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Practice Exam Number 1 - Full Length Question and answers 100% correct

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Institution Practice Number 1 - Full Length
Course Practice Number 1 - Full Length

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Practice Exam Number 1 - Full Length
Question and answers 100% correct
What is the maximum penalty a tax preparer may face if he does not obtain
consent before using tax return information on a return he prepares?
A. $50 for each violation
B. $250 for each violation
C. Not more than $1,000 or imprisoned not more than one year, or both, for
each violation.D. $0. The taxpayer provides consent to use tax return
information when signing the ret - correct answers C. Not more than $1,000 or
imprisoned not more than one year, or both, for each violation.D. $0. The
taxpayer provides consent to use tax return
Explanation:

Tax return preparers are required to obtain consent from taxpayers before
using or providing their tax return information for signature. This is mandated
by the Internal Revenue Code 7216, which prohibits preparers from knowingly
or recklessly disclosing or using such information. Violations of this code may
lead to criminal charges and a convicted preparer may face a maximum fine
of $1,000 and imprisonment for up to one year, for each instance of violation.

How long must each practitioner maintain records of their completed CPE
credits?
A. CPE credit information does not have to be retained by the Enrolled Agent
since the qualifying organization provides the Office of Professional
Responsibility a list of each participant that completed CPE credits.
B. CPE credit information must be maintained for a period of three (3) years
from the date they are completed.
C. CPE credit information must be retained for a period of four (4) years
following the date of renewal of enrollment

,D. CPE credit information must be retained for a period of one (1) year
following the year they are completed. - correct answers C. CPE credit
information must be retained for a period of four (4) years following the date of
renewal of enrollment
Explanation:

An enrolled agent practicing before the IRS is obligated to maintain evidence
of Continuing Professional Education (CPE) for a duration of four years from
the date of enrollment renewal. CPE providers that meet the requirements
need not submit proof to OPR, and should only provide it when requested.
While renewing their enrollment, each individual must demonstrate fulfillment
of the continuing education criteria.
This information is derived from Circular 230, section 10.6 (h) which outlines
the terms and renewal procedures for becoming an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer.

The IRS will release a Notice of Federal Tax Lien __________
A. once the outstanding tax liability is paid.
B. within forty-five days from payment of the outstanding tax liability.
C. in exchange for a promissory note guaranteeing payment of the
outstanding tax liability.
D. within thirty days from payment of the outstanding tax liability. - correct
answers D. within thirty days from payment of the outstanding tax liability.
Explanation:

The IRS will issue a Notice of Federal Tax Lien within thirty days after
payment of the unpaid tax liability along with any interest, penalties, and fees
associated with the lien.
To obtain a release of the Notice of Federal Tax Lien, a bond must be
provided that guarantees payment of the debt. It's important to note that a
promissory note will not be accepted in exchange for the release of the lien.

,Sandy is an enrolled agent. He is preparing a brochure to hand to prospective
clients and would like to explain the enrolled agent designation. Which of the
following language is Sandy not permitted to use?
A. I am permitted to practice before the IRS.
B. I am enrolled to represent taxpayers before the IRS.
C. I am certified by the IRS.
D. I am admitted to practice before the IRS. - correct answers C. I am certified
by the IRS.
Explanation:

The term "certified" is strictly prohibited in Circular 230. As per 10.30
Solicitation, Enrolled Agents are not allowed to suggest any kind of employer-
employee association with the Internal Revenue Service (IRS).

Generally, for how long should a taxpayer retain records?
A. Five years.
B. Indefinitely.
C. Until the statute of limitations expires.
D. Ten years. - correct answers C. Until the statute of limitations expires.
Explanation:

Record Keeping Requirements for Internal Revenue Code
According to the Internal Revenue Code, records must be maintained for as
long as they are required for administration purposes. Typically, this involves
retaining records that validate items presented on a tax return until the period
of limitations for that return expires.
The period of limitations refers to the time frame within which a return can be
adjusted to claim a credit or refund or when the IRS can impose additional tax.

, The length of the period of limitations varies depending on the type of income
tax return filed. In general, the period for additional IRS assessments is three
years from the filing date or the deadline due date (whichever is later),
although it can be up to six years in some cases.
If you want to know more about record keeping requirements and the Internal
Revenue Code, please refer to the IRS Publication 552.

A tax return preparer must complete the paid preparer's area of the return if:
A. The taxpayer prepares his own return
B. The individual volunteers to complete the return for no cost
C. The individual was paid to prepare, assist in preparing, or review the tax
return
D. An employee prepares a tax return for his employer by whom he is
regularly and continuously employed - correct answers C. The individual was
paid to prepare, assist in preparing, or review the tax return
Explanation:

According to Circular 230, individuals who prepare their own tax return or
volunteer to help cannot sign as a paid preparer since they are not receiving
compensation. However, an employee who prepares a tax return for their
employer as part of their job is considered to be paid as an employee and not
as a return preparer.
It's important to note that a tax return preparer is defined as someone who
prepares all or a significant portion of a tax return or refund claim for
compensation, either by themselves or by employing one or more individuals
for this purpose.

In a discussion with his rich neighbor, Domenic learns about a investment
partnership that develops natural gas wells. Domenic is impressed by the
immediate tax savings that the investment offers, due to deductions for
intangible drilling costs that are passed through to him from the partnership.

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