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Newsletter Issue # 13: [Registered Tax Return Preparer Exam Articles Series] Becoming Familiar with Circular 230. |
A close look at the list of IRS recommended study materials for the IRS Competency Exam to become A RTRP
Becoming familiar with Circular 230
Circular 230 is titled "Regulations Governing Practice before the Internal Revenue Services".
To the tax return preparer planning to pass the IRS Competency Exam, it is important because Circular 230 is included in the list of recommend study materials released by the IRS. So, you can expect to be tested on the contents of this regulation and its revisions in the competency examination. The most recent revision of Circular 230 is dated 8/2/11.
Circular 230 are also important because it contains the guidelines to interact with the Internal Revenue Services. If you want to become a Registered Tax Return Preparer, you need to know that the rules in Circular 230 govern your practice before the IRS.
Subpart A: Rules Governing Authority to Practice - When you have that Authority? Well, there is a transition period that runs from 1 January 2011 to 31 December 2013. When this transition period runs out, you can prepare tax return for a fee only when you become a Registered Tax Return Preparer, if you are not a CPA, lawyer or agent. For more information about this transition period watch our video entitled "What you need to know about the IRS Exam"
Subpart B: - Duties Relating to Practice before the Internal Revenue Services
Subpart C: Sanctions for Violation of the Regulation, which includes .......
Subpart D: Rules applicable to Disciplinary Proceedings includes ....
In addition to Circular 230, there are other13 regulations related to the tax return preparer's practice and more recent rules introduced by the IRS. Here is the list of them:
- Notice 2011-61 Continuing Education Providers
- Notice 2011-48- Registered Tax Return Preparer Competency Examination
- Treasury Department 9527 - Regulations Governing Practice before the IRS
- Notice 2011-45 - Restrictions on Use of the Term Registered Tax Return Preparer
- Treasury Department 9523- User Fees Relating to Enrolled Retirement Plan Agents
- Notice 2011-11 - Relief for Tax Return Preparers Who Have Pending PTIN Applications
- Notice 2011-6 -Implementation of Rules Governing Tax Return Preparers
- Treasury Department 9501-Furnishing Identifying Number of Tax Return Preparer
- Treasury Department 9503 -User Fees Relating to Enrollment and Preparer Tax Identification Number
- REG-138637-07 -Circular 230 Changes
- REG-139343-08 -Proposed Regulations on User Fees Relating to Enrollment and Preparer Tax Identification Numbers
- REG-134235-08 - Proposed Regulations on Furnishing Identification Numbers for Tax Return Preparer Requirement for Tax Return Preparer Not Already Subject to Oversight
- Publication 4832 -IRS Proposes New Registration, Testing and Continuing Education
The RTRP test is available from the last week of November 2011 (Fall). The major topics that will be covered by the test were published by the IRS in early September/2011.
If you are planning to take the RTRP competency examination and need information and resources, please, visit our website and let us help you ramp up into the process and become a registered tax return preparer as soon as possible.
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To get it right, you've got to get it! |
Practice, practice and more practice
Topic: Depreciable basis of a equipment
Starr, a self-employed individual, purchased a piece of equipment for use in Starr's business. The costs associated with the acquisition of the equipment were:
Purchase price $55,000
Delivery charges $725
Installation fees $300
Sales tax $3,400
What is the depreciable basis of the equipment?
a. $55,000
b. $58,400
c. $59,125
d. $59,425
ANSWER:
Choice "d" is correct. The rules for depreciable basis in tax are generally the same as the GAAP* rules for capitalizing an asset. The depreciable basis is the cost associated with the purchase of the asset and with getting the asset ready for its intended use. Further improvements are also capitalized, and the basis is reduced for any accumulated depreciation.
*(GAAP: Generally Accepted Accounting Principles)
In this case, the cost of obtaining the equipment and getting the equipment ready for its intended use includes all the items shown above, as follows:
Purchase price $55,000
Delivery charges 725
Installation fees 300
Sales tax 3,400
Total depreciable basis $59,425
Choice "a" is incorrect. The costs of delivery charges, installation, and sales tax are all part of the cost of
obtaining the asset and getting the asset ready for its intended use. All of these charges are included in
the depreciable basis of the equipment.
Choice "b" is incorrect. The costs of delivery charges and installation are both part of the cost of
obtaining the asset and getting the asset ready for its intended use. These charges are included in the
depreciable basis of the equipment.
Choice "c" is incorrect. The cost of installation is part of the cost getting the asset ready for its intended
use. This charge is included in the depreciable basis of the equipment. (Source: AICPA Newly-Released Regulation Questions) |
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Learning tax concepts: definitions
Tax Term:
Depletion.
The process by which the cost or other basis of a natural resource (e.g., an oil or gas interest) is recovered upon extraction and sale of the resource. The two ways to determine the depletion allowance are: 1) the cost and 2)percentage (or statutory) methods.
Under the cost method, each unit of production sold is assigned a portion of the cost or other basis of the interest. This is determined by dividing the cost or other basis by the total units expected to be recovered. Under the percentage (or statutory) method, the tax law provides a special percentage factor for differ types of minerals and other natural resources. This percentage is multiplied by the gross income from the interest to arrive at the depletion allowance.
 | | From 1040 Exam Prep e-Books Series |
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