ExpertHard1 markMultiple Choice
CPA · Question 49 · Area I: Ethics & Tax Procedures
Under Circular 230, a practitioner may charge a contingent fee in which of the following situations?
Under Circular 230, a practitioner may charge a contingent fee in which of the following situations?
Answer options:
A.
For preparing an original tax return.
B.
For services rendered in connection with an IRS examination of an original return.
C.
For preparing an amended return claiming a refund, where the claim is not related to an IRS examination or challenge.
D.
For providing financial planning advice.
How to approach this question
Recall the 3 contingent fee exceptions: 1) IRS Audit/Challenge, 2) Refund of Interest/Penalties, 3) Judicial Proceeding.
Full Answer
B.For services rendered in connection with an IRS examination of an original return.✓ Correct
B
Generally, contingent fees are prohibited for tax preparation. Exceptions exist for: (1) Services in connection with an IRS examination or challenge to an original return, (2) Claims for refund of interest/penalties, and (3) Judicial proceedings.
Common mistakes
Thinking contingent fees are allowed for amended returns (only if responding to IRS challenge).
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