Gleim EA Review Updates to Part Edition, 1st Printing December 29, 2010

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1 Page 1 of 6 Gleim EA Review Updates to Part Edition, 1st Printing December 29, 2010 NOTE: Text that should be deleted from the outline is displayed with a line through the text and a red background. New text is shown in courier font with a green background. Introduction Page 15: This change adjusted the suggested study time allotments. 1. (30 minutes, plus 10 minutes for review) In the Gleim Online course, complete Multiple-Choice Quiz #1 in 30 minutes (excluding the review session). It is expected that your scores will be low on the first quiz. a. Immediately following the quiz, you will be prompted to review the questions you marked and/or answered incorrectly. For each question, analyze and understand why you marked it or answered it incorrectly. This step is an essential learning activity. 2. (30 minutes average) Use the online audiovisual presentation for an overview of the study unit. The Gleim EA Audio Review can be substituted for audiovisual presentations and can beused while driving to work, exercising, etc. 3. (3045 minutes) Complete the 30-question True/False quiz in the Gleim online course. It is interactive and most effective if used prior to studying the Knowledge Transfer Outline. 4. (60 minutes) Study the Knowledge Transfer Outline, particularly the troublesome areas identified from the multiple-choice questions in the Gleim Online course. The Knowledge Transfer Outlines can be studied either online or from the books. 5. (30 minutes, plus 10 minutes for review) Complete Multiple-Choice Quiz #2 in the Gleim Online course. a. Immediately following the quiz, you will be prompted to review the questions you marked and/or answered incorrectly. For each question, analyze and understand why you marked it or answered incorrectly. This step is an essential learning activity. 6. (60 minutes) Complete at least two 20-question quizzes while in Test Mode from the EA Test Prep Software or Test Prep for Windows Mobile. Continue taking 20-question quizzes until you approach your desired proficiency level, e.g., 75%.

2 Page 2 of 6 Study Unit 1 Practice Before the IRS Page 36, Subunit 1.6, 3.b.: This change expands upon the points being made. CPE 3. Renewal is conditioned on completing a minimum of 72 hours continuing professional education credits during the 3-year enrollment cycle, including at least 16 hours in each of the 3 enrollment years (each enrollment year runs from Januay 1 to December 31). a. Two hours per month of CPE credit is required of an individual whose initial enrollment begins during a cycle. b. An individual who receives intitial enrollment during an enrollment cycle must complete 2 hours of ethics or professional conduct for each enrollment year during the enrollment cycle. Enrollment for any part of an enrollment year is considered enrollment for the entire year. b.c. Qualified program. A course of learning may qualify for CPE credit if it is a program 1) Designed to enhance professional knowledge in federal tax-related matters, including a) Taxation b) Accounting c) Tax preparation software d) Ethics 2) Conducted by a qualifying sponsor. To qualify as a sponsor, a program presenter must a) Be an accredited educational institution, b) Be recognized for continuing education by the licensing body of any state, c) Be recognized by the DP as a professional organization, or d) File a sponsor agreement with the DP to obtain approval. c.d. Teaching. For each contact hour of a qualifying program, the following CPE credit is awarded: 1) Two hours for actual subject preparation time, substantiated 2) One hour as instructor, discussion leader, or speaker NOTE: The maximum credit for instruction and preparation may not exceed 50% of the continuing education requirement for an enrollment cycle (Circular 230). d.e. Each individual applying for renewal must retain for a period of 3 years following the date of renewal of enrollment the information required with regard to qualifying continuing professional education credit hours.

3 Page 3 of 6 Page 55, Question 56: This change corrects a typographical error 56. Enrolled agents generally must complete continuing education credits for renewed enrollment. Which of the following describes the credit requirements? A. A minimum of 72 hours must be completed in each year of an enrollment cycle. B. A minimum of 24 hours must be completed in each year of an enrollment cycle. C. A minimum of 80 hours must be completed, overall, for the entire enrollment cycle. D. A minimum of 16 hours must be completed in each year of the enrollment cycle. Answer (D) is correct. (SEE, adapted) REQUIRED: The continuing education requirements for enrolled agents. DISCUSSION: Circular 230, Sec. 10.6(e) states a minimum of 16 hours of continuing education credit must be completed each year of the enrollment cycle. Answer (A) is incorrect. A minimum of 16, not 72, hours must be completed each year of the enrollment cycle. Answer (B) is incorrect. A minimum of 16, not 24, hours must be completed in each year. Answer (C) is incorrect. The maximum minimum hours are 16, not 80, and are required each year of the cycle, not collectively over the entire cycle. Study Unit 2 Tax Preparers and Penalties Page 75, Question 22: This change clarifies the wording of the discussion. 22. A penalty may be assessed on any preparer or A. Any person who prepares and signs a tax return or claim for refund. B. Any member of a firm who gives advice (written or oral) to a taxpayer or to a preparer not associated with the same firm. C. Any person who prepares and signs a tax return or claim for refund and the individual with overall supervisory responsibility for the advice given by the firm with respect to the return or claim. D. The individual with overall supervisory responsibility for the advice given by the firm with respect to the return or claim. Answer (C) is correct. (SEE, adapted) REQUIRED: The individual(s), other than a preparer, on which a penalty may be assessed. DISCUSSION: A penalty may be assessed on any individual who prepares and signs a tax return or claim for a refund. Additionally, an individual with overall superiority responsible supervisory responsibility for advice given by the firm with respect to the return or claim may also be assessed the penalty. Answer (A) is incorrect. A penalty may also be assessed on any individual with overall supervisory responsibility for the advice given by the firm. Answer (B) is incorrect. Any member of a firm who gives advice (written or oral) to a taxpayer is not considered a preparer of the return. Additionally, the individual must be associated with the return in order to be assessed the penalty. Answer (D) is incorrect. A penalty may also be assessed on any person who prepares and signs a tax return or claim for refund.

4 Page 4 of 6 Study Unit 4 The Collection Process Page 103, Subunit 4.3, 2.g.: This change deletes unnecessary/unrelated information. Sale g. After seizing property, the IRS gives notice of its sale to the person from whom it was seized and to the public. 1) Sale must be not less than 10 days nor more than 40 days from the time of giving public notice [Sec. 6335(d)]. a) The property may be sold by public auction or sealed bids. 2) Perishable goods. If the taxpayer posts a bond or pays the appraised value, seized perishable goods must be returned (Sec. 6336). a) Otherwise, they must be sold immediately. 3) If real estate was sold, the taxpayer or anyone with an interest in the property may redeem it at any time within 180 days after the sale by paying the purchaser the amount paid for the property plus a certain percentage of interest. 4) Before the date of sale, the IRS computes a minimum bid price, which is the lowest amount the IRS will accept for the sale of that property to protect the taxpayer s interest in that property. 5) The sale proceeds are applied first against the expenses of the proceedings, next against any federal excise tax imposed directly on the property, and then against the tax liability for which the levy was made, including a separate supporting statement containing the basis for the taxpayer s explanation. 6) Any real property used as a residence by the taxpayer may not be seized to satisfy a levy of $5,000 or less. Page 115, Question 36: This changes some important terminology in the Discussion and Required. 36. A taxpayer s business real property may not be seized and sold by the IRS unless the collection of the tax is in jeopardy or approval has been secured from A. The involved revenue officer s immediate supervisor. B. The IRS chief of collections. C. The IRS district director or assistant district director. D. The IRS regional commissioner or assistant regional commissioner. Answer (C) is correct. (SEE, adapted) REQUIRED: The individual whose approval must be met before a primary residence business real property is sold. DISCUSSION: A levy is one method the IRS uses to collect tax that has not been paid voluntarily. A levy is the seizure of property in order to satisfy a tax debt. A levy cannot be made on a principal residence business real property unless the collection of tax is in jeopardy or approval has been granted by the IRS district director or assistant district director.

5 Page 5 of 6 Study Unit 5 Examination of Returns and the Appeals Process Page 118, Subunit 5.1, 9: This change was made for clarification. 9. If, for the same period of time that a taxpayer owes interest to the IRS on an underpayment and, during the same period of time, the IRS owes the taxpayer interest on an overpayment, the taxpayer will be charged interest on the amount of the underpayment up to the amount on the overpayment at the overpayment interest rate the net rate of interest on equivalent underpayments and overpayments will be zero for this period [Sec. 6621(d)]. a. Form 843, Claim for Refund and Request for Abatement, must be filed at the same service center in which the disputed return was filed. If the taxpayer does not remember where (s)he filed this tax return, (s)he may file the form at the last service center (s)he filed a return. 1) When the taxpayer has already paid the tax, Form 843 must be filed within 3 years of the time (s)he filed the original form or 2 years from the time (s)he paid the interest, whichever is later. Page 123, Subunit 5.4, 3.: This change adjusts a stated amount. Frivolous 3. If the taxpayer files a frivolous income tax return, a $500 $5,000 frivolous return penalty, in addition to any other applicable penalty, is assessed. Page 134, Question 34: This change corrects a term in the incorrect answer explanation. 34. If you don t agree with the Internal Revenue Service examination conclusion, you may take your case to the United States Tax Court for the following: A. State income tax examination. B. Federal income tax examination. C. Federal estate tax examination. D. Both Federal income tax and Federal estate tax examination. Answer (D) is correct. (SEE, adapted) REQUIRED: The tax examination case that can be taken to the U.S. Tax Court. DISCUSSION: If a taxpayer and the IRS still disagree after an appeals conference or the election was made to bypass the IRS appeals system, the case may be taken to the U.S. Tax Court, the U.S. Court of Federal Claims, or a U.S. district court. State income tax matters, however, are not handled by the U.S. Tax Court. Answer (A) is incorrect. State income tax matters are not handled by the U.S. Tax Court. Answer (B) is incorrect. Both federal income tax and federal estate tax issues may be handled by the U.S. Tax Court. Answer (C) is incorrect. Both federal income tax and federal estate tax issues may be handled by the U.S. Tax Court.

6 Page 6 of 6 Page 137, Question 46: This change adjusted an incorrect amount in an answer choice and the Discussion. 46. A frivolous income tax return is one that does not include enough information to figure the correct tax or that certain information clearly showing that the tax that was reported is substantially incorrect. If a taxpayer files a frivolous return, which penalty applies specifically to the taxpayer for the frivolous return? A. $50 for failure to supply your Social Security number. B. 20% of the underpayment, reduced for those items for which there was adequate disclosure made. C. $500 $5,000 frivolous return penalty, applied in addition to any other applicable penalty or penalties. D. $100 for the failure to furnish the tax shelter registration number. Answer (C) is correct. (SEE, adapted) REQUIRED: The frivolous return penalty. DISCUSSION: If the taxpayer files a frivolous income tax return, a $500 $5,000 frivolous return penalty, in addition to any other applicable penalty, is assessed. Answer (A) is incorrect. This question mentions nothing about a missing Social Security number. Answer (B) is incorrect. Sec. 6662(c) does not offer disclosure as a tactic for circumventing the rule. Answer (D) is incorrect. This question does not specifically address tax shelters. Study Unit 6 Tax Authority Page 144, Subunit 6.3, 11.g.: This change corrects a typographical error. General Counsel Memo g. General Counsel Memoranda (GCM) are legal memoranda from the Office of Chief Counsel prepared in connection with the review of certain proposed rulings (Rev. Ruls., PLRs, TCMs TAMs). They contain legal analyses of substantive issues and can be helpful in understanding the reasoning behind a particular ruling and the Service s response to similar issues in the future.