Ethics & Circular 230

Circular 230 §10.23 is very clear that a practitioner must not unreasonably delay the prompt disposition of any matter before the IRS. Clayton’s deliberate strategy to delay proceedings places him in violation of Circular 230. Correct Answer Explanation for B: This type of practitioner advice is specifically prohibited under Circular 230. Correct Answer Explanation for B: Circular 230 states that the standard used to determine penalties is evaluating a practitioner’s pattern of conduct, and whet

The penalty is $65 for 2025 tax returns (filed in the 2026 filing season) for each failure to sign a return or claim for refund as required by regulations. Anyone who is paid to prepare federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign the return and include their PTIN. To see a list of preparer penalties, see the Summary of Preparer Penalties under Title 26. Topic: 26-27EA Part 3 - Section 2 - Representation Before the IRS

Topic: 26-27EA Part 3 - Section 2 - Representation Before the IRS Correct Answer Explanation for C: General refund statute: In general, the IRS has a 3-year statute of limitations for issuing refunds. Correct Answer Explanation for B: Exceptions to the general 3-year refund statute: In general, the IRS has a 3-year statute of limitations for issuing refunds. The IRS generally has ten years from the date of assessment to collect a tax debt from a taxpayer. Correct Answer Explanation for A: The IR

If a taxpayer earns $400 or more from self-employment, they are required to file a tax return, even if their gross income is below the filing threshold. Topic: 26-27EA Part 1-Section 1- Preliminary Work and Taxpayer Data

There is also a statute of limitations on refunds being claimed on amended returns. Correct Answer Explanation for D: If a taxpayer files a fraudulent return, there is no statute of limitations on that return, meaning the IRS can audit the return and assess any tax indefinitely. There is also no statute of limitations on a taxpayer who fails to file a tax return. Correct Answer Explanation for C: General refund statute: In general, the IRS has a 3-year statute of limitations for issuing refunds.

Within a few weeks after a taxpayer’s closing conference with an IRS examiner, he will receive what is commonly called a 30-day letter. This letter includes: A notice explaining the taxpayer’s right to appeal the proposed changes within 30 days A copy of the revenue agent report explaining the examiner’s proposed changes An agreement or waiver form A copy of Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree A "30-Day letter" from the IRS is an official statement r

Topic: 26-27EA Part 1-Section 1- Preliminary Work and Taxpayer Data Correct Answer Explanation for B: If a taxpayer omits more than 25% of the gross income that should have been reported, they must retain their records for at least six years. Correct Answer Explanation for C: To qualify for the foreign earned income exclusion, the taxpayer must have a tax home in a foreign country. The child must generally have lived with the taxpayer for more than half of the year in order to meet the residency

For more information, see Offer in Compromise - Frequently Asked Questions. An Offer in Compromise (OIC) for doubt as to liability may be submitted when there is a legitimate dispute as to whether the taxpayer actually owes the tax. A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonabl

Certain types of income are excluded from the QBI deduction under Section 199A. Correct Answer Explanation for C: An exempt organization may qualify under Section 501(c)(3) if it is organized exclusively for charitable, religious, educational, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals. The other organizations listed may qualify as tax-exempt organizations if certain rules are met, but they would not qualify as charitable organiz

The IRS currently offers two types of voluntary return preparer designations/licensing. Correct Answer Explanation for A: He has $10,000 in net capital gain, figured as follows: Short-term gains and losses (Collectibles) ($5,000) + $16,000 = $11,000 Long-term gains and losses (Collectibles) ($11,000) + $10,000 = ($1,000) Net gains $10,000 Short-term gains and losses ($5,000) + $16,000 = $11,000 gain Long-term gains and losses ($11,000) + $10,000 = ($1,000) loss. He should use Schedule D (Form 10

Topic: 26-27EA Part 1-Section 1- Preliminary Work and Taxpayer Data The confidentiality protection applies to communications that would be considered privileged if they were between the taxpayer and an attorney and that relate to: Noncriminal tax matters before the IRS, or Noncriminal tax proceedings brought in federal court by or against the United States. Tax Court, the other procedure is within the IRS Appeals system. Topic: 26-27EA Part 1 -Section 4-Taxation Topic: 26-27EA Part 1 -Section 5

The ODC can be claimed for: Dependents of any age, including those who are age 18 or older. Dependents living with the taxpayer who aren't related to the taxpayer. Correct Answer Explanation for D: A taxpayer who files Form 4868 is requesting an extension of time to file his individual tax return. Correct Answer Explanation for B: Nonresident aliens who have income that is not subject to U.S. Correct Answer Explanation for B: A preparer tax individual number (PTIN) is required for every individu

To see a list of preparer penalties, see the Summary of Preparer Penalties under Title 26. Certain types of income are excluded from the QBI deduction under Section 199A. Correct Answer Explanation for C: An exempt organization may qualify under Section 501(c)(3) if it is organized exclusively for charitable, religious, educational, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals. The other organizations listed may qualify as tax-exem

A W-7 Form is used to apply for an individual taxpayer identification number, or ITIN, for non-citizens who aren't eligible to receive a Social Security number, but need to file a federal tax return. Correct Answer Explanation for B: Form 8879 serves as a signature authorization for electronic tax returns filed by an electronic return originator (ERO). Correct Answer Explanation for B: Form 8879 is the signature authorization form that authorizes an ERO to transmit a taxpayer's return to the IRS

This type of practitioner advice is specifically prohibited under Circular 230. Correct Answer Explanation for D: Under Circular 230, a tax professional may rely on the advice of another practitioner only if the advice is reasonable, considering all of the facts and circumstances. Correct Answer Explanation for B: Under Circular 230, a "tax return" includes an original return, a claim for refund, or an amended return. Correct Answer Explanation for A: Under Circular 230 §10.20, when the IRS requ