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ATP (Accredited Tax Preparer) exam COMPLETE
VERIFIED QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE.pdf
What amounts does a proprietor have "at risk"? - Answer-
Amounts invested in the business plus any business debts
for which the proprietor is personally liable. (15.16)
What difference does it make if the proprietor is "at risk" or
not? - Answer-Only amounts at risk may be used to
determine the actual loss on Schedule C. (15.16)
How does a Tax Professional meet due diligence
requirements? - Answer-• Tax Professionals fulfill due
diligence requirements by making every effort to prepare
accurate and complete returns.
• Tax Professionals must have knowledge of tax law, and
apply a reasonability check to the information provided by
their clients. (26.1)
What is a thorough interview? - Answer-A thorough
interview consists of asking general information questions,
then asking additional questions whenever information is
incomplete or seems inaccurate or inconsistent. (26.2)
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What is a conflict of interest? - Answer-A conflict of interest
is when one's situation might benefit at the expense of
another's situation. (26.3)
What actions can resolve a conflict of interest? - Answer-A
conflict of interest is resolved when it is acknowledged,
disclosed to all parties, and the parties have consented to
waiving the conflict. (26.3)
What client information is confidential? - Answer-Any
information that could potentially identify the client is
confidential.
Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
• Any information from a tax return (26.4)
Is it acceptable for a Tax Professional to leave a detailed
phone message for a client, letting them know their tax
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return is complete? - Answer-• Tax Professionals must
have prior consent from the client to leave phone
messages related to their tax return.
• The fact that a taxpayer is the client of a Tax Professional
or tax preparation business is confidential information that
must not be disclosed. (26.5)
What is a Tax Professional's responsibility upon finding out
that a client has not complied with any tax law? - Answer-A
Tax Professional must advise the client of the
noncompliance and the consequences for not correcting
the situation. (26.7)
What income reporting form should an independent
contractor sometimes receive from the person who paid
him for his services? - Answer-Form 1099-MISC (15.6)
Schedule C, Line F asks for the accounting method used
in the business.
What is the difference between the cash method and the
accrual method of accounting? - Answer-• Under the
accrual method, total sales and total charges for services
are included in income even though payment may be
received in another tax year.
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• Under the cash method, only income actually received or
expenses actually paid during the year are included. (15.5)
What does it mean if a proprietor "materially participates"
in the business? - Answer-He is active in running the
business in a substantial way on a day-to-day basis. (15.5)
Why is it important to know whether or not the proprietor
materially participates? - Answer-If the proprietor does not
materially participate, any loss from the business is a
passive loss and generally may be currently deducted only
against passive income. (15.6)
What are returns and allowances? - Answer-• Amounts
that were refunded to customers who returned
merchandise for refund or partial refund.
• These amounts are subtracted from gross receipts.
(15.6)
How is cost of goods sold determined? - Answer-
Beginning inventory plus purchases, plus labor, supplies,
depreciation, etc. attributable to product manufacture or
preparation for sale, minus ending inventory. (15.7)
ATP (Accredited Tax Preparer) exam COMPLETE
VERIFIED QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE.pdf
What amounts does a proprietor have "at risk"? - Answer-
Amounts invested in the business plus any business debts
for which the proprietor is personally liable. (15.16)
What difference does it make if the proprietor is "at risk" or
not? - Answer-Only amounts at risk may be used to
determine the actual loss on Schedule C. (15.16)
How does a Tax Professional meet due diligence
requirements? - Answer-• Tax Professionals fulfill due
diligence requirements by making every effort to prepare
accurate and complete returns.
• Tax Professionals must have knowledge of tax law, and
apply a reasonability check to the information provided by
their clients. (26.1)
What is a thorough interview? - Answer-A thorough
interview consists of asking general information questions,
then asking additional questions whenever information is
incomplete or seems inaccurate or inconsistent. (26.2)
,2|Page
What is a conflict of interest? - Answer-A conflict of interest
is when one's situation might benefit at the expense of
another's situation. (26.3)
What actions can resolve a conflict of interest? - Answer-A
conflict of interest is resolved when it is acknowledged,
disclosed to all parties, and the parties have consented to
waiving the conflict. (26.3)
What client information is confidential? - Answer-Any
information that could potentially identify the client is
confidential.
Information includes (but is not limited to):
• Name
• Address and phone number
• Social security numbers
• Place of employment
• Any information from a tax return (26.4)
Is it acceptable for a Tax Professional to leave a detailed
phone message for a client, letting them know their tax
,3|Page
return is complete? - Answer-• Tax Professionals must
have prior consent from the client to leave phone
messages related to their tax return.
• The fact that a taxpayer is the client of a Tax Professional
or tax preparation business is confidential information that
must not be disclosed. (26.5)
What is a Tax Professional's responsibility upon finding out
that a client has not complied with any tax law? - Answer-A
Tax Professional must advise the client of the
noncompliance and the consequences for not correcting
the situation. (26.7)
What income reporting form should an independent
contractor sometimes receive from the person who paid
him for his services? - Answer-Form 1099-MISC (15.6)
Schedule C, Line F asks for the accounting method used
in the business.
What is the difference between the cash method and the
accrual method of accounting? - Answer-• Under the
accrual method, total sales and total charges for services
are included in income even though payment may be
received in another tax year.
, 4|Page
• Under the cash method, only income actually received or
expenses actually paid during the year are included. (15.5)
What does it mean if a proprietor "materially participates"
in the business? - Answer-He is active in running the
business in a substantial way on a day-to-day basis. (15.5)
Why is it important to know whether or not the proprietor
materially participates? - Answer-If the proprietor does not
materially participate, any loss from the business is a
passive loss and generally may be currently deducted only
against passive income. (15.6)
What are returns and allowances? - Answer-• Amounts
that were refunded to customers who returned
merchandise for refund or partial refund.
• These amounts are subtracted from gross receipts.
(15.6)
How is cost of goods sold determined? - Answer-
Beginning inventory plus purchases, plus labor, supplies,
depreciation, etc. attributable to product manufacture or
preparation for sale, minus ending inventory. (15.7)
