ExpertHard1 markMultiple Choice
CPA · Question 01 · Area 1: Ethics & Procedures
Under Circular 230, which of the following scenarios represents a permissible contingent fee arrangement for a practitioner representing a client before the IRS?
Under Circular 230, which of the following scenarios represents a permissible contingent fee arrangement for a practitioner representing a client before the IRS?
Answer options:
A.
A fee based on a percentage of the refund on an original tax return.
B.
A fee based on the amount of a refund claimed on an amended return filed within 120 days of the taxpayer receiving a written notice of examination of the original return.
C.
A fee based on the complexity of the tax law research required for a private letter ruling request.
D.
A fee arrangement where the practitioner charges 30% of any tax savings generated from a tax shelter promotion.
How to approach this question
Recall the general rule that contingent fees are prohibited, then identify the three specific exceptions: 1) IRS examination/audit, 2) Claim for refund of interest/penalties, 3) Judicial proceedings.
Full Answer
B.A fee based on the amount of a refund claimed on an amended return filed within 120 days of the taxpayer receiving a written notice of examination of the original return.✓ Correct
A fee based on the amount of a refund claimed on an amended return filed within 120 days of the taxpayer receiving a written notice of examination of the original return.
Circular 230 §10.27 generally prohibits contingent fees. However, exceptions exist for services rendered in connection with an IRS examination of an original tax return, or an amended return/claim for refund filed within 120 days of receiving a written notice of examination.
Common mistakes
Confusing amended returns generally (not allowed) with amended returns filed in response to an audit notice (allowed).
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