Free IRS Enrolled Agent SEE Part 3 (Representation, Practices and Procedures) Practices and Procedures Practice Questions
Practices and Procedures on the IRS SEE Part 3 covers Treasury Department Circular 230, practice scope, due-diligence (§10.22), conflict of interest (§10.29), competence (§10.35), written-advice standards (§10.37), Section 10.51 disreputable conduct, and the Section 10.60-10.82 sanctions ladder (censure, suspension, disbarment).
Sample Questions
Question 1
Easy
An enrolled agent's three-year enrollment renewal cycle is determined by:
Solution
Circular 230 §10.6(d) groups enrolled agents into three renewal cycles based on the last digit of the practitioner's Social Security number (or, for an EA without an SSN, by tax identification number assigned for renewal grouping). Renewal applications are filed on Form 8554 between November 1 and January 31 in the renewal year for the EA's group.
Question 2
Medium
Under Circular 230 §10.31, a practitioner who prepares tax returns is prohibited from:
Solution
Circular 230 §10.31 provides that a practitioner who prepares tax returns may not endorse or otherwise negotiate any check (including directing or accepting payment by any means, electronic or otherwise, into an account owned or controlled by the practitioner or any firm or other entity with whom the practitioner is associated) issued to a client by the government in respect of a Federal tax liability. The rule targets practitioner control over the client's refund — not communication or routing to the client's own account.
Question 3
Hard
Which of the following is a recognized badge of fraud that the IRS uses to distinguish civil tax fraud from ordinary negligence?
Solution
Per IRM 25.1.2 and the Supreme Court's analysis in Spies v. United States, badges of fraud include consistent and substantial understatement of income, inadequate records, concealment of assets, dealing in cash, failure to file a return, implausible or inconsistent explanations, false statements to investigators, engaging in illegal activities, attempts to conceal illegal activities, and a pattern of behavior over time indicating intent to evade. Civil fraud requires clear and convincing evidence of intent — mere negligence or honest mistake is not sufficient.