Starr, CPA, prepared and signed Cox's current-year federal income tax return. Cox informed Starr that Cox had paid doctors' bills of $20,000 although Cox actually had paid only $7,000 in doctors' bills during the year. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's tax return, Starr is

Starr, CPA, prepared and signed Cox's current-year federal income tax return. Cox informed Starr that Cox had paid doctors' bills of $20,000 although Cox actually had paid only $7,000 in doctors' bills during the year. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's tax return, Starr is

A. Not liable to the IRS for any penalty or interest.
B. Liable to Cox for interest on the underpayment of tax.
C. Not liable to the IRS for any penalty but is liable to the IRS for interest on the underpayment of tax.
D. Liable to the IRS for negligently preparing the return.

Answer: A

The Secretary of the Treasury can censure, suspend, or disbar a practitioner from practice before the Internal Revenue Service for incompetence and/or disreputable conduct. Which one of the following is considered disreputable conduct?

The Secretary of the Treasury can censure, suspend, or disbar a practitioner from practice before the Internal Revenue Service for incompetence and/or disreputable conduct. Which one of the following is considered disreputable conduct?

A. Giving false or misleading information or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof.
B. Conviction of any criminal offense under the revenue laws of the United States.
C. Conviction of any criminal offense involving dishonesty or breach of trust.
D. All of the answers are correct.

Answer: D

Which of the following is considered a tax return preparer?

Which of the following is considered a tax return preparer?

A. A neighbor who assists with preparation of depreciation schedule.
B. A volunteer at a local church who prepares tax returns but accepts no payment.
C. A woman who prepares tax returns in her home during filing season and accepts payment for her services.
D. A son who enters tax return information into a computer program and prints a return.

Answer: C

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?

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?

A. It must be communicated as an estimate before the engagement begins, with the understanding that the actual amount of the fee will not be determined until the engagement ends.
B. It may be communicated only through the confidential engagement letter between the tax practitioner and the taxpayer.
C. It may not be communicated by television, radio, or hand-delivered flyers.
D. It may be communicated in a number of ways, including in professional lists, telephone directories, mailings, and electronic mail.

Answer: D

Which of the following is not a tax return preparer?

Which of the following is not a tax return preparer?

A. Someone who prepares a substantial portion of a return or claim for refund under Title 26 of the Code.
B. Someone who employs one or more persons to prepare for compensation, other than for the employer, all or a substantial portion of any tax return under Title 26 of the Code.
C. The preparer of another return with entries directly related to a substantial portion of this second return.
D. Someone who prepares, as a fiduciary, a return or claim for refund for any person.

Answer: D

According to the accounting profession's standards, which of the following statements is true regarding the standards a member of the AICPA should follow when recommending tax return positions and preparing tax returns?

According to the accounting profession's standards, which of the following statements is true regarding the standards a member of the AICPA should follow when recommending tax return positions and preparing tax returns?

A. A member may recommend a position if (s)he has a good faith belief that the position has a realistic possibility of being sustained if challenged.
B. A. A member may recommend a position if (s)he has a good faith belief that the position has a realistic possibility of being sustained if challenged.
C. A member may recommend a position that (s)he concludes is frivolous if the position is adequately disclosed on the return.
D. A member may recommend a position that (s)he concludes is frivolous if the position is adequately disclosed on the return.

Answer: A