Free CPA REG Practice Questions Online

Correct answer: A. Make reasonable inquiries and exercise due diligence before relying on the schedule.

Circular 230 requires due diligence in preparing or assisting with returns and other submissions. A known inconsistency is a reason to inquire; client responsibility does not excuse blind reliance.

• B: A practitioner may generally rely on client information, but not without inquiry when it appears incorrect, inconsistent, or incomplete.
• C: Due diligence applies before submission; an audit is not the trigger for investigating a known inconsistency.
• D: The duty is to determine a supportable fact, not to select the tax-favorable figure.

Correct answer: B. Each affected client gives informed written consent at the time required by the rule.

Circular 230 allows a waivable conflict only when all stated conditions are met, including informed consent confirmed in writing by each affected client. Fee parity and IRS staffing do not cure a conflict.

• A: Assignment of different IRS personnel does not provide the client consent required by Circular 230.
• C: Conflict consent does not itself waive privileges or authorize unrestricted disclosure to the IRS.
• D: Equal fees are irrelevant to whether conflicted representation is permitted.

Correct answer: D. $500.

UCC 2-201 uses a $500 threshold in the official text. This is a fixed statutory element of the rule, not an inflation-indexed annual amount; exceptions and sufficiency requirements must then be considered.

• A: The official Article 2 text does not set the general threshold at $100.
• B: The official Article 2 text does not set the general threshold at $250.
• C: The official Article 2 text does not set the general threshold at $300.

Correct answer: C. Representing a taxpayer in a judicial proceeding arising under the Internal Revenue Code under a contingent-fee agreement.

Circular 230 expressly permits contingent fees for services connected with a judicial proceeding arising under the Code. Preparing an original return or ordinary planning for a refund- or savings-based fee is outside that exception.

• A: The rule's general prohibition covers contingent compensation for preparing an original return.
• B: An amended return is not automatically within an exception merely because it seeks a refund; timing and the specific examination/challenge conditions matter.
• D: Routine planning is not transformed into an authorized proceeding merely by tying the fee to expected savings.

Correct answer: D. A practitioner may not use false, fraudulent, coercive, or misleading statements or claims.

Circular 230 regulates the substance of solicitation: false, fraudulent, coercive, and misleading communications are prohibited. A PTIN is not IRS endorsement, and truthful direct mail is not categorically forbidden.

• A: A disclaimer does not sanitize a false or misleading performance claim.
• B: The rule permits written solicitation subject to its content and identification requirements; it is not a blanket direct-mail ban.
• C: Holding a PTIN authorizes identification for filing purposes, not a claim of IRS endorsement.