Free EA Exam Part 3 questions: Representation, Practices & Procedures

Question 1 · Authority to Practice Before the IRS

Which of the following activities constitutes practice before the IRS under Circular 230?

• A. Appearing at an IRS examination solely as a fact witness, to describe events the witness observed.
• B. Preparing and signing a client's federal income tax return for compensation as a paid preparer.
• C. Attending a conference with a revenue agent for a client and arguing that a disallowed deduction should stand.
• D. Furnishing documents to the IRS in response to a written request for information addressed to the holder.

Question 2 · Authority to Practice Before the IRS

Which individuals hold unlimited rights to practice before the IRS, assuming they are in good standing and file the required declaration?

• A. Attorneys, certified public accountants, enrolled agents, and any preparer holding a current PTIN.
• B. Enrolled agents and enrolled retirement plan agents, but not attorneys or certified public accountants.
• C. Any preparer who has completed the Annual Filing Season Program and holds a record of completion.
• D. Attorneys, certified public accountants, and enrolled agents, each in good standing before the IRS.

Question 3 · Authority to Practice Before the IRS

Marisol holds no credential — she is not an attorney, a certified public accountant or an enrolled agent, and she has never taken part in the Annual Filing Season Program. Four people have asked her to appear for them at an IRS examination. Under the limited practice rules of Circular 230 §10.7(c), which one may she represent?

• A. Her sister, on the individual income tax return for the year under examination.
• B. A company she worked for full time until she resigned two years ago, for a year she was employed there.
• C. A close friend, provided that she accepts no fee and records the arrangement in writing.
• D. A corporation in which she owns fifteen percent of the shares but holds no office and does no work.

Question 4 · Authority to Practice Before the IRS

A regular full-time employee of a corporation who holds no professional credential may, under Circular 230 §10.7(c), represent before the IRS:

• A. Any subsidiary in which the employing corporation holds at least a ten percent equity interest.
• B. The corporation's customers in disputes about its products, where they authorize the appearance in writing.
• C. Any member of the corporation's board of directors, in that director's own individual tax matters.
• D. The corporation that employs the individual, on matters arising while that employment continues.

Question 5 · Authority to Practice Before the IRS

An enrolled agent filed a Form 2848 describing the matters covered as 'Income, Form 1040, 2023'. The IRS later notifies the taxpayer that it is also examining his 2024 Form 1040, and that it proposes to assess a trust fund recovery penalty against him personally. On the strength of the power of attorney already on file, the enrolled agent may:

• A. Represent the taxpayer on the 2023 income tax examination only, and needs a further authorization for the rest.
• B. Represent the taxpayer on every matter now open, because an authorization recorded on the CAF covers open years.
• C. Represent the taxpayer on the penalty only, because a civil penalty is not tied to any particular return year.
• D. Represent the taxpayer on both income tax years, because the authorization names that same form number.

Question 6 · Authority to Practice Before the IRS

Which statement about Form 8821, Tax Information Authorization, is correct?

• A. The designee may receive and inspect the taxpayer's confidential return information for the matters listed.
• B. The designee may receive return information in collection matters, but not in examination matters.
• C. The designee may receive return information and argue the taxpayer's case at an Appeals conference.
• D. The designee may inspect return information and also sign a consent extending the period for assessment.

Question 7 · Authority to Practice Before the IRS

Which of the following must appear on a Form 2848 before the IRS will accept it?

• A. The signatures of the taxpayer and the representative, each acknowledged before a notary public.
• B. The taxpayer's written consent to disclose return information to third parties under IRC §7216.
• C. A separate form for each year covered, because one form may not list more than a single period.
• D. The matters covered — the type of tax, the form number, and the years or periods at issue.

Question 8 · Authority to Practice Before the IRS

An unenrolled return preparer who holds an Annual Filing Season Program record of completion may represent a taxpayer:

• A. Before IRS Appeals on that return, provided the taxpayer consents to the representation in writing.
• B. Before revenue agents and customer service representatives, on a return the preparer prepared and signed.
• C. Before any IRS employee on any matter, in the same way that an enrolled agent may do.
• D. Before revenue officers in collection matters arising from a return the preparer prepared and signed.

Question 9 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

An enrolled agent represents a client in an examination. The revenue agent serves on her a proper and lawful written request for the client's bank statements and invoices for the year under examination, all of which are in her file and none of which are privileged. On hearing of the request, the client instructs her to hand over nothing. The enrolled agent must:

• A. Promptly submit the records, unless she believes in good faith and on reasonable grounds that they are privileged.
• B. Return the records to the client, and tell the IRS that she is no longer in possession of them.
• C. Submit the records only once the IRS issues a summons, an informal request having no compulsory force.
• D. Follow the client's instruction, because the duty of confidentiality owed to the client outranks the request.

Question 10 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

While preparing this year's return, an enrolled agent discovers that the client materially understated income on a return filed two years ago. Under Circular 230, the enrolled agent must:

• A. Prepare and file an amended return for the earlier year before completing the current year's return.
• B. Withdraw from the engagement unless the client agrees to file an amended return for the earlier year.
• C. Advise the client promptly of the error and of its consequences under the Code and the regulations.
• D. Notify the IRS of the error, because a practitioner's duty of candour to the Service overrides confidentiality.

Question 11 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

A practitioner has no first-hand knowledge of the figures a client supplies for the return. He may rely on them without verifying them:

• A. Only where the client signs a representation letter accepting responsibility for the figures supplied.
• B. In good faith, but he must make reasonable inquiries if the information looks incorrect or incomplete.
• C. Never, because the due diligence standard obliges him to inspect the documents behind every figure.
• D. In good faith, provided he records the reliance in the engagement file and keeps it for three years.

Question 12 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

Which of the following satisfies the due diligence standard of Circular 230 §10.22?

• A. Carrying prior-year figures forward on the footing that the earlier return must have been prepared correctly.
• B. Delegating correspondence with the IRS to an unsupervised intern who has been given written instructions.
• C. Signing returns prepared by an assistant, on the strength of the assistant's own review of the completed file.
• D. Relying on work done by a staff member whom the practitioner engaged, supervised, trained and evaluated with care.

Question 13 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

An enrolled agent received in January the last of the documents she needed to resolve a client's pending penalty matter with the IRS. She did nothing with them until August, having taken on better-paying engagements in the meantime. The matter is still open and no deadline has been missed. Her conduct:

• A. Breaches the prohibition on unreasonably delaying the prompt disposition of a matter before the IRS.
• B. Breaches Circular 230 only where the delay costs the client a right, such as an appeal deadline.
• C. Is a question of business judgment, which Circular 230 leaves the practitioner to exercise as she sees fit.
• D. Is permissible provided she tells the client of the delay and reduces her fee to reflect the wait.

Question 14 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

A certified public accountant hires a former enrolled agent who was disbarred from practice before the IRS last year. The former agent signs nothing and never holds himself out as the representative, but he attends the meetings with revenue agents on client matters and does the negotiating. The certified public accountant has:

• A. Breached Circular 230 only if the disbarred person is paid out of the fees charged for the representation.
• B. Breached Circular 230 by knowingly accepting assistance from a disbarred person in matters constituting practice.
• C. Complied with Circular 230, because the disbarred person acts under the accountant's supervision rather than alone.
• D. Complied with Circular 230, provided the clients are told of the disbarment and consent to the arrangement.

Question 15 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

A revenue agent participated personally and substantially in the examination of a corporation while she was employed by the IRS. She has since left the Service and become an enrolled agent. She may represent that corporation in that same examination:

• A. Once two years have passed since she left the IRS, that being the cooling-off period for former employees.
• B. Once the corporation gives written consent after being told of the part she played in the examination.
• C. Once she is enrolled, because enrollment supersedes the restrictions that bound her as an employee.
• D. Never, because the bar on a matter in which she participated personally and substantially is permanent.

Question 16 · Practitioner Duties and Restrictions (Circular 230 Subpart B)

An enrolled agent is also a notary public. In which circumstance may she perform a notarial act?

• A. On a document in an IRS matter for a member of her immediate family, but not for an unrelated client.
• B. On a document in an IRS matter for a client she represents, provided she charges no separate notary fee.
• C. On any document, because notarial acts are performed under state law, which Circular 230 does not reach.
• D. On a document in an IRS matter in which she is not acting as representative and has no interest of her own.

Question 17 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

The 'best practices' described in Circular 230 §10.33 are:

• A. Aspirational standards practitioners should aim to follow in providing advice and preparing submissions.
• B. Requirements enforced through preparer penalties.
• C. Applicable only to attorneys.
• D. Mandatory rules whose violation results in automatic disbarment.

Question 18 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

Which of the following is among the §10.33 best practices for tax advisors?

• A. Communicating clearly with the client regarding the terms of the engagement and the form and scope of advice.
• B. Guaranteeing audit protection.
• C. Minimizing written documentation to preserve privilege.
• D. Quoting fees only after the refund is known.

Question 19 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

Under §10.33, when advising a client about a return position, a best-practice advisor informs the client of:

• A. The examiner most likely to be assigned.
• B. The import of the conclusions reached — for example, whether the client may avoid accuracy-related penalties through adequate disclosure.
• C. Competitors' fee schedules.
• D. The advisor's malpractice coverage limits.

Question 20 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

Practitioners with responsibility for a firm's tax practice should, under §10.33(b):

• A. Personally sign every client deliverable.
• B. Restrict advice to oral communications.
• C. Take reasonable steps to ensure the firm's procedures for all members are consistent with best practices.
• D. File annual best-practices certifications with OPR.

Question 21 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

A position on a return that is NOT disclosed generally avoids being an 'unreasonable position' under IRC §6694(a) (and thus §10.34) only if it has:

• A. More-likely-than-not certainty.
• B. A reasonable basis.
• C. Substantial authority.
• D. The client's written approval.

Question 22 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

With adequate disclosure on Form 8275, a non-shelter return position avoids the §6694 preparer penalty if it meets at least the:

• A. Beyond-reasonable-doubt standard.
• B. Reasonable-basis standard.
• C. Substantial-authority standard.
• D. More-likely-than-not standard.

Question 23 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

A taxpayer wants to take a position contrary to a Treasury regulation. To disclose it adequately, the practitioner should file:

• A. Form 843.
• B. Form 8275.
• C. Form 8275-R.
• D. Form 8821.

Question 24 · Best Practices, Competence, and Written Advice (§§10.33–10.37)

For a position with respect to a tax shelter or reportable transaction, §10.34 effectively requires the practitioner to reasonably believe the position would:

• A. Survive at least a 20% chance of success.
• B. More likely than not be sustained on the merits.
• C. Generate no penalties regardless of outcome.
• D. Be conceded by the IRS.

Question 25 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

Under §10.50, after notice and an opportunity for a proceeding, the IRS may impose which sanctions on a practitioner?

• A. Automatic criminal referral in every case.
• B. Censure, suspension, or disbarment from practice before the IRS.
• C. Only suspension of a state CPA or bar license.
• D. Revocation of the practitioner's Social Security number.

Question 26 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

In addition to or in lieu of censure, suspension, or disbarment, §10.50(c) authorizes the IRS to impose:

• A. A monetary penalty.
• B. Mandatory retirement.
• C. A lien on the practitioner's personal residence.
• D. Loss of voting rights in a professional association.

Question 27 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

If a practitioner's employer knew of, and benefited from, the practitioner's disreputable conduct, §10.50(c) permits a monetary penalty against:

• A. The IRS employee who processed the return.
• B. Only the individual practitioner, never the firm.
• C. The employer, firm, or entity as well as the individual practitioner.
• D. The client who received the noncompliant advice.

Question 28 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

Censure under §10.50 differs from suspension or disbarment in that censure:

• A. Automatically triggers a criminal indictment.
• B. Is a public reprimand that does not itself bar the practitioner from practice before the IRS.
• C. Cannot be published by the IRS.
• D. Permanently revokes the PTIN.

Question 29 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

Section 10.51 addresses:

• A. Fee-splitting with non-practitioners.
• B. Incompetence and disreputable conduct.
• C. PTIN application procedures.
• D. The written-advice standard.

Question 30 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

Which of the following, standing alone, is listed under §10.51(a) as disreputable conduct?

• A. Conviction of any criminal offense under the federal tax laws.
• B. Disagreeing with an examiner's factual findings.
• C. Charging a contingent fee expressly permitted under §10.27.
• D. Filing a timely extension for a client.

Question 31 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

An EA is convicted of a state felony for insurance fraud unrelated to taxes. Under §10.51(a)(3), this conviction supports discipline if:

• A. The conviction occurred more than ten years ago.
• B. The conduct involved renders the practitioner unfit to practice before the IRS.
• C. The client consents to continued representation.
• D. It is never a basis for discipline because it is a non-tax felony.

Question 32 · Sanctions, Disreputable Conduct, and Disciplinary Proceedings (Circular 230 Subparts C & D)

A practitioner tells the IRS revenue agent that a client's records were destroyed in a fire, knowing this is untrue, to delay an examination. This is disreputable conduct under:

• A. §10.36 firm procedures only.
• B. It is not sanctionable because no return was affected.
• C. §10.33 best practices only.
• D. §10.51(a)(4) — giving false or misleading information to Treasury.

Question 33 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

Under §10.4, the two general paths to becoming an enrolled agent are:

• A. Holding a state CPA license, or holding a state bar license.
• B. Passing the Special Enrollment Examination (SEE), or qualifying technical experience as a former IRS employee.
• C. Passing the CPA exam and the SEE together.
• D. Completing a bachelor's degree in accounting, or five years of any tax-related job.

Question 34 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

An applicant seeking enrollment based on former IRS employment under §10.4(d) generally must have had at least:

• A. One year of any IRS employment, technical or not.
• B. No experience requirement, only a college degree.
• C. Ten years of qualifying technical experience.
• D. Five years of qualifying technical experience regularly applying tax law and regulations.

Question 35 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

An application for enrollment as an enrolled agent is made on:

• A. Form 8821.
• B. Form 23, Application for Enrollment to Practice Before the Internal Revenue Service.
• C. Form 2848.
• D. Form W-12.

Question 36 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

Under §10.5, the IRS will not grant enrollment to an applicant who:

• A. Fails to demonstrate the requisite good character, reputation, and qualifications, or has engaged in conduct that would justify suspension or disbarment under §10.51.
• B. Lives outside the applicant's home state.
• C. Has more than one professional license.
• D. Has ever changed employers.

Question 37 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

An applicant for enrollment must also, as a matter of IRS practice, hold a current:

• A. Preparer Tax Identification Number (PTIN).
• B. Federal firearms license.
• C. Notary public commission.
• D. State CPA license.

Question 38 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

The standard continuing education requirement for an enrolled agent's three-year enrollment cycle is:

• A. 24 hours total.
• B. 40 hours total.
• C. 72 hours total.
• D. 150 hours total.

Question 39 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

Within the 72-hour, three-year CE requirement, an enrolled agent must complete a minimum of how many CE hours in each year of the cycle?

• A. 16 hours per year.
• B. 72 hours per year.
• C. 8 hours per year.
• D. 30 hours per year.

Question 40 · Enrolled Agent Enrollment, Renewal, and Continuing Education Requirements

Of the 16-hour annual CE minimum, how many hours must be on ethics or professional conduct?

• A. 2 hours per year.
• B. 0 hours; ethics is only required once every three years.
• C. 6 hours per year.
• D. 10 hours per year.

Question 41 · PTIN Rules, Data Security, and Identity Theft

Under IRC §6109(a)(4) and its regulations, a paid tax return preparer must include which identifying number on returns prepared for compensation, in lieu of the preparer's Social Security number?

• A. A CAF number.
• B. A Preparer Tax Identification Number (PTIN).
• C. The preparer's driver's license number.
• D. An Employer Identification Number (EIN).

Question 42 · PTIN Rules, Data Security, and Identity Theft

Enrolled agent Priya prepares federal income tax returns for compensation. Which statement about her PTIN obligation is correct?

• A. She may use her CAF number instead of a PTIN on returns she signs.
• B. She must obtain and maintain a valid PTIN even though she is an enrolled agent, because the PTIN requirement applies to all compensated preparers regardless of credential.
• C. She only needs a PTIN if she prepares more than ten returns per year.
• D. As an enrolled agent, she is exempt from the PTIN requirement because her enrollment number already identifies her to the IRS.

Question 43 · PTIN Rules, Data Security, and Identity Theft

Which form is used to apply for or renew a PTIN by paper (as opposed to the online system at the IRS Tax Professional PTIN System)?

• A. Form 8554.
• B. Form SS-4.
• C. Form W-9.
• D. Form W-12.

Question 44 · PTIN Rules, Data Security, and Identity Theft

A PTIN is valid for what period before it must be renewed?

• A. Indefinitely once issued, with no renewal required.
• B. Three years, matching the standard record-retention period.
• C. Five years, matching the enrollment renewal cycle for enrolled agents.
• D. One calendar year; PTIN holders must renew annually to keep the number active for the upcoming filing season.

Question 45 · PTIN Rules, Data Security, and Identity Theft

Which individual is generally required to obtain a PTIN?

• A. A taxpayer who prepares only his or her own individual return.
• B. An individual who merely provides typing or reproduction services for a return without exercising judgment on its content.
• C. A non-signing preparer who, under the supervision of an attorney, CPA, or EA, prepares substantially all of a return but does not sign it.
• D. A volunteer at a VITA site who prepares returns without compensation.

Question 46 · PTIN Rules, Data Security, and Identity Theft

An individual applying for a PTIN who does not have a U.S. Social Security number (for example, a foreign practitioner without SSN eligibility) generally must:

• A. Apply for a PTIN only after first obtaining an ITIN and waiting one full filing season.
• B. Use a client's EIN as a substitute identifying number.
• C. Be automatically denied a PTIN, since an SSN is mandatory in all cases.
• D. Apply on paper Form W-12 and submit the additional documentation the form requires in lieu of an SSN.

Question 47 · PTIN Rules, Data Security, and Identity Theft

Renewing enrolled agent status on Form 8554 requires the applicant to:

• A. Obtain a new PTIN every time a Form 2848 is filed.
• B. Surrender the PTIN in exchange for a CAF number.
• C. Provide a valid PTIN as part of the renewal information.
• D. List every PTIN ever issued to the applicant, including expired ones.

Question 48 · PTIN Rules, Data Security, and Identity Theft

Which of the following best describes the current PTIN fee structure?

• A. The fee is charged only for the initial application; all renewals are free.
• B. The fee varies based on the number of returns the preparer expects to file that year.
• C. The IRS charges a nonrefundable fee for each new PTIN application and for each annual renewal.
• D. There is no fee for a PTIN application or renewal.