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SEE Part 3

SEE Part 3 practice questions and answers

12 questions across every section of the exam. Each answer explains the rule and quotes the IRS source behind it.

Want to know where you stand first? Answer them one at a time and get a score for each section.

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  1. Practices and ProceduresQuestion 1

    Tomas, an enrolled agent, prepares a routine installment-agreement request for a client, a two-page form supported by one pay stub. He bills 200 hours at $500 an hour — $100,000 — for the job, a total no practitioner in town charges for that task. His engagement letter disclosed the hourly rate. Is the fee permitted?

    1. No. $100,000 for a routine two-page request is unconscionable for the work done
    2. No, but a $100,000 flat fee for the same request would stand
    3. Yes. A customary hourly rate can never produce an unconscionable fee
    4. Yes. Without a dollar threshold in the rule, any disclosed rate stands
    Show answer
    • No. $100,000 for a routine two-page request is unconscionable for the work doneCircular 230 bars unconscionable fees without setting a dollar line. A $100,000 bill for a routine two-page request, far beyond any customary charge for that task, is the kind of charge the ban reaches.
    • No, but a $100,000 flat fee for the same request would standThe billing method is not what saves a fee. A $100,000 flat fee for a routine two-page request fails the same amount-against-work test.
    • Yes. A customary hourly rate can never produce an unconscionable feeThe rate is only half the bill. A customary rate times hours no task could justify still produces an unconscionable total.
    • Yes. Without a dollar threshold in the rule, any disclosed rate standsNeither half helps. No dollar threshold draws the line, but a fee far beyond anything the task could justify still fails the ban, and disclosing the rate does not cure it.

    A practitioner may not charge an unconscionable fee in any IRS matter. $100,000 for a routine two-page request, far beyond any customary charge, is unconscionable, and disclosing the rate does not cure it.

    Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service (Rev. 6-2014) Page 21

    § 10.27 Fees. (a) In general. A practitioner may not charge an unconscionable fee in connection with any matter before the Internal Revenue Service. (b) Contingent fees — (1) Except as provided in paragraphs (b)(2), (3), and (4) of this section, a practitioner may not charge a contingent fee for services rendered in connection with any matter before the Internal Revenue Service.
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    Taught in Fees That Are Allowed

  2. Practices and ProceduresQuestion 2

    Sam, an enrolled agent, learns that a signed financial statement his client submitted to IRS Collections understates the client's monthly income by $900. No officer has questioned the statement. What must Sam do?

    1. Promptly tell the client about the understatement and its Code consequences
    2. Say nothing while the statement serves its purpose; revisit it only if Collections asks
    3. Tell the client's lender, which relied on the statement, and let the lender decide
    4. File a corrected statement with Collections himself, without telling the client
    Show answer
    • Promptly tell the client about the understatement and its Code consequencesA practitioner who knows of an error in a paper the client submitted must promptly advise the client of the fact and of its consequences under the Code and regulations. Both halves are required at once.
    • Say nothing while the statement serves its purpose; revisit it only if Collections asksWaiting contradicts promptly. The duty arises when Sam learns of the error, not when Collections asks about it.
    • Tell the client's lender, which relied on the statement, and let the lender decideThe duty runs to the client, not to third parties. Sam must advise the person whose paper it is, not the lender who read it.
    • File a corrected statement with Collections himself, without telling the clientThe rule requires Sam to advise the client, not to act behind the client's back. It gives him no authority to file on the client's behalf or to skip telling the client.

    A practitioner who knows the client erred in a submitted paper must promptly advise the client of the error and its Code and regulation consequences. Sam must tell the client now, not wait, go around the client, or warn the lender.

    Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service (Rev. 6-2014) Page 19

    § 10.21 Knowledge of client’s omission. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission. The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission.
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    Taught in Information the IRS Is Owed

  3. Practices and ProceduresQuestion 3

    Lena, an enrolled agent, was required to file federal income tax returns for the last two years and willfully filed neither. Her client work is careful, and no client has complained. Can Lena be sanctioned under Circular 230?

    1. Yes. Willfully not filing her own return is disreputable conduct
    2. Yes, but only after a criminal conviction for not filing
    3. No. Circular 230 reaches only conduct in client matters
    4. No, as long as she files late and pays the penalties
    Show answer
    • Yes. Willfully not filing her own return is disreputable conductWillfully failing to make a federal tax return is disreputable conduct for which a practitioner may be sanctioned. That the return is her own and not a client's makes no difference.
    • Yes, but only after a criminal conviction for not filingNo conviction is needed. Willfully failing to file is itself on the list of disreputable conduct, apart from any criminal case.
    • No. Circular 230 reaches only conduct in client mattersThe disreputable-conduct list is not limited to client work. It includes a practitioner willfully failing to make her own federal tax return.
    • No, as long as she files late and pays the penaltiesFiling late and paying penalties afterwards does not undo two years of willful failure to file. The conduct is sanctionable as it happened.

    Circular 230 lists willfully failing to make a federal tax return as disreputable conduct. It covers the practitioner's own returns, and it needs no client harm and no conviction, so Lena can be sanctioned.

    Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service (Rev. 6-2014) Page 47

    (f) Willfully failing to make a Federal tax return in violation of the revenue laws of the United States, willfully evading, attempting to evade, or participating in any way in evading or attempting to evade any assessment or payment of any Federal tax, or knowingly counseling or suggesting to a client or prospective client an illegal plan to evade Federal taxes or payment thereof.
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    Taught in Conduct That Draws Sanction

  4. Practices and ProceduresQuestion 4

    Omar's filed return claims a $40,000 deduction backed by a published revenue ruling squarely on point, giving him substantial authority for the position. He discloses nothing about the deduction on the return. The IRS disallows it in full, producing an understatement. Is the understatement reduced?

    1. Yes, and the full $40,000 is automatically allowed as a deduction
    2. No. Only a disclosed position can reduce an understatement
    3. No. Substantial authority counts only alongside a reasonable basis
    4. Yes. Substantial authority reduces the understatement with no disclosure needed
    Show answer
    • Yes, and the full $40,000 is automatically allowed as a deductionReduction shrinks the understatement for penalty purposes. The deduction itself stays disallowed; only the penalty math changes.
    • No. Only a disclosed position can reduce an understatementDisclosure is required only on the reasonable-basis path. The substantial-authority path stands on its own.
    • No. Substantial authority counts only alongside a reasonable basisThat merges the two paths. Reasonable basis pairs with disclosure; substantial authority needs neither.
    • Yes. Substantial authority reduces the understatement with no disclosure neededThe understatement is reduced by the portion attributable to a position with substantial authority. Disclosure plus reasonable basis is a separate, alternative path.

    An understatement is reduced by the portion attributable to a position with substantial authority, whether or not disclosed. Omar's ruling-backed deduction qualifies, so the understatement is reduced.

    United States Code, Title 26, § 6662 — Imposition of accuracy-related penalty on underpayments (govinfo section granule) Page 2

    (B) Reduction for understatement due to position of taxpayer or disclosed item The amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to— (i) the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or (ii) any item if— (I) the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return, and (II) there is a reasonable basis for the tax treatment of such item by the taxpayer.
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    Taught in Which Penalty Fits

  5. Representation Before the IrsQuestion 5

    Dana is buying Rosa's business. Before closing, Dana's CPA asks to inspect Rosa's business tax transcripts to verify reported income. Rosa says by phone, “Go ahead and pull them,” but signs no authorization. May the CPA inspect the transcripts?

    1. Yes. Rosa's permission to the CPA is enough to open her transcripts
    2. No. Rosa has given the IRS no authorization for the CPA
    3. Yes. A buyer-side CPA is exempt from authorization requirements
    4. No. Only Rosa herself may ever inspect her transcripts
    Show answer
    • Yes. Rosa's permission to the CPA is enough to open her transcriptsTelling the buyer's CPA to go ahead reaches no one at the IRS. Rosa has given the IRS no authorization naming the CPA, so there is nothing for it to act on.
    • No. Rosa has given the IRS no authorization for the CPAA tax information authorization is a document Rosa signs naming who may receive or inspect her return information for the matter. She has signed none, and a phone call with the buyer's CPA does not reach the IRS.
    • Yes. A buyer-side CPA is exempt from authorization requirementsNo buyer-side exemption exists. The CPA gets access only through an authorization from Rosa.
    • No. Only Rosa herself may ever inspect her transcriptsThat over-denies. The taxpayer may designate any individual or entity in a signed authorization; inspection is not limited to the taxpayer herself.

    Disclosure of Rosa's return information to the CPA needs Rosa's authorization. A phone call with the CPA authorizes nothing with the IRS, and she has signed no tax information authorization, so the CPA may not inspect.

    Conference and Practice Requirements (26 CFR Part 601, Subpart E, republished as Publication 216) Page 4

    (15) Tax information authorization. A document signed by the taxpayer authorizing any individual or entity (e.g., corporation, partnership, trust or organization) designated by the taxpayer to receive and/or inspect confidential tax return information in a specified matter. (See section 6103 of the Internal Revenue Code and the regulations there-under.)
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    Taught in Form 2848 or Form 8821

  6. Representation Before the IrsQuestion 6

    Nadia has filed Forms 2848 for clients for years and has a CAF number. This year her enrollment as an enrolled agent was placed on the inactive roster because she did not renew it. A client asks her to handle an examination, and she plans to file a new Form 2848 showing her CAF number. May she represent the client?

    1. Yes, if the new Form 2848 shows the CAF number
    2. Yes. A CAF number authorizes practice until the IRS cancels it
    3. No. A CAF number does not give authority to practice
    4. Yes. Inactive status limits only new clients, not existing ones
    Show answer
    • Yes, if the new Form 2848 shows the CAF numberShowing the CAF number on the form adds no authority. The number identifies the representative for processing; it says nothing about whether she may practice.
    • Yes. A CAF number authorizes practice until the IRS cancels itA CAF number never authorized practice, so there is nothing for the IRS to cancel. Whether Nadia may represent anyone turns on her enrollment, which is inactive.
    • No. A CAF number does not give authority to practiceThe CAF number is an identification number the IRS assigns to representatives to process their powers of attorney. It is not authority to practice. That comes from active enrollment, and an enrolled agent on the inactive roster is ineligible to practice.
    • Yes. Inactive status limits only new clients, not existing onesInactive status is not limited to new clients. While on the inactive roster, an enrolled agent is ineligible to practice before the IRS at all.

    A CAF number identifies a representative for processing powers of attorney; it is not an indication of authority to practice. Nadia's enrollment is inactive, so she is ineligible to practice, and listing her CAF number changes nothing.

    Instructions for Form 2848, Power of Attorney and Declaration of Representative Page 4

    The CAF number is a unique nine-digit identification number (not the SSN, EIN, PTIN, or enrollment card number) that the IRS assigns to representatives. The CAF number is not an indication of authority to practice. The representative should use the assigned CAF number on all future powers of attorney.
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    Taught in Starting, Changing, and Ending Authority

  7. Representation Before the IrsQuestion 7

    Luis's shares in a startup became worthless in 2021. In 2025, four years later, he files a claim based on the worthless-securities loss. His original return was honest, with no omission or fraud issue. Which limitations period governs the claim?

    1. Seven years, the period for worthless-securities losses
    2. Three years, the honest-return period for every claim
    3. The later of three years from filing or two years from payment
    4. Six years, the period for omissions over 25% of income
    Show answer
    • Seven years, the period for worthless-securities lossesThe table gives claims for losses from worthless securities or bad-debt deductions seven years. Filed four years after the loss year, his claim is inside it.
    • Three years, the honest-return period for every claimThree years is the assessment period for an honest return, not the period for this special claim.
    • The later of three years from filing or two years from paymentThat later-of rule governs general refund claims. The table carves worthless-securities and bad-debt claims out with their own seven years.
    • Six years, the period for omissions over 25% of incomeThe six-year rule covers income omitted from a return, not a loss claimed on it. Luis omitted nothing.

    Worthless-securities loss claims get seven years, not the general refund or assessment periods. Luis's fourth-year claim is timely.

    Publication 17 — Your Federal Income Tax Page 20

    5 File a claim for credit or refund after you filed your return, The later of 3 years or 2 years after tax was paid. 6 File a claim for a loss from worthless securities or bad debt deduction, 7 years.
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    Taught in Beating the Clock

  8. Specific Areas of RepresentationQuestion 8

    Omar's 2025 records are incomplete and his return cannot be finished by April 15, 2026. He does not know yet whether he will owe or be due a refund. He asks his preparer to file Form 1127 for more time to file. What should the preparer tell him?

    1. Form 1127 is the wrong paper for filing time; he needs Form 4868
    2. File Form 1127. It extends both the filing and the payment deadlines
    3. File Form 1127, first showing undue hardship for needing more filing time
    4. File Form 4868 for the payment extension and Form 1127 for the filing extension
    Show answer
    • Form 1127 is the wrong paper for filing time; he needs Form 4868Form 1127 is for more time to pay, not more time to file. The filing extension is Form 4868, or Form 2350 for some taxpayers abroad.
    • File Form 1127. It extends both the filing and the payment deadlinesForm 1127 does not extend the filing date. It asks for more time to pay because of undue hardship, not more time to file.
    • File Form 1127, first showing undue hardship for needing more filing timeA filing extension needs no hardship showing, and Form 1127 is not the filing paper in any case.
    • File Form 4868 for the payment extension and Form 1127 for the filing extensionThat is backwards. Form 4868 is the filing extension; Form 1127 is not for filing time.

    Form 1127 is never the paper for filing time. Omar needs Form 4868 for the filing extension.

    Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship Page 3

    are seeking an extension of time to file your income tax return file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return; or Form 2350, Application for Extension of Time To File U.S. Income Tax Return. Do not file Form 1127.
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    Taught in More Time to Pay

  9. Specific Areas of RepresentationQuestion 9

    In January Maya receives a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. She does not respond within 30 days. In November she sends Form 12153, checking the equivalent-hearing box. In December, before any hearing, the IRS levies her bank account for the same tax. May it?

    1. No. Maya must pay the balance first to earn any hearing
    2. No. Every hearing request bars levy until Appeals decides
    3. Yes, and the levy ends her right to the equivalent hearing
    4. Yes. An equivalent hearing does not prohibit levy
    Show answer
    • No. Maya must pay the balance first to earn any hearingNo pay-first rule exists. A hearing may be requested without paying the balance.
    • No. Every hearing request bars levy until Appeals decidesOnly a timely CDP request prohibits levy. Maya's November request, months after the notice, is not timely.
    • Yes, and the levy ends her right to the equivalent hearingNothing cancels the requested hearing because a levy followed. Levy and hearing proceed on separate tracks; the hearing still goes forward.
    • Yes. An equivalent hearing does not prohibit levyA late request brings an equivalent hearing, which is the same as a CDP hearing except it does not prohibit levy. Nothing bars the December levy.

    Only a timely CDP hearing request prohibits levy. Maya's late request brings an equivalent hearing, which does not bar levy, so the December levy may proceed.

    Form 12153, Request for a Collection Due Process or Equivalent Hearing Page 3

    If you want a hearing with Appeals after the deadline for requesting a timely CDP hearing has passed, you must check the box in item 2. In this case you will receive an equivalent hearing, which is the same as a CDP hearing except it does not prohibit levy or suspend the 10-year period for collecting your taxes; also, you cannot go to court to contest Appeals' decision about your disagreement.
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    Taught in Liens, Levies, and Summonses

  10. Specific Areas of RepresentationQuestion 10

    Luis disagrees with his examination changes. He receives the 30-day letter with the examination report, then does nothing for two months. What follows?

    1. The IRS sends a 90-day letter, the notice of deficiency
    2. The 30-day letter becomes the notice of deficiency; he has 90 days from it to petition the Tax Court
    3. Silence accepts the changes; the tax is assessed with no further letter
    4. He may still appeal under the 30-day letter whenever he is ready
    Show answer
    • The IRS sends a 90-day letter, the notice of deficiencyThe package gives 30 days to accept or appeal the proposed changes. With no response, the IRS sends the 90-day letter.
    • The 30-day letter becomes the notice of deficiency; he has 90 days from it to petition the Tax CourtThe two letters are different papers. The 30-day letter proposes and offers appeal; the 90-day letter that follows is the notice of deficiency.
    • Silence accepts the changes; the tax is assessed with no further letterSilence is not agreement. Unanswered proposals move to the 90-day letter, not straight to assessment.
    • He may still appeal under the 30-day letter whenever he is readyThe 30 days run from the letter's date. Waiting two months lets the clock expire; readiness does not reopen it.

    A 30-day letter gives 30 days to accept or appeal. Ignored, it is followed by the 90-day letter, the notice of deficiency.

    Publication 556 — Examination of Returns, Appeal Rights, and Claims for Refund Page 5

    30-day letter and 90-day letter. Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. The letter will explain what steps you should take, depending on which action you choose. Be sure to follow the instructions carefully. Appeal Rights are explained later. 90-day letter. If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency.
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    Taught in Answering the Examination

  11. Filing ProcessQuestion 11

    Sam, an ERO, e-files Dana's return and receives the IRS acceptance acknowledgement on April 2. A listed appraisal attachment must travel on Form 8453. Sam mails Form 8453 on April 15, waiting until the client's refund arrived. How does the transmittal stand?

    1. Late. Form 8453 was due within 3 business days after the April 2 acceptance
    2. Timely. The 3 business days run from the client's refund date
    3. Late. No paper may follow an e-filed return
    4. Timely. Form 8453 follows the return's April 15 due date
    Show answer
    • Late. Form 8453 was due within 3 business days after the April 2 acceptanceAn ERO must mail Form 8453 within 3 business days after receiving acknowledgement of acceptance. April 15 is well past April 2 plus three business days.
    • Timely. The 3 business days run from the client's refund dateThe clock starts at the acceptance acknowledgement, not at the refund. Waiting for the refund lets it expire.
    • Late. No paper may follow an e-filed returnListed attachments do follow an e-filed return on Form 8453. This transmittal is late, but not because paper follow-up is forbidden.
    • Timely. Form 8453 follows the return's April 15 due dateThe return's due date does not govern the transmittal. Form 8453 runs its own 3-business-day clock.

    Form 8453 must reach the IRS within 3 business days after the ERO learns the return was accepted. Mailed thirteen days later, Sam's transmittal is late.

    Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return Page 2

    When and Where To File If you are an electronic return originator (ERO), you must mail Form 8453 to the IRS within 3 business days after receiving acknowledgement that the IRS has accepted the electronically filed tax return.
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    Taught in Who Must e-file

  12. Filing ProcessQuestion 12

    In 2025 Dana purges files. She holds 2024 return support with that year's limitations still open, 2016 employment tax records for tax due and paid in 2017, and purchase records for equipment bought in 2014 and sold in a taxable sale in 2023, with that year's limitations still open. Which may she discard?

    1. The 2016 employment tax records, whose 4-year clock has run
    2. None. Every tax record must be kept at least ten years
    3. The 2024 return support. Last year's records are stale
    4. The equipment purchase records. The equipment was bought over a decade ago
    Show answer
    • The 2016 employment tax records, whose 4-year clock has runEmployment tax records need at least 4 years after the tax was due or paid — here 2017 plus four, long past. Return support stays until that return's limitations run, and property records until the disposition year's limitations run; both are still open.
    • None. Every tax record must be kept at least ten yearsNo ten-year rule exists. Each record type keeps its own period: limitations for returns and property, four years for employment taxes.
    • The 2024 return support. Last year's records are staleStaleness is not the test. Support for a return stays until that return's limitations period runs out, which for 2024 it has not.
    • The equipment purchase records. The equipment was bought over a decade agoProperty records run from the disposition year, not the purchase year. The 2023 sale year's limitations are still open.

    Return support and property records stay until their limitations periods run; eight-year-old employment tax records, past their four years, may go.

    Publication 583, Starting a Business and Keeping Records Page 16

    How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Table 3 contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date. Keep copies of your filed tax returns. They help in TIP preparing future tax returns and making computations if you file an amended return. Employment taxes. If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. For more information about recordkeeping for employment taxes, see Pub. 15. Assets. Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition.
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    Taught in Keeping Records Safe

Want to know where you stand first? Answer them one at a time and get a score for each section.

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Written by GroundSkill, not taken from the exam. GroundSkill is independently produced and is not affiliated with or endorsed by the IRS. See what's in the course