Final Exam
88%
1, A Tax Professional group's high level of ethical conduct:
Cannot be evaluated by the IRS.
(Correct) Gives public confidence in the quality of service provided regardless of which member of the group provides the service.
Is only maintained by strict industry regulation.
Has little effect on public confidence in individual members of the group.
2, A Tax Professional's high ethical standards protect clients by:
(Correct) Providing them with an accurate return, including all tax benefits to which they are entitled.
Guaranteeing their returns will not be questioned by the IRS.
Promising they will be free from IRS penalties.
High Tax Professional standards do not help clients; they only protect the Tax Professional.
3, What is a Tax Professional's correct response to a client who omitted items on an income tax return which was submitted in a previous year? Advise the client promptly of the fact of such omission and:
Refuse to prepare the current-year return until the previous return is amended.
Make an adjustment for the previous year's omission on the current-year return.
(Correct) Advise them of the consequences as provided under the Internal Revenue code and Preparer Regulations.
Refer the client to a supervisor.
4, The IRS has the authority to assess a monetary penalty to which of the following?
The client
(incorrect) The Tax Professional
H&R Block
All three of these
5, Rachel is the qualifying child of Greta, her grandmother, and 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 you prepare a return for Greta claiming Rachel for EITC?
Yes, Greta can claim Rachel for EITC because her AGI is higher.
Yes, Greta can claim Rachel for EITC if she files before Lisa.
No, Greta cannot claim Rachel for EITC because she is not her parent.
(Correct) No, Greta cannot claim Rachel for EITC because Lisa, the mother, holds a higher right than Greta, the grandmother.
6,Which of the following is NOT one of the four requirements for a Tax Professional to meet the EITC due diligence requirement?
Maintain a record of how and when EITC information was obtained and the identity of the person who provided it.
(Correct) Investigate and verify the accuracy of information a client provides to show eligibility for EITC.
Prepare an EITC eligibility checklist for a potential EITC client by completing Form 8867 or an alternate eligibility record.
Compute the EITC by completing an Earned Income Credit worksheet or alternate computation record.
7, Sabrina, who wants to claim EITC, informs her Tax Professional that she is still married but is separated from her spouse, and that her seven-year-old son lives with her. Logically, what is the first EITC-related question to ask her?
(incorrect)V How long has your son lived in your household?
When did your spouse last live in your household?
Did anyone else live in your household?
Do you want to file a joint return with your spouse?
8, Tax preparation software is designed to meet EITC due diligence tests. But the software alone cannot satisfy which test?
Retain a record of how and when EITC information was obtained and the identity of the person who provided it.
(Correct) Comply with the knowledge requirement.
Complete an eligibility checklist.
Compute the amount of the credit.
9, Harmon comes to you for help filing a return this year because he received a Form W-2 from a second job. He tells you he has not filed tax returns for the past two years because his wages from his first job are paid in cash. Which of the following most accurately states your responsibilities as a Tax Professional?
Advise the IRS about Harmon's failure to report income.
Advise Harmon he should report his cash wages and file his prior-year returns.
Advise Harmon that if the IRS has not investigated him before, they will probably not do so now.
(Correct) Advise Harmon he must report his cash wages and file prior-year returns, and explain the consequences for failure to do so.
10, In which of the following situations should a Tax Professional be especially wary?
In which of the following situations should a Tax Professional be especially wary?
Many Forms W-2 for one tax year
(Correct) A handwritten Form W-2
All income and expenses are reported on Schedule C
Many children live in the taxpayer's household
11, The H&R Block Maximum Refund Guarantee:
Gives clients the right to claim whatever deductions they wish on their returns.
(Correct) Never excuses preparing an inaccurate or incomplete Schedule C.
Is only for Peace of Mind® Extended Service Plan clients.
Does not respect EITC due diligence rules.
12, If a Schedule C client does NOT bring the Tax Professional documentation to prove income:
They cannot claim EITC.
The Tax Professional cannot prepare the return.
They can make a Form 1099-MISC to document their own income.
(Correct) They must give the Tax Professional other indication that the self-employment income is accurate, before the Tax Professional can complete and sign the return.
13, A good Schedule C interview includes a Tax Professional:
(Correct) Explaining to the client that an accurate Schedule C reports all income and expenses associated with the business.
Accepting the client's statement of expenses with no questions asked.
Ignoring items which might reduce the client's refund.
Providing amounts for expenses typical in the region where the return is being prepared.
14, When a client comes to H&R Block hoping to defraud the government by electronically filing a false return:
The client is protected by IRS privacy rules which forbid the Tax Professional to tell anyone else about the return.
(Correct) Contact your supervisor.
Call the IRS as soon as possible.
Confront your client and, in no uncertain terms, accuse them of fraud.
15, When a taxpayer receives more EITC after adding a Schedule C to their return than they would have received without it, the Tax Professional must:
Document in notes the amount of EITC with and without Schedule C.
Omit Schedule C from the return.
(Correct) Apply sound judgment and common sense to the information provided and provide question and answer documentation to show the questions asked and the taxpayer's responses.
Enter only a modest amount of expenses on Schedule C.
16, Under what circumstances may a tax preparer who prepares federal tax returns endorse or otherwise negotiate a client’s federal tax refund check?
A tax preparer may cash a federal tax refund check if the client endorses the check and grants power of attorney on Form 2848.
(Correct) No circumstances exist that allow a tax preparer to endorse or otherwise negotiate a client’s federal tax refund check.
A tax preparer may endorse and cash a federal tax refund check if the amount of the check is less than $100 and the client has no bank account.
A tax preparer, who is authorized to represent taxpayers, may endorse and cash a federal tax refund check for a client.