Free SEE-3 practice questions

Under Circular 230, which statement best describes what 'practice before the IRS' comprises?

• AIt comprises all matters connected with a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under the laws or regulations administered by the Service, including corresponding and communicating with it.check_circle Correct
• BIt covers any service for which a person charges a fee in the field of federal taxation, so that bookkeeping, payroll processing, and tax planning advice each amount to practice before the agency.
• CIt comprises only formal appearances at an Appeals conference or an examination interview, so that written correspondence and telephone contact with the Service on a client's behalf fall outside the meaning of practice.
• DIt comprises any act of submitting a federal document to the IRS, so that lodging an information return or a payment voucher is by itself an instance of practising before the Service.

Why A is correct: Section 10.2 defines practice before the Service as all matters connected with a presentation relating to a taxpayer's rights, privileges, or liabilities, including communicating and corresponding with the IRS; this states the definition correctly.

Why B is wrong: Tying the definition to charging a fee feels intuitive, but Circular 230 defines practice by the nature of the dealing with the Service rather than by whether a fee was charged, so this sweeps in unrelated paid services and is wrong.

Why C is wrong: Limiting practice to in-person appearances seems orderly, but Section 10.2 expressly includes corresponding and communicating with the Service, so excluding written and telephone contact understates the definition and is incorrect.

Why D is wrong: Filing paperwork looks like dealing with the Service, but a presentation about a taxpayer's rights, privileges, or liabilities is what defines practice; merely transmitting a routine document is not itself practice, so this misstates the boundary.

Under Circular 230, does the act of preparing and signing a taxpayer's return, standing alone, constitute practice before the IRS?

• AYes, because lodging a signed return is a presentation to the Service, so the preparer is automatically practising before the IRS and gains full representation rights for that taxpayer.
• BNo, because preparing and signing a return, and furnishing information at the Service's request, are treated separately from practice; representation arises only when the person presents a taxpayer's position to the IRS.check_circle Correct
• CYes, but only where the preparer is an enrolled agent, because enrolment converts the ordinary act of signing any taxpayer's return into practice before the Service for that engagement.
• DNo, because no person may practise before the Service until the IRS has issued that person a separate written authorisation for the particular taxpayer whose return is being prepared.

Why A is wrong: Equating signing a return with full practice seems natural, but preparation and signing alone are not practice before the Service and do not confer representation rights, so this overstates what signing achieves and is wrong.

Why B is correct: Circular 230 treats preparing and signing a return, and furnishing requested information, as distinct from practice; practice arises from presenting a taxpayer's rights, privileges, or liabilities to the Service, so this correctly states the boundary.

Why C is wrong: Enrolment status is real and matters for representation, but it does not transform the bare act of signing a return into practice; the distinction between preparing and representing applies regardless of credential, so this is incorrect.

Why D is wrong: A formal IRS pre-authorisation sounds like a safeguard, but Circular 230 imposes no such per-taxpayer written permission before practice; the real reason signing is not practice is the preparation-versus-representation distinction, so this misstates the mechanism.

Under Circular 230, which activity falls within practice before the IRS rather than outside it?

• AMaintaining a client's books and records during the year and reconciling bank statements, because that ongoing accounting work supports the eventual figures the Service will examine on the return.
• BGiving a client general written advice on the tax treatment of a planned transaction, where the advice is not communicated to the Service and no matter about it is presented to the IRS at any stage.
• CAdvocating a taxpayer's position by corresponding and communicating with the Service, and representing the taxpayer at conferences, hearings, and meetings about the taxpayer's rights, privileges, or liabilities.check_circle Correct
• DTransmitting a client's estimated tax payment together with the payment voucher to the Service, because handing money and a form to the IRS is a direct dealing with the agency on the client's behalf.

Why A is wrong: Bookkeeping underlies the return and so feels connected to the Service, but it is not a presentation about a taxpayer's rights, privileges, or liabilities to the IRS, so this routine accounting work is not practice before it.

Why B is wrong: Tax advice can feel like practitioner work, but advice kept between adviser and client, with nothing presented to the Service, lacks the presentation to the IRS that defines practice, so it falls outside the term.

Why C is correct: Section 10.2 includes communicating and corresponding with the Service and representing a taxpayer at conferences, hearings, and meetings within practice; advocating the taxpayer's position in these dealings is squarely practice before the IRS.

Why D is wrong: Submitting a payment is a direct contact with the Service, which makes it tempting, but it is a ministerial transmittal rather than a presentation about the taxpayer's rights, privileges, or liabilities, so it is not practice before the IRS.

Which statement correctly distinguishes the authority granted by Form 2848 from the authority granted by Form 8821?

• AForm 2848 lets the named person inspect and receive confidential information only, while Form 8821 lets that person argue the taxpayer's position and sign agreements before the IRS on the taxpayer's behalf.
• BForm 2848 appoints a recognised representative who may act for the taxpayer before the IRS, whereas Form 8821 only authorises the IRS to disclose confidential tax information to a designee who may not represent the taxpayer.check_circle Correct
• CBoth forms appoint a representative who may advocate for the taxpayer, but Form 2848 is used for individual taxpayers and Form 8821 is used for business entities filing employment or excise tax returns.
• DBoth forms authorise the designated person to receive the taxpayer's confidential information, and either form may then be used to represent the taxpayer at an examination or appeals conference.

Why A is wrong: This option reverses the two instruments, which is tempting because both grant third-party access; in fact Form 2848 confers representation and Form 8821 confers disclosure only, so the roles are swapped and the statement is wrong.

Why B is correct: Form 2848 is the Power of Attorney that names a representative authorised to act before the IRS, while Form 8821 is a Tax Information Authorization that merely permits disclosure to a designee with no representation; this correctly separates acting from receiving information.

Why C is wrong: An individual-versus-entity split sounds like a plausible filing rule, but the two forms are distinguished by the authority granted, not by taxpayer type, and only Form 2848 confers representation, so this misstates the distinction.

Why D is wrong: It is true that both forms allow a third party to receive information, which makes this attractive, but a Form 8821 designee cannot represent the taxpayer, so treating either form as a basis for representation is incorrect.

A taxpayer wants an accounting firm to receive copies of IRS notices and to inspect account transcripts, but does not want anyone authorised to argue the taxpayer's position or sign documents before the IRS. Which instrument fits this need?

• AForm 2848, Power of Attorney, because naming the firm as representative is the only way the IRS will release transcripts and copies of notices to a third party acting for the taxpayer.
• BForm 4506-T, Request for Transcript of Tax Return, because a standing transcript request is the established way to give an accounting firm ongoing access to a taxpayer's account information.
• CForm 8821, Tax Information Authorization, because it permits the IRS to disclose the specified confidential information to the named designee without granting any authority to represent or act for the taxpayer.check_circle Correct
• DForm 56, Notice Concerning Fiduciary Relationship, because notifying the IRS of the firm's fiduciary status lets it receive notices and inspect the taxpayer's account on a continuing basis.

Why A is wrong: Form 2848 would indeed allow the firm to receive information, but it also grants representation the taxpayer expressly does not want, and it is not the only route to disclosure, so it overshoots the stated need.

Why B is wrong: Form 4506-T does obtain transcripts and feels relevant, but it is a one-time transcript request rather than a standing authorisation for the IRS to disclose information to a designee, so it does not meet the ongoing-access need.

Why C is correct: Form 8821 authorises disclosure of confidential information to a designee and grants no representation rights, which matches a taxpayer who wants notices and transcripts shared but no advocacy; this is the right instrument.

Why D is wrong: Form 56 establishes a fiduciary such as an executor or trustee, which superficially resembles third-party access, but an accounting firm receiving information is not a fiduciary, so this form does not apply to the situation.

Under the rules governing Form 8821, what may a designee named on a valid Tax Information Authorization do for the taxpayer?

• ARepresent the taxpayer at an examination, sign a consent to extend the assessment period, and execute a closing agreement, provided the designee holds a recognised professional credential.
• BNegotiate and agree an installment payment arrangement with a revenue officer on the taxpayer's behalf, because authorised access to the account carries the power to resolve the balance owed.
• CInspect the taxpayer's information and also receive the taxpayer's refund check directly, since the disclosure authority extends to handling amounts due back to the taxpayer.
• DReceive and inspect the taxpayer's confidential tax information for the matters and periods listed, but not advocate the taxpayer's position or sign any document on the taxpayer's behalf.check_circle Correct

Why A is wrong: A credentialled designee sounds capable of these acts, but signing consents and representing at examination are representation powers reserved to a Form 2848 representative, so a Form 8821 designee may not perform them.

Why B is wrong: It feels logical that access to the account would let the designee settle the balance, but negotiating an agreement is an act of representation, which Form 8821 does not grant, so this exceeds the designee's authority.

Why C is wrong: Receiving information might seem to imply handling refunds, but no IRS authorisation directs a refund to a third party in this way, and Form 8821 covers disclosure only, so this confuses information access with handling funds.

Why D is correct: Form 8821 limits the designee to receiving and inspecting the confidential information specified for the listed matters and periods, with no power to advocate or sign, which states exactly what the designee may and may not do.

Which statement correctly describes the guaranteed installment agreement that the IRS must grant to an eligible individual under IRC Section 6159?

• AThe IRS must accept it for an individual whose aggregate income tax liability, excluding penalties and interest, is 10,000 dollars or less and who agrees to full payment within three years, having met the other statutory conditions.check_circle Correct
• BThe IRS must accept it for any taxpayer whose assessed balance is 50,000 dollars or less and who agrees to pay the full amount over a period that may extend up to seventy-two months from the date of acceptance.
• CThe IRS must accept it for an individual owing 10,000 dollars or less only after the taxpayer submits a complete Form 433-A collection information statement disclosing income, expenses, and equity in assets.
• DThe IRS must accept it for an individual owing 10,000 dollars or less, but only where the taxpayer pledges equity in real property as security for the deferred income tax balance.

Why A is correct: A guaranteed agreement is mandatory when the assessed income tax owed apart from penalties and interest is 10,000 dollars or less, the taxpayer agrees to pay in full within three years, and the other conditions such as recent compliance are satisfied, which states the rule precisely.

Why B is wrong: The 50,000 dollar figure and the seventy-two month term describe the streamlined agreement, not the guaranteed one, so borrowing those parameters confuses the two categories and misstates the guaranteed rule.

Why C is wrong: Requiring a full financial disclosure sounds prudent for any agreement, but the guaranteed agreement specifically does not call for a Form 433 financial statement, so adding that condition contradicts what makes the agreement guaranteed.

Why D is wrong: Security for a balance feels like a reasonable safeguard, yet the guaranteed agreement requires no pledge of collateral, so conditioning it on secured property invents a requirement the statute does not impose.

What feature distinguishes a partial-payment installment agreement from a routine or streamlined installment agreement?

• AIt allows the taxpayer to pay a reduced fixed sum each month without any financial disclosure, because the IRS waives the collection information statement for partial-payment cases to speed up resolution.
• BIt permits monthly payments that will not satisfy the full liability before the collection statute of limitations expires, so the IRS collects only part of the balance owed over the remaining statutory period.check_circle Correct
• CIt extends the collection statute of limitations for an additional ten years, allowing the IRS to keep collecting reduced monthly amounts well beyond the original statutory deadline.
• DIt requires the taxpayer to pay the entire assessed balance within seventy-two months, but at a fixed monthly rate the IRS sets after reviewing the taxpayer's reported income and allowable expenses.

Why A is wrong: A waived financial statement is attractive because partial-payment terms are modest, but these agreements in fact require a full collection information statement and periodic review, so claiming no disclosure is needed reverses the actual rule.

Why B is correct: A partial-payment agreement is defined by payments too small to retire the debt before the collection statute runs, meaning the taxpayer pays only a portion of the liability across the time left to collect, which is the feature that sets it apart.

Why C is wrong: An extended collection period seems to follow from smaller payments, but a partial-payment agreement does not lengthen the statute by ten years; the unpaid balance is generally written off when the period ends, so this misdescribes the mechanism.

Why D is wrong: Full payment within seventy-two months describes a streamlined agreement, so attaching that term to a partial-payment agreement contradicts its defining trait of paying less than the full amount owed.

Which statement correctly describes a streamlined installment agreement for an individual taxpayer?

• AIt is available only where the assessed balance is 10,000 dollars or less, must be paid within three years, and obliges the IRS to accept it once recent filing and payment compliance is shown.
• BIt is available regardless of balance size, but the taxpayer must submit a full collection information statement and pledge equity in assets before the IRS will set the monthly payment amount.
• CIt is available where the assessed balance is within the current administrative ceiling set by the IRS, allows payment over a term of up to seventy-two months, and generally requires no collection information statement.check_circle Correct
• DIt is available where the assessed balance is within the administrative ceiling, yet it requires the unpaid portion to be settled through an accepted offer in compromise once the seventy-two month term ends.

Why A is wrong: These parameters describe the guaranteed agreement rather than the streamlined one, so importing the lower ceiling, shorter term, and mandatory-acceptance trait misidentifies the category being asked about.

Why B is wrong: Unlimited balance size with full disclosure resembles a negotiated agreement for larger debts, but a streamlined agreement is capped by an administrative ceiling and avoids the financial statement, so this contradicts both of its hallmarks.

Why C is correct: A streamlined agreement applies when the balance falls within the administrative dollar ceiling the IRS publishes, lets the taxpayer pay across up to seventy-two months, and ordinarily needs no Form 433 financial disclosure, which captures all three defining features correctly.

Why D is wrong: Linking the agreement to an offer in compromise sounds like a tidy way to close out a balance, but a streamlined agreement is designed to full-pay within its term and carries no offer requirement, so this adds a step that does not exist.

Which statement correctly describes the scope of the paid-preparer due diligence requirements that Form 8867 documents?

• AThey apply to the earned income credit, the child tax credit with the additional child tax credit and the credit for other dependents, the American opportunity credit, and head of household filing status.check_circle Correct
• BThey apply to the earned income credit alone, so a preparer claiming the child tax credit or the American opportunity credit has no due diligence duty to record under the rules.
• CThey apply to every refundable credit a preparer claims on a return, including the premium tax credit and the recovery rebate amounts, because each one carries a risk of an improper refund.
• DThey apply to the child tax credit and the American opportunity credit, but head of household status is a filing choice rather than a credit and so falls outside the documented duty.

Why A is correct: Form 8867 due diligence covers exactly these four credits and the head of household filing status, so this correctly states the full scope of the requirement.

Why B is wrong: The earned income credit was the original focus, which makes this tempting, but the duty now extends well beyond it, so limiting Form 8867 to that one credit understates the rule and is wrong.

Why C is wrong: Refund risk does run across many credits, but the due diligence rule is limited to a named set and does not reach the premium tax credit or rebate amounts, so casting it over all refundable credits is incorrect.

Why D is wrong: Head of household is indeed a filing status rather than a credit, which makes the exclusion sound logical, but the rule expressly brings that status within the duty, so leaving it out is wrong.

Which set of actions makes up the four due diligence requirements a paid preparer must satisfy for a covered credit under Section 6695(g)?

• AObtain a signed engagement letter, verify the client's identity with photo identification, request prior-year returns, and store all of these items for the statutory retention period.
• BComplete and submit Form 8867, complete the applicable computation worksheets, satisfy the knowledge requirement by making reasonable inquiries when information appears incorrect, and keep the required records.check_circle Correct
• CConfirm the client's bank account for the refund, file the return electronically, attach Form 8867 to the return, and keep a copy of the transmitted acknowledgement on file.
• DInterview the client in person, compute the credit using the preparer's own software, obtain a written client representation of eligibility, and retain that representation for three years.

Why A is wrong: These are sensible practice-management steps, and identity checks feel like diligence, but none of them is one of the four statutory requirements, so this list describes good habits rather than the rule and is wrong.

Why B is correct: These are the four requirements under the regulation: completing Form 8867, the computation worksheets, the knowledge requirement, and record retention, so this correctly states the rule.

Why C is wrong: Submitting Form 8867 with the return is a real duty, which makes the list look plausible, but the electronic filing and refund-account steps are not among the four requirements, so the set is incorrect.

Why D is wrong: A client representation can support a file, which makes this tempting, but a signed statement does not replace the preparer's own knowledge check or worksheets, so this misstates the four requirements and is wrong.

Which statement correctly describes the knowledge requirement that forms one of the four due diligence duties for a covered credit?

• AThe preparer must independently verify every figure the client supplies by obtaining third-party documentation, because accepting any client statement without supporting records is a due diligence failure.
• BThe preparer may accept whatever the client reports as long as the client signs the return, because the signature shifts responsibility for the accuracy of the claim onto the taxpayer.
• CThe preparer must apply a knowledge-based standard, not relying on information that appears incorrect, inconsistent, or incomplete, and must make and document reasonable inquiries to resolve the gaps.check_circle Correct
• DThe preparer must inquire only when the client volunteers that information might be wrong, since the duty is triggered by the client rather than by the appearance of the information itself.

Why A is wrong: Probing doubtful information is required, which makes blanket verification sound diligent, but the rule does not demand third-party proof for every figure, so this overstates the standard and is wrong.

Why B is wrong: The taxpayer does sign under penalty of perjury, which makes this feel reasonable, but the preparer's own knowledge duty is not discharged by the client's signature, so relying on it is incorrect.

Why C is correct: The knowledge requirement asks the preparer to recognise questionable information and resolve it through documented reasonable inquiries rather than accept it at face value, so this correctly states the duty.

Why D is wrong: Client-prompted questions are part of practice, but the duty is triggered when information appears incorrect, inconsistent, or incomplete to the preparer, not only when the client raises it, so this misplaces the trigger and is wrong.