Tax Preparer Complete Exam Study
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1. Taxable income are: - ANSWER Jury duty pay, wages, unemployment
compensation
2. Tax Return Preparer - ANSWER Person who prepares or employs other
people to prepare Tax Return or Claim refund for compensation
Professional with IRS preparer tax identification number PTIN - authorized
preparer
No CPA License Required
3. Reasonable Basis Standard - ANSWER >20% chance of having tax position
upheld in courts (frivolous, patently improper)
If you disclose the position - minimum standard
4. frivolous, patently improper - ANSWER Less than 20% - NOT satisfied by
a return position that is merely arguable/colorable
5. Substantial Authority Standard - ANSWER >40% but <50% likelihood of
tax position upheld
Objective standard - reasonable person believes
If you don't disclose the position - need this level of standard
,6. More likely than not standard - ANSWER >50% chance of having tax
position upheld
Need this level of standard for listed/reportable transactions
7. Understatement Due to Unreasonable Position - ANSWER Understatement
of tax liability
Disclosed AND <20% chance upheld (RBS)
Undisclosed AND <40% chance upheld (SAS)
Tax Shelter/Reportable Transaction AND <50% chance upheld (MLTNS)
8. Avoid Unreasonable position - ANSWER Reasonable basis for a disclosed
position exists
Substantial Authority exists - regardless of disclosure
More likely than not standard exists for a listed/reportable transaction
9. Disclosure for unreasonable position - ANSWER Form 8275 - if NOT
contrary to US treasury regulations
Form 8275 R if contrary to US Treasury Regulations
10.Penalty for Understatement due to Unreasonable Position - ANSWER
GREATER of
1000
50% income received for tax services
11.understatement due to willful or reckless conduct - ANSWER Fraud: Not
good faith
Willful attempt to underestimate tax
,Reckless or intentional disregard for tax rules
12.Supporting Documentation - ANSWER Preparer is not required to prepare
supporting documentation
UNLESS you have reason to suspect accuracy of info provided by client
13.reason to suspect accuracy of info provided by client - ANSWER Make
reasonable inquiries if info appears incorrect or incomplete
Don't ask - minimum ordinary negligence
14.Not a Tax Return Preparer - ANSWER Someone who types, reproduces, or
mechanical assistance - data entry, copies, or mailing
Prepares a return or claim for refund for an Employer
Prepares a return or claim for refund as a fiduciary - trustee executor
Volunteer Preparers (VITA)
15.Licensed Tax Practitioner - ANSWER Unlimited representation rights -
represent clients regardless of if they prepared the return
Enrolled Agents, CPA, Attorney
16.Tax Preparers - No License - ANSWER PTIN Holders with no Credentials
No credential and don't participate in annual filing season program
Can only prepare tax returns
CANNOT represent clients before IRS
17.All paid tax return preparers are required to - ANSWER Register with IRS
and have PTIN
, 18.Signing Tax Return Preparer - ANSWER Who has primary responsibility
for overall accuracy of return or claim
19.Non-signing Tax Return Preparer - ANSWER Prepares a substantial portion
of tax return/offers advice to taxpayer
Assist in preparation of the return - but work is mechanical (no thinking)
20.Primary authoritative sources to determine tax treatment - ANSWER
Provisions of IRC
Revenue rulings or procedures
Tax Treaties
US Treasury Department
Court Cases
21.Listed Transaction/Reportable Transaction (Tax Shelter) - ANSWER Any
transaction where additional info required to be included with a return
type of transaction having potential for:
Legal tax avoidance
Tax evasion - illegal
22.Ordinary Negligence - ANSWER Fail to make a reasonable attempt to
comply with IRC - Not fraud
Failure to exercise ordinary and reasonable care
EX: Failure of taxpayer to keep adequate books and records
Questions with Already Graded A+
Answers | Guarantee Pass
1. Taxable income are: - ANSWER Jury duty pay, wages, unemployment
compensation
2. Tax Return Preparer - ANSWER Person who prepares or employs other
people to prepare Tax Return or Claim refund for compensation
Professional with IRS preparer tax identification number PTIN - authorized
preparer
No CPA License Required
3. Reasonable Basis Standard - ANSWER >20% chance of having tax position
upheld in courts (frivolous, patently improper)
If you disclose the position - minimum standard
4. frivolous, patently improper - ANSWER Less than 20% - NOT satisfied by
a return position that is merely arguable/colorable
5. Substantial Authority Standard - ANSWER >40% but <50% likelihood of
tax position upheld
Objective standard - reasonable person believes
If you don't disclose the position - need this level of standard
,6. More likely than not standard - ANSWER >50% chance of having tax
position upheld
Need this level of standard for listed/reportable transactions
7. Understatement Due to Unreasonable Position - ANSWER Understatement
of tax liability
Disclosed AND <20% chance upheld (RBS)
Undisclosed AND <40% chance upheld (SAS)
Tax Shelter/Reportable Transaction AND <50% chance upheld (MLTNS)
8. Avoid Unreasonable position - ANSWER Reasonable basis for a disclosed
position exists
Substantial Authority exists - regardless of disclosure
More likely than not standard exists for a listed/reportable transaction
9. Disclosure for unreasonable position - ANSWER Form 8275 - if NOT
contrary to US treasury regulations
Form 8275 R if contrary to US Treasury Regulations
10.Penalty for Understatement due to Unreasonable Position - ANSWER
GREATER of
1000
50% income received for tax services
11.understatement due to willful or reckless conduct - ANSWER Fraud: Not
good faith
Willful attempt to underestimate tax
,Reckless or intentional disregard for tax rules
12.Supporting Documentation - ANSWER Preparer is not required to prepare
supporting documentation
UNLESS you have reason to suspect accuracy of info provided by client
13.reason to suspect accuracy of info provided by client - ANSWER Make
reasonable inquiries if info appears incorrect or incomplete
Don't ask - minimum ordinary negligence
14.Not a Tax Return Preparer - ANSWER Someone who types, reproduces, or
mechanical assistance - data entry, copies, or mailing
Prepares a return or claim for refund for an Employer
Prepares a return or claim for refund as a fiduciary - trustee executor
Volunteer Preparers (VITA)
15.Licensed Tax Practitioner - ANSWER Unlimited representation rights -
represent clients regardless of if they prepared the return
Enrolled Agents, CPA, Attorney
16.Tax Preparers - No License - ANSWER PTIN Holders with no Credentials
No credential and don't participate in annual filing season program
Can only prepare tax returns
CANNOT represent clients before IRS
17.All paid tax return preparers are required to - ANSWER Register with IRS
and have PTIN
, 18.Signing Tax Return Preparer - ANSWER Who has primary responsibility
for overall accuracy of return or claim
19.Non-signing Tax Return Preparer - ANSWER Prepares a substantial portion
of tax return/offers advice to taxpayer
Assist in preparation of the return - but work is mechanical (no thinking)
20.Primary authoritative sources to determine tax treatment - ANSWER
Provisions of IRC
Revenue rulings or procedures
Tax Treaties
US Treasury Department
Court Cases
21.Listed Transaction/Reportable Transaction (Tax Shelter) - ANSWER Any
transaction where additional info required to be included with a return
type of transaction having potential for:
Legal tax avoidance
Tax evasion - illegal
22.Ordinary Negligence - ANSWER Fail to make a reasonable attempt to
comply with IRC - Not fraud
Failure to exercise ordinary and reasonable care
EX: Failure of taxpayer to keep adequate books and records
