Ethics & Circular 230
Part 3 · 93 study cards · Active recall format
Q1.What must a preparer do when information for a covered credit or head-of-household claim appears incorrect, inconsistent, or incomplete?
Exam wording
make reasonable additional inquiries document the questions and client responses may not ignore implications of known information may not file the claim without enough information to determine eligibility and amount
Q2.Which practitioner may represent a taxpayer before any IRS office or employee?
Exam wording
An enrolled agent in active status. Publication 947 permits enrolled agents, attorneys, and CPAs to represent taxpayers before any IRS office or employee.
Q3.An active enrolled agent represents a taxpayer in an IRS matter. Which act is within the enrolled agent's authority?
Exam wording
Sign an offer or waiver of restriction on assessment or collection.
Q4.A practitioner discovers that two current clients have directly adverse positions. When may the practitioner continue both representations under Circular 230?
Exam wording
Both representations can be handled competently and diligently The representation is lawful Each client gives informed written consent
Q5.Two business partners ask one enrolled agent to represent both in an IRS dispute between them. What consent is required if the conflict can otherwise be competently and lawfully managed?
Exam wording
Informed consent confirmed in writing by each affected client. Each affected client must give informed consent confirmed in writing.
Q6.When giving written federal tax advice, what must a practitioner do with factual assumptions?
Exam wording
Base the advice on reasonable factual and legal assumptions. Circular 230 requires written advice to rest on reasonable factual and legal assumptions.
Q7.A client supplies an implausible forecast for a written tax opinion. What is the practitioner's Circular 230 responsibility?
Exam wording
Do not rely on it if that reliance would be unreasonable. Circular 230 prohibits unreasonable reliance on taxpayer representations used in written advice.
Q8.A paid preparer receives information for an EITC claim that appears incomplete. What must the preparer do?
Exam wording
Make reasonable inquiries Contemporaneously document the inquiries
Q9.When does the Form 8867 knowledge standard require additional inquiries?
Exam wording
When supplied information appears incorrect, inconsistent, or incomplete.
Q10.Which Circular 230 sanction is essentially a public reprimand?
Exam wording
Censure. The IRS OPR FAQ describes censure as essentially a public reprimand.
Q11.A practitioner receives a fixed-term suspension. May the practitioner automatically resume practice when the stated term ends?
Exam wording
No; the practitioner must petition for and be granted reinstatement by OPR. The OPR FAQ states that even a fixed-term suspension requires a successful petition for reinstatement.
Q12.What is the exam-ready rule on information to be furnished to the IRS?
Exam wording
A practitioner must promptly provide properly requested records or information unless the practitioner reasonably believes the material is privileged.
Q13.What official rule governs omission or error on return, document, or affidavit?
Exam wording
On learning of a client's tax noncompliance, error, or omission, the practitioner must promptly advise the client and explain the consequences.
Q14.Summarize the correct treatment of rules for employing or accepting assistance from former IRS employees or disbarred/suspended persons.
Exam wording
A practitioner may not accept practice-related assistance from a suspended or disbarred person.
Q15.What threshold rule applies to rules regarding fees (e.g., contingent, unconscionable)?
Exam wording
Circular 230 prohibits an unconscionable fee and restricts contingent fees, subject to controlling law and stated exceptions.
Q16.State the controlling rule for rules for refund check negotiation.
Exam wording
A practitioner may not endorse or otherwise negotiate a taxpayer's federal refund check.
Q17.What is the key limitation involving enrollment cycle and renewal?
Exam wording
Enrollment must be renewed under the applicable three-year renewal cycle and eligibility rules.
Q18.How should a practitioner handle rules for prompt disposition of matters before the IRS?
Exam wording
A practitioner may not unreasonably delay prompt disposition of a matter before the IRS.
Q19.What official rule governs pTIN requirements?
Exam wording
Anyone who prepares or assists in preparing federal returns for compensation generally must have a valid PTIN unless an exception applies.
Q20.Summarize the correct treatment of practitioner supervisory responsibilities.
Exam wording
A practitioner with principal authority over a firm's tax practice must take reasonable steps to ensure adequate Circular 230 compliance procedures.
Q21.What common mistake should be avoided with sanctionable acts?
Exam wording
Circular 230 sanctions require conduct within the rule's identified grounds and the applicable disciplinary process.
Q22.What threshold rule applies to incompetence and disreputable conduct?
Exam wording
Conviction, dishonesty, misappropriation, contemptuous conduct, and specified willful tax failures are among conduct addressed by §10.51.
Q23.What should a representative verify about frivolous submissions (returns and documents)?
Exam wording
A practitioner may not advise a frivolous position or a submission intended to delay or impede tax administration.
Q24.What should a representative verify about potential for criminal aspects?
Exam wording
The limited tax-practitioner confidentiality privilege does not apply to communications in connection with promoting a tax shelter or to criminal tax matters.
Q25.State the controlling rule for competence, expertise, and time to handle issue.
Exam wording
A practitioner must possess or obtain the knowledge, skill, thoroughness, and preparation necessary for competent representation.
Q26.Summarize the correct treatment of tax return disclosure statements.
Exam wording
A disclosure statement may affect a position's penalty treatment only when the governing disclosure and reasonable-basis requirements are met.
Q27.How does current authority treat judicial levels of representation beyond the scope of EA representation?
Exam wording
Enrollment to practice before the IRS does not by itself authorize an EA to practice in federal court.
Q28.What should a representative verify about limited practitioner privilege (e.g., IRC section 7525)?
Exam wording
Section 7525 is a limited privilege for qualifying communications in noncriminal federal tax matters and excludes tax-shelter promotion communications.
Q29.Do Annual Filing Season Program participants have unlimited IRS practice rights?
Exam wording
No, unless they are also an attorney, CPA, or enrolled agent. AFSP rights are limited and exclude Appeals and collection representation.
Q30.May an unenrolled return preparer represent a client before IRS Appeals?
Exam wording
No. Unenrolled preparers may not represent taxpayers before appeals officers (their limited authority is confined to the examination setting described in Pub. 947).
Q31.May enrolled agents represent taxpayers before the IRS?
Exam wording
Yes. Enrolled agents may represent taxpayers before the IRS.
Q32.Must Form 8867 be filed with a return claiming EIC or head of household?
Exam wording
Yes. Form 8867 must be filed with the taxpayer’s return or amended return claiming EIC, CTC/ACTC/ODC, AOTC, and/or HOH filing status.
Q33.How does a paid preparer meet the Form 8867 knowledge requirement for EIC or HOH?
Exam wording
By interviewing the taxpayer, asking adequate questions, contemporaneously documenting responses, and reviewing adequate information to determine eligibility and credit amounts.
Q34.Johnny passed all three parts of the EA exam and applied immediately by filing Form 23. When does his official enrollment take effect?
Exam wording
The date listed on his enrollment card.
Q35.Rose's tax return is under audit. All of the following persons are permitted to represent Rose before the examination division of the IRS except:
Exam wording
Harold, Rose's boyfriend. Harold has an AFSP certificate, and he is an unenrolled return preparer, but he did not prepare the return under audit.
Q36.Cameron is an enrolled agent who takes a continuing education class from an approved IRS provider. The class runs continuously from 9 a.m. until 11:45 a.m., when there is a break for lunch. How many CE credits will Cameron receive for the morning session of the class?
Exam wording
Three
Q37.Which of the following individuals is required to obtain a PTIN?
Exam wording
An EA who works for a CPA firm, but does not sign any tax returns.
Q38.What is the "enrollment cycle" for enrolled agents?
Exam wording
The enrollment cycle means the three successive enrollment years preceding the effective date of renewal.
Q39.Denise and Gabriela are cousins. Gabriela does not speak English. Gabriela must appear before the IRS for an examination. Denise wants to appear before the IRS on her cousin's behalf, though she is not an enrolled practitioner. Which of the following statements is correct?
Exam wording
Denise may appear before the IRS as a witness, if necessary, and to translate for Gabriela, but she may not advocate for Gabriela.
Q40.Andrea has been an EA for 10 years. Her records show that she had the following hours of qualified CE during the year: • January 2, 2025, seven hours: Federal tax CE. • May 3, 2025, one hour: Ethics. • December 20, 2025, nine hours: Federal tax CE. Has Andrea met her minimum yearly CE requirements?
Exam wording
Andrea has not met her ethics requirements.
Q41.Which of the following individuals does not qualify as an enrolled practitioner?
Exam wording
Registered tax return preparer.
Q42.Matthew is a full-time bookkeeper for Parkway Partnership. He is not an EA, attorney, or CPA. Parkway requests that Matthew represent the partnership in connection with an IRS audit. Which of the following statements is correct?
Exam wording
Matthew is allowed to represent the partnership before the IRS.
Q43.Enrolled agents must complete continuing education credits for renewed enrollment. Which of the following best describes the minimum yearly credit requirements?
Exam wording
A minimum of 16 hours must be completed in each year of the enrollment cycle, including two hours of ethics.
Q44.Barry helps his best friend, Jose, who does not speak English fluently. Barry appears before the IRS and translates for Jose at an IRS examination. Which of the following statements is correct?
Exam wording
Barry is not considered to be practicing before the IRS.
Q45.Khan is a CPA who employs Lynne, an accounting student, to assist in preparing tax returns. Lynne prepares several of the easier tax returns, but Khan reviews and signs all of the returns. Which of the following statements is correct?
Exam wording
Lynne is required to obtain a PTIN.
Q46.Which of the following persons is considered a "tax return preparer" under Circular 230 regulations?
Exam wording
A full-time teacher who also prepares tax returns for pay, part-time from home.
Q47.Matias is an EA with a PTIN. What must he do to retain his existing PTIN?
Exam wording
Matias must renew his existing PTIN each year.
Q48."Practice before the IRS" does not include:
Exam wording
Representing a taxpayer in the U.S. Tax Court.
Q49.All of the following are potential grounds for denial of enrollment except:
Exam wording
The candidate does not have a Social Security Number.
Q50.An enrolled agent can represent a taxpayer ____.
Exam wording
Before any administrative level of the IRS.
Q51.Enrolled agents who apply for renewal to practice before the IRS must retain information about continuing education hours completed. How long must this documentation be retained?
Exam wording
For four years following the enrollment renewal date.
Q52.An enrolled agent can charge a contingent fee for services rendered in connection with which one of the following scenarios?
Exam wording
An IRS audit of an original tax return
Q53.Grace, an enrolled agent, represented Marley and his former business partner before the Internal Revenue Service with regard to a specific tax matter. Due to the potential conflict of interest, Grace obtained written consent from each client, waiving the conflict of interest and giving informed consent. Grace must keep those written consents for how long after the conclusion of representation?
Exam wording
36 Months.
Q54.Melanie is an EA and an ERO, who submits her clients' returns via IRS e-file. In order to save paper, she does not give a copy of the prepared tax return to her clients if they do not request it. Melanie allows her clients to have a copy of the return, as long as they pay a small fee. Which of the following statements is correct?
Exam wording
Melanie is in violation of IRC §6107.
Q55.Deangelo is an enrolled agent in the process of representing Arthur, his client, before the Internal Revenue Service for an old tax matter on a jointly-filed return. Arthur's ex-wife, Michelle, also asked Deangelo to represent her for the same matter. Which of the following is required for Deangelo to represent them both?
Exam wording
Both taxpayers must waive the conflict of interest with written informed consent.
Q56.Frank is an enrolled agent representing his client, who is under examination by the IRS. The IRS examiner requests certain documents from Frank about his client's business. All of the following statements regarding Frank's responsibility to provide information requested by the IRS examiner are correct except:
Exam wording
Frank must promptly turn over all records relating to the IRS request, no matter what the circumstances.
Q57.Maeve, an enrolled agent, buys a practice owned by Kellan, a tax preparer who is retiring. As she reviews the records from Kellan's practice, she learns Kellan has been incorrectly claiming dependents for certain clients. What should Maeve do?
Exam wording
Notify the clients of the error and the consequences of not correcting the error.
Q58.Constanza is an enrolled agent. Her client, Aaron, is a wealthy businessman who frequently travels on extended business trips. Aaron is planning to be outside of the United States on business for at least 9 months this year. Constanza has a properly signed power of attorney from Aaron. Which of the following actions is she permitted to do on Aaron's behalf?
Exam wording
Receive Aaron's refund check, but not endorse or cash the check.
Q59.Whitman is an EA who decides to advertise his fee schedule in the local newspaper. Which of the following fee arrangements is likely prohibited under the language contained in Circular 230?
Exam wording
Unconscionable fees for representing a taxpayer before the IRS.
Q60.Zoe is an enrolled agent who is also a notary public. Which of the following statements is correct?
Exam wording
Zoe cannot notarize documents for IRS matters for clients she represents before the IRS.
Q61.Circular 230 §10.35 states that a practitioner must be ____ to engage in practice before the IRS.
Exam wording
Competent
Q62.Keagan is a CPA and the owner of his own tax practice. Keagan has spent hours finishing the year-end bookkeeping for a client. The client has yet to pay Keagan for fees charged in connection with the bookkeeping, but the client demands a copy of the back-up file, because the client cannot prepare his tax return without it. Which of the following best describes Keagan's responsibility regarding the client's request for a copy of the spreadsheet?
Exam wording
The firm is under no obligation to hand over the bookkeeping file the client has not paid for, but must return the client's original records.
Q63.Which of the following is not listed as a "best practice" for practitioners in Circular 230?
Exam wording
Consulting other tax professionals when questions arise about a particular tax issue.
Q64.Oliver is an enrolled agent. He has a new client named Minnie, who asks him to prepare her business tax return. When he presents the return to Minnie for signature, she gets upset about the amount that she owes, and refuses to pay for the return or sign it. She demands her original records back. Which of the following statements is correct regarding Minnie's request for her original records?
Exam wording
Oliver must, at the request of his client, promptly return her records, regardless of fee disputes.
Q65.Which of the following statements is correct?
Exam wording
A practitioner may represent clients who have a conflict of interest under certain circumstances, but waivers to the conflict must be signed by both parties.
Q66.Arthur is an enrolled agent. He must, at all times, exercise due diligence when:
Exam wording
Preparing any document involving IRS matters.
Q67.Drake is an enrolled agent. He has a new client, Alexia, who has self-prepared her own returns in the past. Drake notices several errors on Alexia's prior-year return. What is Drake required to do?
Exam wording
Drake must advise Alexia about the errors and the consequences of not correcting the errors.
Q68.When should a practitioner not rely on the advice of another person?
Exam wording
When the person has a conflict of interest in the tax matter.
Q69.Joshua, an enrolled agent, is required to inform Nancy, his client, of any potential penalties that may apply to a position taken on her tax return if:
Exam wording
Joshua gave Nancy advice on the position.
Q70.In the “standard of review” section of Circular 230, the IRS will evaluate whether a practitioner has complied with the written advice rules of §10.37 by applying a ____ standard.
Exam wording
"Reasonable practitioner"
Q71.Under Circular 230, what is the responsibility of a practitioner who oversees a firm's tax practice?
Exam wording
To ensure the firm has adequate procedures in place to ensure compliance with all provisions of Circular 230.
Q72.Violeta is an EA with a client, Maximo, who wishes to claim a deduction for a large business expense. However, there is a question about whether the expense is "ordinary and necessary" for his business. If the deduction were later disallowed, there would be a substantial understatement of tax. Violeta believes the position has a reasonable basis, but not substantial authority. Maximo does not want to disclose the position on the return, because he is afraid that the IRS will disallow it. What are the repercussions for Violeta if the position is not disclosed and she signs the tax return?
Exam wording
Violeta may be liable for IRC §6694 preparer penalties.
Q73.Jonathan is an enrolled agent, and Janice is his client. What type of written advice would not be permitted under Circular 230?
Exam wording
Advice from Jonathan about the likelihood of getting audited by the IRS for a particular deduction.
Q74.Which of the following is NOT a credit for which the IRS specifies additional due diligence requirements for preparers?
Exam wording
Energy Efficient Home Improvement Credit
Q75.What is the "performance standard" set by IRS regulations for all EITC, CTC, ACTC, ODC, AOTC, and HOH returns?
Exam wording
What a reasonable and well-informed tax preparer, knowledgeable in the law, would do.
Q76.All of the following are potential penalties for a preparer who files fraudulent refund claims except:
Exam wording
Criminal prosecution by the OPR.
Q77.All of the following are due diligence requirements except:
Exam wording
To verify the taxpayer's information with the appropriate third parties.
Q78.Austin is an EA who submits a return for his client on March 1, 2026, for the 2025 tax year. The return claims the Earned Income Tax Credit, but Austin fails to submit Form 8867 for the return, because he did not purchase professional software, and the Form 8867 is not available in the consumer software he is using. What penalty does Austin potentially face?
Exam wording
$650
Q79.The IRS can impose the following ban related to the AOTC, EITC, CTC/ACTC, ODC and/or HOH filing status:
Exam wording
Ten-year ban for fraud.
Q80.All of the following are common errors taxpayers make in claiming the EITC except:
Exam wording
Listing earned income for the year.
Q81.Roger is a tax preparer, and he has a new client named Samantha. Samantha tells Roger: • She has no Form 1099-NEC. • She was self-employed cleaning houses. • She earned $13,000. • She had no expenses related to the cleaning business. • She has three children who live with her; all three are under the age of 10. Samantha says she would like to claim the Earned Income Tax Credit and the Child Tax Credit. What is the best course of action for Roger in this case?
Exam wording
Ask questions to determine the facts and ask for proof of income or any expenses.
Q82.When must a tax preparer complete Form 8867 (Paid Preparer's Due Diligence checklist) for a client claiming the AOTC?
Exam wording
Every year.
Q83.Andreas and Briseis are citizens of Ecuador. They are married and live in the United States. Both have valid ITINs. They have two children, both of whom have valid SSNs, because both children were born in the United States. Can Andreas and Briseis claim the EITC on their tax return, if they meet the income requirements?
Exam wording
They cannot claim the EITC, regardless of whether their children have valid SSNs.
Q84.A suspended or disbarred practitioner may:
Exam wording
Appear before the IRS as a fiduciary.
Q85.All of the following are considered examples of disreputable conduct for which an enrolled agent can be disbarred or suspended except:
Exam wording
Nonwillful failure to timely pay personal income taxes.
Q86.Alisha is an enrolled agent that was disbarred from practice by OPR. How long must Alisha wait in order to petition for reinstatement?
Exam wording
Five years.
Q87.Which of the following types of disciplinary actions allows a practitioner to continue practicing before the IRS?
Exam wording
Censure
Q88.Bowie is an enrolled agent. The OPR receives a complaint about Bowie and launches an investigation. The OPR determines Bowie has violated provisions of Circular 230 by cashing his client's refund checks. Bowie wants to fight the determination. Which of the following best describes the due process procedures that Bowie will face?
Exam wording
The formal OPR complaint is filed A disciplinary hearing is held before an administrative law judge Either OPR or Bowie may appeal The Treasury Appellate Authority issues the final decision Bowie must sue in court to contest the decision
Q89.Renata Smith, an enrolled agent, advises her prospective clients that she is able to obtain approval of qualified retirement plans with unique vesting provisions because of her close relationship with the IRS territory manager of the Tax Exempt Government Entities operating unit in her locality. This type of solicitation constitutes:
Exam wording
Disreputable conduct
Q90.Under Treasury Department Circular 230, all of the following are considered to be "incompetence and disreputable conduct" except:
Exam wording
Willfully disclosing tax return information with the consent of the taxpayer.
Q91.What is the primary source of disciplinary cases opened by the Office of Professional Responsibility (OPR)?
Exam wording
Internal and external referrals
Q92.Which of the following is a common reason for referral to the OPR?
Exam wording
Cashing, diverting, or splitting a taxpayer's refund by electronic or other means
Q93.Which of the following is not listed in Circular 230 as conduct that could cause a practitioner to be censured, suspended, or disbarred?
Exam wording
Indictment on a criminal offense charge.
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