Free Special Enrollment Examination: Part 3 Practice Questions

Sample Practice Questions

Try these 10 sample questions from the Special Enrollment Examination: Part 3 practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Under Circular 230, which activity is expressly included in practice before the IRS?

   1. A. Preparing documents for presentation to the IRS
   2. B. Preparing documents only for a client's internal files
   3. C. Filing documents solely with a state tax agency
   4. D. Corresponding only with a private creditor about taxes

   Answer: A

   Explanation: Circular 230 says "Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service;" Preparing documents for presentation to the IRS is therefore within the defined practice. The other activities do not involve a presentation to the IRS about federal tax matters.

   Reference: Treasury Department Circular No. 230 — § 10.2(a)(4), p. 6

2. 2A taxpayer wants an eligible individual to represent the taxpayer before the IRS. Which authorization form is designed for that purpose?

   1. A. Form 2848
   2. B. Form 8821
   3. C. Form 56
   4. D. Form 8275

   Answer: A

   Explanation: The IRS instructions state, "Use Form 2848 to authorize an individual to represent you before the IRS." Form 2848 grants representative authority. Form 8821 only allows information access, Form 56 addresses fiduciary status, and Form 8275 is a disclosure statement.

   Reference: Instructions for Form 2848 — Purpose of Form

3. 3A taxpayer uses a short-term IRS payment plan lasting no more than 180 days. What happens to setup fees and accruals under Topic 202?

   1. A. No setup fee; interest and applicable penalties continue.
   2. B. No setup fee; interest and penalties stop immediately.
   3. C. A setup fee applies; interest stops immediately.
   4. D. A setup fee applies; penalties stop immediately.

   Answer: A

   Explanation: Topic 202 says, "There's no fee for this short-term payment plan. However, interest and any applicable penalties continue to accrue until your liability is paid in full." The payment-plan fee is absent, while applicable accruals continue.

   Reference: Topic no. 202, Tax payment options — Short-term payment plans

4. 4A tax preparation program accepts client data that appear internally inconsistent. What should the preparer do?

   1. A. Make additional inquiries and evaluate the inconsistency
   2. B. Assume software acceptance proves accuracy
   3. C. Delete the inconsistent source document
   4. D. Transmit first and ask the client later

   Answer: A

   Explanation: The IRS states, "Due diligence requires you to make additional inquiries if a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that the information you receive from your client appears to be incorrect, inconsistent, or incomplete." Software acceptance does not replace professional inquiry.

   Reference: Due diligence requirements for tax preparers — Using professional judgement in addition to tax software

5. 5For Circular 230's definition of a tax return, which document is included in addition to an original return?

   1. A. A claim for refund
   2. B. An IRS account transcript
   3. C. A Form 2848 power of attorney
   4. D. An IRS examination report

   Answer: A

   Explanation: Circular 230 states, "A tax return includes an amended tax return and a claim for refund." A claim for refund is included in that defined term; the other documents are not tax returns or refund claims.

   Reference: Treasury Department Circular No. 230 — § 10.2(a)(6), p. 6

6. 6A taxpayer wants an organization to receive confidential tax information without authorizing representation. Which form fits?

   1. A. Form 8821
   2. B. Form 2848
   3. C. Form 56
   4. D. Form 8879

   Answer: A

   Explanation: The IRS instructions state, "Use Form 8821, Tax Information Authorization, if you want to authorize an individual or organization to inspect and/or receive your confidential tax return information, but do not want to authorize an individual to represent you before the IRS." Form 8821 fits information access without representation. The competing forms serve different authority or filing purposes.

   Reference: Instructions for Form 2848 — Purpose of Form, Form 8821

7. 7A taxpayer cannot pay a tax balance immediately or within 180 days but can pay it through monthly payments. Which arrangement addresses that need?

   1. A. A short-term payment plan
   2. B. A long-term installment agreement
   3. C. A doubt-as-to-liability offer
   4. D. Currently Not Collectible status

   Answer: B

   Explanation: The IRS states, "If you're not able to pay your balance in full immediately or within 180 days, you may qualify for a monthly payment plan (installment agreement) that lets you make a series of monthly payments over time." The long-term installment agreement fits monthly payment after the short-term window.

   Reference: Topic no. 202, Tax payment options — Long-term payment plans

8. 8What can tax preparation software not replace under IRS preparer due-diligence guidance?

   1. A. Professional judgment and legal responsibility
   2. B. Arithmetic calculations and print formatting
   3. C. Electronic storage of entered data
   4. D. Automatic transfer of data between software fields

   Answer: A

   Explanation: The IRS states, "Your tax preparation software helps, but it cannot replace your professional judgment or responsibility under the law." The preparer must still evaluate whether entries make sense.

   Reference: Due diligence requirements for tax preparers — Using professional judgement in addition to tax software

9. 9Which condition must an enrolled agent meet to practice before the IRS under Circular 230 § 10.3(c)?

   1. A. The agent must not currently be suspended or disbarred from IRS practice.
   2. B. The agent must be licensed as an attorney in the client's state.
   3. C. The agent must be an IRS employee assigned to the matter.
   4. D. The agent must hold a CPA license in the client's state.

   Answer: A

   Explanation: Circular 230 provides, "Any individual enrolled as an agent pursuant to this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service." Attorney, CPA, and IRS employment status are different qualifications and are not imposed on an enrolled agent by this provision.

   Reference: Treasury Department Circular No. 230 — § 10.3(c), p. 6

10. 10What information belongs on Form 2848 line 3 for a valid tax-matter power of attorney?

    1. A. Matter, applicable tax form, and applicable year or period
    2. B. Only the representative's name and fee
    3. C. Only a general phrase such as all tax years
    4. D. Only the taxpayer's mailing address and PTIN

    Answer: A

    Explanation: The IRS instructions state, "you must enter the description of the matter, the tax form number (where applicable), and the year(s) or period(s) (where applicable)." The description, form, and period specify the authorized matter; a blanket reference is expressly rejected.

    Reference: Instructions for Form 2848 — Line 3, Acts Authorized