▪ Confidentiality
▪ Due diligence
▪ Conflicts of interest
▪ Best practices
SCORE: 81%
PASSED
Question 1
A Tax Professional group's high level of ethical conduct:
Cannot be evaluated by the IRS.
X Gives the 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.
Question 2
A Tax Professional's high ethical standards protect clients by:
X 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.
None of the above. High Tax Professional standards do not help clients; they only protect the Tax Professional.
Question 3
Who does a Tax Professional contact after suspecting a client of using H&R Block services for an unlawful purpose?
The IRS
X The Tax Professional's manager
No one
H&R Block Client Support
Question 4
The IRS has the authority to assess a monetary penalty to which of the following?
The client
The Tax Professional
H&R Block
X All three of these
Question 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.
X No, Greta cannot claim Rachel for EITC because Lisa, the mother, holds a higher right than Greta, the grandmother.
Question 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.
X 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.
Question 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?
How long has your son lived in your household?
When did your spouse last live in your household?
X Did anyone else live in your household?
Do you want to file a joint return with your spouse?
Question 8
Grace is your best friend's 20-year-old daughter. Grace has a one-year-old child. You know that Grace lived at home and was a full-time student until she quit college at the end of September of the tax year. Your friend (Grace's mom) gives you Grace's tax documents and tells you to let Grace claim herself and claim her child for EITC. To meet the EITC due diligence knowledge requirement, you:
X Cannot ignore the facts about Grace living with her mother for nine months of the year when she was a full-time student.
Can disregard information obtained through a personal relationship.
Cannot complete Grace's return under any circumstances.
Can complete Grace's return filing her as a single non-dependent, with EITC for her child.
Question 9
Which of the following is NOT an example of tax preparation due diligence? Taking reasonable steps to:
Assure that all income is reported on a tax return.
Assure that the taxpayer meets all required criteria for claiming dependency exemptions.
Provide tax returns to clients before filing deadlines.
X All of these are examples of due diligence.
Question 10,
Henry, who is not a dependent, states he wishes to claim EITC this year for his 35-year-old dependent child. Both reside in the U.S. Henry states that the child lives with Henry, is not married, is disabled, and has not worked during the year. What does Henry's Tax Professional need to do to determine if the child can qualify Henry for EITC?
Enter Henry's child on his return and identify him as a disabled qualifying child.
X Advise the client of the tax definition of disabled and apply sound judgment and common sense to see if the definition is met.
Ask for proof of the child's income.
Explain to Henry that a 35-year-old child is too old to be a qualifying child for EITC.
Question 11
The H&R Block Maximum Refund Guarantee:
Gives clients the right to claim whatever deductions they wish on their returns.
X 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.
Question 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.
X 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.
Question 13
A good Schedule C interview includes a Tax Professional:
X 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.
Question 14,
When a client files for EITC based on earned income from Schedule C, their Tax Professional must:
Attach to the return documentation of their income and expenses.
Prepare the return in a way which is disadvantageous to the client.
Document all questions they asked the client and all of the client's responses.
X Document the questions they asked and the client's answers to questions they asked pertaining to the income that is advantageous for EITC.
Question 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.
X 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.
Question 16,
Under Circular 230, Lisa, a Tax Professional, may sign, as the preparer, a tax return that:
Reports a $12,000 loss from an investment with no documentation or written opinion.
Shows zero income tax due and includes a claim that filing and paying income taxes are voluntary.
X Takes a non-frivolous position and has substantial authority for the position.
Takes an undisclosed position that Marissa has not encountered before and does not have time to research.