ENROLLED AGENT PRT 3 (1 of 4)

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COMPLETION OF THE FILING PROCESS

How does the IRS use document
matching to select returns for audit?

The IRS uses document matching to select returns for audit by
comparing amounts reported on a taxpayer's income forms (Forms W-
2, 1099, 1098, and Schedules K-1) with the income reported on the
return.

Willie is the owner of an accounting firm. An employee prepares a tax
return for a client and advises that a deduction may be claimed for a
bad debt. If the return is examined and the deduction is disallowed,
Willie will not be subject to a preparer penalty for any of the following
EXCEPT:
A. There was a substantial authority for the position.
B. There was a reasonable basis for the position.
C. There was reasonable cause for the underpayment and the
preparer acted in good faith.
D. The tax preparer exercised due diligence in preparation of the
return.

Willie, the owner of an accounting firm and employer of return
preparers, will not be subject to a preparer penalty if any one of the
following applies: 1) There was substantial authority for the position.
2) There was a reasonable basis for the position, and the position was
adequately disclosed. 3) There was reasonable cause for the
underpayment and the preparer acted in good faith. Due diligence is
not an exception to a preparer penalty in this scenario.

Emily, a tax return preparer, must complete the paid preparer's area of the return if she:
A. Reviews a taxpayer's self-prepared return
B. Completes a taxpayer's return for no cost
C. Is paid to prepare or review a tax return
D. Has a job that includes preparing the employer's tax return

A tax return preparer must complete the paid preparer's area of the
return if the individual was paid to prepare, assist in preparing, or
review the tax return, and is the preparer of the return under Reg.
1.6695-1(a).

Which of the following statements about the electronic federal tax
payment system (EFTPS) is not true?
A. Taxpayers can make tax payments using EFTPS without enrolling
in the system.
B. Taxpayers can e-file and e-pay in a single step by authorizing
electronic funds withdrawal or by credit card.
C. Individuals can pay their quarterly estimated taxes electronically
using EFTPS
D. If EFTPS Online is not available when a tax payment is due,
taxpayers should pay by phoning the EFTPS Voice Response
System.

Taxpayers cannot make tax payments using EFTPS until they enroll in the system.

Which fee arrangement described below is permissible for an
electronic return originator (ERO)?
A. Fees based on AGI reported on the tax return
B. Fees based on a percentage of the refund
C. Separate fees for e-file and direct deposit
D. None of the above

None of the described fee arrangements (fees based on adjusted gross income or percentage of the refund, or a separate fee for direct deposit) are permissible for an ERO.

A Form 1065, U.S. Return of Partnership Income, must be filed
electronically or on magnetic media if the number of partners in the
partnership exceeds:

Form 1065, U.S. Return of Partnership Income, must be filed
electronically or on magnetic media if the number of partners exceeds
100.

Which of the following returns may be electronically filed?
A. An amended tax return
B. A decedent's final Form 1040
C. Current-year Form 1040 with an APO address
D. Both B and C

Choice B (decedent's final Form 1040) and choice C (current-year
Forms 1040 with APO addresses) may be filed electronically.
Amended returns do not qualify for electronic filing.

Which of the following statements about electronic filing is correct?
A. A taxpayer who has no permanent address cannot elect to e-file.
B. A taxpayer who has a balance due may e-file the return and pay a
balance due electronically.
C. An ERO may charge a percentage of a tax refund if it does not charge for direct deposit.
D. An ERO may charge up to $15 for direct deposit if it charges a flat fee for preparation and filing.

The statement "A taxpayer who has a balance due may e-file the return and pay a balance due electronically" is The other statements are not

Which of the following statements is correct with respect to a Refund
Anticipation Loan (RAL)?
A. A RAL is money borrowed by the taxpayer from the U.S.
Government.
B. A RAL indicator must be included in electronic return data that is
transmitted to the IRS.
C. If the anticipated tax refund is not received after a RAL is made,
the loan is subtracted from the subsequent years' refunds until paid
D. If correct procedures are followed, the IRS is liable for any loss
suffered by a taxpayer in connection with a RAL.

A RAL indicator must be included in electronic return data that is
transmitted to the IRS. The other statements are not

Which of the following requirements applies to advertisements of e-file
services that are broadcast on radio or television?
A. The broadcast materials must be pre-approved by the IRS.
B. A copy of the broadcast must be retained and provided to the IRS if
requested.
C. A copy of the advertisement must be kept until the end of the
calendar year following the last transmission or use.
D. Both B and C.

Both B and C apply to advertisements of e-file services that are broadcast on radio or television: a copy of the broadcast must be retained and provided to the IRS if requested and a copy of the advertisement must be kept until the end of the calendar year
following the last transmission or use.

Which of the following statements is correct regarding electronically
filed returns?

A. A current-year final return for a deceased taxpayer may be
electronically filed.
B. 2006 U.S. Individual Income Tax Returns may not be e-filed after
April 15, 2007.
C. All e-filed returns require a separate signature document to be
submitted to the IRS.
D. Both B and C.

A current-year final return for a deceased taxpayer can be
electronically filed. The other statements are not

Taxpayers who e-file their tax returns may pay tax balances due and
estimated taxes using which
methods?

Taxpayers who e-file their tax returns may pay tax balances due and estimated taxes using all of the listed methods: direct debit, credit
card, check, or money order.

What electronic return originators (EROs) can accept returns from
someone other than directly from the individual taxpayer?

Electronic return preparers and intermediate service providers that
are EROs can accept returns from sources other than directly from
individual taxpayers.

If a taxpayer's return is rejected by the IRS and the ERO cannot fix
the problem and re-transmit the return within the time prescribed, the
ERO must make reasonable attempts to notify the taxpayer of the
reject. How long from the time the return is rejected does the ERO
have to try to contact the taxpayer?

An ERO, who cannot fix the problem and re-transmit an e-file return within the time prescribed, must make reasonable attempts to notify the taxpayer within 24 hours of the reject.

Under Circular 230, Marissa, a tax professional, may sign, as the
preparer, a tax return that

A tax professional may not sign a tax return unless one of the
following applies: 1) There was substantial authority for the position.
2) There was a reasonable basis for the position, and the position was
adequately disclosed. 3) There was a reasonable cause for the
underpayment and the preparer acted in good faith.

Rachel is the qualifying child of Greta, her grandmother, and of Lisa,
her mother. Greta's AGI is $22,000 and Lisa's AGI is $14,000. Both
Greta and Lisa want to claim Rachel. Can Greta claim Rachel for
EIC?

Greta cannot claim her grandchild, Rachel, for EIC because Lisa,
Rachel's mother, holds a higher right.

Caleb's parents, Charles (AGI $31,200) and Tammy (AGI $23,950),
are divorced. During the tax year, Caleb lived with his father for seven
months and his mother the entire year. Charles has claimed EIC
based on Caleb, and Tammy wants to claim it. May Tammy claim
Caleb?

Tammy may claim Caleb for EIC because Caleb lived with her for a
longer period during the year than he lived with his father, Charles.

Frankie, a truck driver, is also a enrolled return preparer. He
specializes in preparing income tax returns claiming the earned
income credit (EIC). Frankie is not subject to a preparer penalty for an
erroneously claimed EIC if he:

Frankie, a truck driver and paid preparer, is not subject to a preparer
penalty for an erroneously claimed EITC if he meets the following:
completes an eligibility checklist and the EIC computation worksheet
based upon client information; has knowledge the information used to
determine eligibility for an amount of EIC is

What is the minimum period of time Clyde should keep his tax
records?

Clyde should keep his tax records: three years if he owes additional
tax; seven years if he files a claim for a loss from worthless securities;
or indefinitely if he does not file a return.

Which of the following statements is not true about the due diligence
required of a tax professional in preparing a tax return claiming EIC?

Choice B is not A tax professional is only required to make reasonable inquiries if a client's EIC information appears to be incorrect, inconsistent, or incomplete. The other listed actions are

Records and information pertaining to EIC and used to prepare EIC tax returns must be retained for three
years after:

Records and information pertaining to EIC and used to prepare EIC
tax returns must be retained for three years after June 30th following
the date the return was presented to the taxpayer for signature.

Virginia comes to your tax office to have her income tax return prepared. She is eligible to claim EIC based on Kellie, her granddaughter and qualifying child. Kellie's father, Herman, also is eligible and plans to claim Kellie as a qualifying child for EIC. May Kellie claim EIC?

Herman holds a higher right and may claim EIC based on Kellie
because he is Kellie's parent. The preparer may not prepare Virginia's

return claiming the EIC based on Kellie, and Herman and Virginia
cannot agree to split the EIC.

To satisfy the earned income credit (EIC) due diligence requirements,
what documents must a preparer
retain?

To satisfy the earned income credit (EIC) due diligence requirements,
a preparer must retain all of the listed items except a record of how
and when, and from whom, the required information was obtained is
not required.

John Jones, an enrolled agent, prepared the 2009 tax return for Mr.
William Smith. His return included Schedule C income, wages (Form
W-2), and retirement income (Form 1099-R). Mr. Smith signed Form
8879 to elect to have John Jones electronically file the tax return.
Based upon the information provided, Mr. Jones must retain:

With respect to Mr. Smith's 2009 e-filed tax return, Mr. Jones must
retain a copy of the From 8879 and paper copies of Forms W-2 and
1099-R, as well as any supporting documents not included in the
electronic return data.

For three years after the return

For three years after the return period, tax return preparers are
required to maintain their choice of either: a complete copy of each
return or claim for refund they have prepared, or a list of taxpayers'
names and TINs, and the tax years for which returns were prepared.

When dealing with IRS employees, taxpayers have the right to:

A right to appeal is available for most collection actions.

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