Enrolled Agent part 3 Exam 1 Taxpayer Questions with Correct Answers
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EA - Enrolled Agent
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EA - Enrolled Agent
1. Ethan claimed the Earned Income Tax Credit for the past several years. The IRS audited his returns and disallowed the EITC in 2019. The IRS also found that Ethan claimed the EITC due to reckless disregard of the EITC rules. For how many tax years is Ethan barred from claiming the EITC? Ethan can...
Enrolled Agent part 3 Exam 1 Taxpayer
Questions with Correct Answers
1. Ethan claimed the Earned Income Tax Credit for the past several years. The IRS
audited his returns and disallowed the EITC in 2019. The IRS also found that Ethan
claimed the EITC due to reckless disregard of the EITC rules. For how many tax years
is Ethan barred from claiming the EITC? Ethan cannot claim the EITC for:
A. 1 year.
B. 2 years.
C. 3 years.
D. 4 years. - Answer-1. The answer is B. Ethan will not be allowed to claim the credit for
at least two tax years. There are special restrictions on EITC claims by taxpayers who
have had previous ElTC claims denied. A taxpayer who claimed the EITC due to
reckless or intentional disregard of the ElTC rules cannot claim the ElTC for two tax
years. If the error was due to fraud, the taxpayer cannot claim the ElTC for ten tax
years.
2. For the non-refundable $500 "Other Dependent Credit," which of the following would
not be a qualifying person for the purposes of the credit?
A. A qualifying relative of the taxpayer, 17 years and older.
B. A qualifying child with ITIN or ATIN.
C. A qualifying relative including a taxpayer's aging parent.
D. A qualifying child that is the dependent of another taxpayer. - Answer-2. The answer
is D. A child that is the qualifying child of another taxpayer would not be a qualifying
person for the non-refundable "Other Dependent Credit."
3. For the IRS to grant a "guaranteed" installment agreement, a taxpayer must have not
failed to file any income tax returns or pay any tax shown on such returns during any of
the preceding:
A. 3 taxable years.
B. 5 taxable years.
C. 6 taxable years.
D. 10 taxable years. - Answer-3. The answer is B. For the IRS to grant a "guaranteed"
installment agreement, a taxpayer must have not failed to file any income tax returns or
pay any tax shown on such returns during the preceding 5 years (question based on a
released EA exam question).
4. Circular 230 outlines expectations for written advice provided by a tax practitioner.
Which of the following is a correct statement?
,A. A practitioner can use the possibility of an IRS audit as a factor in providing the
written advice.
B. A practitioner must not use the possibility of an IRS audit as a factor in providing the
written advice.
C. Depending on the clients individual situation, a practitioner can use the possibility of
an IRS audit as a factor in providing the written advice.
D. A practitioner can use the possibility of an IRS audit as a factor in providing the
written advice for individual taxpayers but not for business taxpayers. - Answer-4. The
answer is B. Circular 230 510.37 details expectations for certain types of written advice
a practitioner gives a client. When issuing written advice, a practitioner cannot take into
consideration the chances that a tax return may or may not be audited or that a
particular matter may or may not be raised on audit.
5. If a taxpayer and the IRS fail to settle a non-docketed examination controversy in the
IRS Appeals Office, the next event to occur is?
A. Issuance of a notice of deficiency.
B. Issuance of notice and demand for payment.
C. Return of the case to the Revenue Agent for further review.
D. Referral of the case to the Taxpayer Advocate. - Answer-5. The answer is A. If a
taxpayer and the IRS fail to settle a non-docketed examination controversy in the IRS
Appeals Office, the next event to occur is the issuance of a notice of deficiency.
6. Which of the following statements is not correct about becoming an enrolled agent?
A. All applicants must pass the three parts of the Special Enrollment Examination.
B. All applicants must pass a suitability check.
C. All applicants must be at least 18 years old.
D. All applicants must apply for enrollment by submitting Form 23. - Answer-6. The
answer is A. Not all enrolled agents are required to pass the EA exam. There are two
paths to becoming an enrolled agent. An individual may receive the designation by
virtue of past employment with the IRS, rather than by passing the three-part Special
Enrollment Examination. An EA candidate must possess a minimum of five years of
past service with the IRS and technical experience as outlined in Circular 230. A
candidate must apply within three years of leaving the IRS.
7. Judy is an enrolled agent. In 2019, she fires a client for nonpayment. She had been
representing the client in an IRS audit of their business. What action should Judy take
with the IRS if she chooses to permanently end her representation of this particular
client?
A. Nothing. It is the taxpayer's responsibility to notify the IRS.
B. She must call the IRS to revoke the POA.
C. She should formally withdraw from the engagement and write "WITHDRAW" across
the top of Form 2848 and send it to the IRS via mail or fax.
D. She cannot withdraw from an audit engagement once the audit has already begun. -
Answer-7. The answer is C. Judy must write "WITHDRAW" across the top of Form 2848
,and send it to the IRS via mail or fax. If an enrolled agent or other practitioner wishes to
withdraw from representation of a client, she must write "WITHDRAW" across the top of
the first page of Form 2848, Power of Attorney and Declaration of Representative, with
his signature and the date below it. It must be either mailed or faxed to the IRS. The
form must clearly indicate the applicable tax matters and periods. If a taxpayer decides
to revoke a power of attorney, he or she must write "REVOKE" across the top of the
form with a signature and the date below it. If neither the taxpayer nor the
representative has a copy of the power of attorney, a statement of revocation or
withdrawal may be sent to the IRS.
8. Rory is a licensed notary public as well as an enrolled agent. Regarding Rory's notary
commission, which of the following statements is correct?
A. A federally-authorized tax practitioner is not allowed to be a notary public.
B. A federally-authorized tax practitioner is required to be a notary public.
C. A federally-authorized tax practitioner cannot notarize any documents in which he
has a material interest in matters before the IRS.
D. A federally-authorized tax practitioner can only notarize documents for clients if they
sign a written consent. - Answer-8. answer C. Under 510.26 of Circular 230, an enrolled
practitioner is allowed to be a notary public. However, a notary public who is employed
as counsel, attorney, or agent in a matter before the IRS or who has a material interest
in the matter cannot engage in any notary activities related to that matter. This includes
all enrolled agents and other federally-authorized tax practitioners. In other words, it is
fine that Rory is a notary, but he cannot notarize documents for any audit engagement
in which he is also representing the taxpayer.
9. The IRS Office of Appeals:
A. Provides an independent forum for taxpayers to resolve their disagreements with the
IRS.
B. Acts as a mediator between the IRS and the U.S. Tax Court.
C. Acts as an advocate for the taxpayer against the collection division of the IRS.
D. All of the above statements are correct. - Answer-9. The answer is A. The IRS Office
of Appeals provides taxpayers an independent forum for taxpayers to resolve their
disagreements with the IRS. The IRS Appeals office is an alternative to going to court.
The role of Appeals is to resolve disputes on a fair and impartial basis that does not
favor either the government or the taxpayer. Appeals officers are directed to give
serious consideration to settlement offers by taxpayers or their representatives.
10. Aida is an enrolled agent who e-files an individual return for her client, Rolando.
However, her client's e-filed return is rejected by the IRS just one day before the
deadline. Aida cannot resolve the rejection issue and the return must be filed on paper.
In order to timely file the tax return, what is the deadline for filing a paper return?
A. The original due date of the return.
B. Five calendar days after the date the IRS first rejects the e-filed return.
C. One calendar day after the date that the IRS first rejects the return.
, D. 30 calendar days after the date the IRS first rejected the return. - Answer-10. The
answer is B. The IRS provides a "transmission perfection period" for rejected returns.
Individual returns are given a 5-day perfection period, while most business returns are
given a 10-day perfection period. The following transmission "perfection" dates pertain
to individual returns:
April 20, 2020 — Last day for retransmitting rejected timely filed Form 1040 returns (or
Form 1040-NR with effectively connected income).
October 20, 2020 — Last day for retransmitting rejected timely filed Form 1040 returns
(or Form 1040-NR with effectively connected income) on extension from Form 4868.
Note: The "transmission perfection period" is not an extension of time to file; it is merely
an allowed period to correct errors in a previously submitted e-file. See IRS Publication
4164, Modernized e-File Guide, for more information.
11. Enrolled agents are allowed to assert a limited practitioner confidentiality privilege
relating to:
A. Noncriminal tax matters brought before the IRS, or noncriminal tax proceedings
brought in federal court.
B. Noncriminal tax matters, including communications regarding tax shelters.
C. The preparation of tax returns.
D. Criminal and noncriminal tax matters brought before the IRS. - Answer-11. The
answer is A. Under IRC section 7525, communications relating to tax advice between
an enrolled agent and a taxpayer are confidential to the same extent that the
communications would be privileged if they were between a taxpayer and an attorney,
and the advice relates to:
Noncriminal tax matters before the IRS, or
Noncriminal tax proceedings brought in federal court by or against the United States.
This confidentiality privilege does not extend to:
Communications regarding tax shelters.
Communications in furtherance of a crime or fraud. Any criminal matter before the IRS.
o The preparation of tax returns.
12. Which of the following enrolled tax practitioners have the most limited area of
practice before the IRS?
A. Enrolled agent.
B. Certified public accountant.
C. Attorney.
D. Enrolled actuary. - Answer-12. The answer is D. The practice of enrolled actuaries is
limited to certain Internal Revenue Code sections that relate to their area of expertise,
principally those sections governing employee retirement plans.
13. On a jointly filed return (MFJ) both spouses are for all the tax due even if only one
spouse earns any income.
A. Independently liable.
B. Jointly and severally liable.
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