Question

Jack, a return preparer, did not retain copies of all returns that he prepared but did keep a list that reflected the taxpayer's name, identification number, tax year, and type of return for each of his clients. Which of the following statements best describes this situation?
A. Jack is in compliance with the provisions of the tax code if he retains the list for a period of 1 year after the close of the return period in which the return was signed.
B. Jack is not in compliance with the tax code since he has not kept all the information required by the Code.
C. Jack is not in compliance with the tax code since he must retain copies of all returns filed.
D. Jack is in compliance with the provisions of the tax code, provided he retains the list for a 3-year period after the close of the return period in which the return was signed.

Answer 1

Answer:

D) Jack is in compliance with the provisions of the tax code, provided he retains the list for a 3-year period after the close of the return period in which the return was signed.

Explanation:

The Internal Revenue Service (IRS) requires tax return preparers to keep the following records;

• either maintain a complete copy of each tax return or claim for refund they have filed for 3 years after the return period, or
• maintain a list of the names, identification numbers, and tax years for those individuals or businesses whose tax returns were prepared and to keep this list for 3 years after the return period.

The tax preparer can choose the alternative that best suits hims or her.