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Federal Tax Ethics Course

This topic contains concepts governing the recognition of attorney, certified public accountant, enrolled agents, and other persons representing taxpayers before the IRS. Regulations such as rules relating to the authority to practice before the Internal Revenue Service, the duties and restrictions relating to such practice, prescription of sanctions for violating the regulations, the rules applicable to disciplinary proceedings and the availability of official records. Usually, attorneys, CPAs, enrolled agents, and enrolled actuaries can represent taxpayers before the IRS. Under special circumstances, other individuals, including un-enrolled tax return preparers can assist taxpayers on tax matters. Special forms need to be filed to authorize an individual or certain entities to receive and inspect a taxpayer's confidential tax information. In addition, the following information is great for understanding what ethics is. We need to strive to be as ethical as the following reading material is trying to teach. This material goes into detail on what it is to live a good life. These are good concepts to think about.

Step
Instructions -
You must do all of the following (steps 1 - 3)
Links:

(We must receive from you both an assignment and a quiz for each Tax Subject)

1
Print the checklist:

2
Read the reading material and answer the questions on this page.
Reading Material

3
Submit the answers to the Review Questions online (the questions on this page). Scroll down for all questions on this page. When you are ready to submit click on the Review Questions link. Make sure you either write your answers or print the page before you click on the Review Questions link.
Review-Questions

Important: If you fail a topic you can keep trying until you pass. Every time you try the questions will be different.

Most forms are in Adobe Acrobat PDF format. You will need Adobe Reader to view and print these forms. If you do not already have Adobe Reader installed on your computer, you may download the software for free.

Review Questions

Question

1 of 20

The following is a true statement regarding practitioners.

A. The practitioner must use reasonable efforts to identify and ascertain the facts, which may relate to future events if a transaction is prospective, and to determine which facts are relevant.

B. The practitioner can base an opinion on any unreasonable factual assumptions (including assumption as to future events).

C. The practitioner can base an opinion on any unreasonable factual representations, statements or findings or of the taxpayers or any other person.

D. It is reasonable for a practitioner to rely on a projection, financial forecast or appraisal if the practitioner knows or should know that it is incorrect or incomplete or was prepared by a person lacking skills or qualifications.

2 of 20

Any practitioner who has principal authority and responsibility for overseeing a firm's practice of providing advice concerning federal tax issues must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees. Any such practitioner will be subject to discipline for failing to comply with the requirements if

A. The practitioner takes reasonable steps to ensure that the firm has adequate procedures to comply with section 10.35, and individuals who are members of, associated with, or employed by, the firm are, or have engaged in a pattern or practice, in connection with their practice with the firm, fail to comply with such.

B. The practitioner knows or should know that one or more individuals that don't comply with section 10.35 and the practitioner fails to take prompt action to correct the noncompliance.

C. The practitioner does not give written advice as to the conduct of individuals who are not in compliance with section 10.35.

D. None of the above.

3 of 20

The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service if the practitioner

A. Is shown to be incompetent or disreputable.

B. Fails to comply with any regulation under the prohibited conduct standards or with intent to defraud.

C. Willfully and knowingly misleads or threatens a client or prospective client.

D. Any of the above.

4 of 20

Incompetence or disreputable conduct for which a practitioner may be sanctioned includes

A. Willfully disclosing or otherwise using a tax return or tax return information in a manner authorized by the Internal Revenue Service.

B. Failing to sign a tax return prepared by the practitioner when the practitioner's signature is not required by the federal tax laws.

C. Contemptuous conduct in connection with the practice before the Internal Revenue Service, including the use of abusive language or making false accusations or statements, knowing them to be false.

D. Giving false or misleading information to the Department of the Treasury or any officer or employee thereof, or to any tribunal authorized to pass upon federal tax matters, when not knowing the information to be false or misleading.

5 of 20

A complaint is not sufficient to just fairly inform the respondent of the charges brought so that the respondent is able to prepare a defense.

True

False

6 of 20

To maintain active enrollment to practice before the Internal Revenue Service, each individual is required to have the enrollment renewed. The following statement is correct regarding enrollment renewal.

A. If you don't receive notification from the Director of the Office of Professional Responsibility of the renewal requirement, it means the individual is not required to renew.

B. The effective date of renewal is the first day of the fourth month following the close of the period for renewal.

C. A minimum of 42 hours of continuing education credit must be completed during each enrollment cycle.

D. A minimum of 10 hours of continuing tax education credit must be completed during each enrollment year of an enrollment cycle.

7 of 20

To qualify for continuing tax education credit for an enrolled agent, a course of learning must

A. Be a qualifying program designed to enhance professional knowledge in federal taxation or federal taxation related matters.

B. Be a qualifying program consistent with the Internal Revenue Code and effective tax administration.

C. Be sponsored by a qualifying tax education sponsor.

D. All of the above.

8 of 20

A practitioner may take acknowledgments, administer oaths, certify papers, or perform official acts as a notary public with respect to any matter administered by the Internal Revenue Service.

True

False

9 of 20

A practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if

A. There is no significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibility to another client, a former client or a third person, or by a personal interest of the practitioner.

B. The representation of one client will be directly adverse to another client.

C. The representation is prohibited by law.

D. Each affected client waives the conflict of interest and gives informed consent.

10 of 20

Tax advisors should provide clients with the highest quality representation concerning federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service. Best practice includes

A. Advising a client to take a position on a document, affidavit or other paper submitted to the Internal Revenue Service.

B. Advising a client to submit a document, affidavit or other paper to the Internal Revenue Service even if this impedes the administration of the federal tax laws.

C. Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law to the relevant facts, and arriving at a conclusion supported by the law and the facts.

D. Advising a client to take any step necessary to avoid the payment of tax at all cost.

11 of 20

In cases where any part of the understatement of the tax liability is due to a willful attempt by the return preparer to understate the liability, or if the understatement is due to reckless or intentional disregard of the rules or regulations by the tax preparer, the preparer is subject to a

A. $5,000 penalty.

B. Penalty of 50% of income derived or to be derived.

C. $1,000 penalty.

D. Greater of A or B above.

12 of 20

A penalty will not be imposed on any part of an underpayment if there was reasonable cause for your position and you acted in good faith in taking that position. However, if you failed to keep proper books and records or failed to substantiate items properly, you

A. Can avoid the penalty by disclosure.

B. Cannot avoid the penalty by disclosure.

C. Cannot file Form 8275-R.

D. Should just pay the preparer penalty.

13 of 20

The penalty for reckless or intentional disregard of a regulation may be avoided by disclosure only if the position represents a good faith challenge to the validity of the regulation and has a reasonable basis. Generally, the accurate-related penalty of any position of a tax underpayment attributable to negligence or disregard of the rules or regulations is

A. 10%

B. 20%

C. 40%

D. 50%

14 of 20

An understatement in the excess of the amount of tax required to be shown on the tax return over the amount of tax shown on the return for the tax year, reduced by any rebates. There is a substantial understatement if the amount of the understatement for any year exceeds

A. 10% of the tax required to be shown on the return for the tax year.

B. $5,000 ($10,000 for a corporation).

C. $10,000,000.

D. The greater of A or B above.

15 of 20

Any individual engaged in limited practice before the IRS who is involved in disreputable conduct may be

A. Disbarred, suspended, or censured.

B. Dismissed.

C. Jailed.

D. Forced to meet with the IRS.

16 of 20

The following un-enrolled individual can represent the specific taxpayers before the IRS, provided this individual presents satisfactory identification.

A. A family member.

B. An officer of a corporation.

C. An employee representing the employer.

D. Any of the above.

17 of 20

In general, individuals who are not eligible or who have lost the privilege as a result of certain actions cannot practice before the IRS. If an individual loses eligibility to practice, his or her power of attorney will be

A. Discarded.

B. Returned to him by certified mail.

C. Will not be recognized by the IRS.

D. (As long as he files one) recognized by the IRS.

18 of 20

As for negotiation of taxpayer refund checks, practitioners who are income tax return preparers (unenrolled)

A. Can endorse any refund issued to the taxpayer.

B. Must not endorse or otherwise negotiate (cash) any refund check issued to the taxpayer.

C. Can negotiate any refund check issued to the taxpayer.

D. Both A and C above.

19 of 20

Being convicted of any criminal offense under the revenue laws or of any offense involving dishonesty or breach of trust is

A. Acceptable conduct if offense was committed in a state other than the one you practice in.

B. Alright as long as it does not directly involve your client.

C. Not considered disreputable conduct.

D. Considered disreputable conduct.

20 of 20

Who presides over a hearing on a complaint for disbarment based on a violation of the laws or regulations governing practice before the IRS?

A. The Commissioner of the IRS.

B. The Office of Professional Responsibility.

C. The United States Tax Court Judge.

D. The Secretary of the Treasury.

Please Note: If you filled out the answers directly on this page, please print this page or write down the answers before you proceed to submit them by clicking on "Review Questions" link in step 3 above.

Back to Tax School Homepage

Revised: 07/26/15