1. Tax Preparer, not a practicing agent for
IRS purposes, had a contract with client to
be paid a 62% of a tax-refund on a return
disputed by the Internal Revenue Service,
should the client win. Such an
arrangement is:
a) improper as a contingent fee to be
charged for preparing next year tax-return
b) illegal because the amount is
unconscionable
c) illegal because it is not based on the
Preparer's services
d) all of the above
2. Tax Preparer had a dispute with client
over preparation fees. Regardless whether
or not there is an IRS audit of client's tax
return, the Tax Preparer, upon demand,
must return to client:
a) W-2 forms
b) receipts of tax-deductible donations
c) receipts for medical payments
d) all of the above
3. The Johnsons received $550 in (current
tax-year) dividends from their mutual
fund. They must report what amount of
dividends on their (current tax-year)
income tax?
a) $350
a) $450
b) $550
c) $500
4. Interest on securities issued by the federal govt. is_____ taxable on your federal return;
____ taxable on your California state return.
a) Fully; not
b) Not; fully
c) Fully; fully
d) Not; partially
5. Under the cash basis of accounting for a self-employed business or profession, expense
items are reported in the year in which:
a) the services are performed
b) they are paid
c) the goods are delivered
d) the property is used
6. The California Franchise Tax Board decides to
hear an administrative case involving a tax
preparer's forging of a completion
certificate. It is proper for the tax preparer
to:
a) inquire from any Franchise Tax Board
employee the time and date of the hearing
b) write to one of the Franchise Tax Board employees his opinions as to the case
c) try to obtain from the Franchise Tax Board statistics as to how many such
forgeries are suspected and ignored in each
registration period
d) argue on the phone the merits of his other case with one of the Franchise Tax
Board employees
7. Which of the following expenses
incurred by professionals in the course of
their work are generally not allowed as
deductions from income when figuring
profit (or loss) from their professional
practice:
a) Supplies
b) capital expenditures
c) dues to professional societies
d) salaries of assistants
8. A position taken in a tax return as to a controversial tax due the Internal Revenue
Service should be considered a reasonably realistic possibility" if its chance of being
sustained on its merits in a tax court is at least better than
a) 80%
b) 50%
c) 34%
d) 30%
9. According to law, a Tax Preparer, aware that the client has not complied in
submitting a proper tax return for a previous tax-year, must:
a) advise client to submit one
b) inform promptly the Internal Revenue
Service
c) inform the State Franchise Tax Board
d) keep quiet
10. Tax Preparer heard a rumor that client
had substantially less losses than client
declared in the tax return. In preparing
the tax return, Tax Preparer has to:
a) make independent, diligent
investigations as to the source and possible
truth of the rumor
b) rely on client's representations
c) inform the client of the rumor
d) inform the Internal Revenue Service of
what he or she heard
11. One of the following advertising
wordings is not proper to he used by an
Enrolled Agent:
a) an IRS certified taxpayer
representative
b) an IRS admitted tax practitioner
c) an IRS enrolled taxpayer
representative
d) none of the above
12. Client being out of town gave full discretion to the tax preparer to dispose of client's
refund cheek. Tax Preparer proceeded legally if:
a) Tax Preparer negotiated the check and
obtained cash promptly forwarded to
client
b) Presented the check to a court in an
interpleaded dispute action regarding fees
due Tax Preparer for services rendered
c) Tax Preparer gave check to third party
as collateral for a loan obtained by client
d) Refused to give check to client upon demand