled agent. An example of another category is an AFSP participant, who has limited representation rights before the IRS. A properly completed Form 2848 satisfies the requirements of both a power of attorney and a declaration of representative [26 CFR 601.503(b)(1)]. A recognized representative is an individual who is recognized to practice before the IRS [26 CFR 601.501(b)(12)].
Sarah Smith wants her business associate, Ned Nelson, to be informed about her personal tax accounts. To have this information disclosed to Ned, Sarah files a complete Tax Information Authorization (TIA, Form 8821) with the IRS. Which of the following statements is true regarding the authority given to Ned by this TIA?
A. Ned will have no power to represent Sarah before the IRS.
B. Ned may represent Sarah at a conference with the IRS.
C. Ned may represent Sarah before the IRS on limited matters.
D. Ned may sign a closing agreement for Sarah.
Ned will have no power to represent Sarah before the IRS.
Explanation
A TIA filed with the IRS allows a taxpayer’s appointee to receive or inspect confidential tax information on behalf of the taxpayer. It is strictly a disclosure authorization form and cannot be used to designate an individual to represent the taxpayer. A TIA does not authorize an appointee to advocate the taxpayer’s position with respect to federal tax laws; execute waivers, consents, or closing agreements; or otherwise represent the taxpayer before the IRS. Thus, Ned will not have any power to represent Sarah before the IRS, as a result of the filed TIA.
If a representative chooses to use a non-IRS power of attorney form, which of the following “Declaration of Representative” statements is NOT required in order for the power of attorney to be valid?
A. A declaration that the representative is not currently under suspension or disbarment from practice before the IRS or other practice of his or her profession by any other authority.
B. A declaration that the representative is authorized to practice before the IRS in his or her capacity as an attorney, a certified public accountant, an enrolled agent, etc.
C. A declaration that the representative is not currently under investigation by the IRS.
D. A declaration that the representative is aware of the regulations contained in Treasury Department Circular 230 concerning the practice of enrolled agents, attorneys, CPAs, etc.
A declaration that the representative is not currently under investigation by the IRS.
Explanation
The Declaration of Representative is a statement made by a representative under the penalty of perjury that (s)he is (1) authorized to practice before the IRS in his or her capacity as an attorney, a CPA, an enrolled agent, etc.; (2) not currently suspended or disbarred from practice before the IRS; (3) authorized to represent the taxpayer for the matter specified in the power of attorney; and (4) aware of the regulations governing practice before the IRS. It is filed with a power of attorney, and its failure to indicate current investigation by the IRS will not invalidate the power of attorney.
A taxpayer filed an appeal of an IRS examination and then signed IRS Form 8821, Tax Information Authorization, on behalf of an unenrolled return preparer. Which of the following is correct?
A. The preparer may represent the client before IRS Appeals with the oral consent of the client.
B. The preparer may represent the client before IRS Appeals with a note attached by the client.
C. The preparer may not represent the client before IRS Appeals.
D. The preparer may represent the client before IRS Appeals based on the Form 8821.
The preparer may not represent the client before IRS Appeals.
Explanation
Form 8821 is used if a taxpayer wants to authorize an individual or organization to request and inspect confidential tax return information but does not want to authorize that individual or organization to represent the taxpayer before the IRS.
A power of attorney or tax information authorization should contain all of the following information EXCEPT
A. The divisions of the IRS that are involved in the matter covered by the power of attorney.
B. The year(s) or period(s).
C. The type of tax involved.
D. The taxpayer’s intent as to the scope of authority of the representative.
The divisions of the IRS that are involved in the matter covered by the power of attorney.
Explanation
A power of attorney or tax information authorization need not list the divisions of the IRS that are involved in the matter. Required information includes the taxpayer’s intention as to the scope of the authority of the representative, the tax matter(s) to which the authority relates, and the year(s) or period(s) involved [26 CFR 601.503(a)].
