Question 1

What does Internal Revenue Code Section 7525 privileged communication apply to?

Corporate tax matters.

Criminal tax matters.

State tax law.

Tax advice.

Question 2

Hank, who wants to claim the Earned Income Credit, informs his tax preparer that he is still married but currently doesn't live with his spouse. He wants to claim head of household filing status because he maintains a home for his six-year-old son, who is eligible to be claimed as his dependent. To determine his filing status, which question should the tax preparer ask?

Did your spouse live with you during the first six months of the tax year?

Did your spouse live with you during the last six months of the tax year?

Is your spouse employed?

What is your spouse's adjusted gross income?

Question 3

Enzo is preparing a client's return. The taxpayer is claiming the Earned Income Credit (EIC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and the American Opportunity Tax Credit (AOTC). Which of the following best describes the actions Enzo must take to substantiate the taxpayer's eligibility for the credits?

Complete Form 8867, Paid Preparer's Due Diligence Checklist, and submit it to the IRS with the taxpayer's return.

Complete and submit Form 8867, Paid Preparer's Due Diligence Checklist. Complete and keep all worksheets used to compute the credits. He is also expected to ask additional questions and document the taxpayer's answers. He must retain a copy of documents provided by the taxpayer that he relied on when determining credit eligibility.

Complete all worksheets used to compute the credit. If the worksheet is completed by hand, keep a hard copy in the taxpayer's client file.

Ask additional questions and document the taxpayer's answers to those questions. He must also retain a copy of documents provided by the taxpayer that he relied on when determining credit eligibility.