EA Part 3 ethics scenarios: choose the next action
In an ethics scenario, identify the fact that changes the next action: a known error requires client advice; conflicting information requires inquiry; a conflict requires a permissibility assessment; a records request requires analysis of the return-of-records rule. Client instructions do not override the practitioner’s duties.
1You discover a filed-return error
Next actionAdvise the client promptly and explain consequences.
Reject this shortcutSilence until the IRS notices.
2New information contradicts a deduction
Next actionMake reasonable inquiries before relying on it.
Reject this shortcutChoose whichever number gives the lowest tax.
3Two clients have adverse interests
Next actionApply all §10.29 conditions.
Reject this shortcutGet a signature without assessing permissibility.
4Client asks for compliance records
Next actionApply §10.28 and return required records promptly.
Reject this shortcutHold everything solely to collect fees.
Answer the next-action question in order
A correct later action can still be a poor answer to a question asking what comes first. When an unexplained conflict in the records appears, investigate it before calculating the deduction. When a conflict of interest appears, assess whether the engagement can continue before collecting a waiver.
- Name the triggering fact.
- Name the duty and its exception, if any.
- Eliminate actions that require authority or facts the stem has not supplied.
Solve the first required action before the final outcome
Mixed ethics questions often include several true statements. The task is to identify which duty is triggered now. A known error invokes advice to the client; a contradiction that has not been resolved invokes inquiry; a proposed representation invokes authority, conflict and competence checks. Naming a possible sanction does not answer a question asking what the practitioner should do first.
Use a short sequence: identify the actor, isolate the triggering fact, name the governing duty, and test the proposed action. Then ask whether another rule limits how that action can be carried out. For example, advising a client to correct an error does not automatically permit filing the correction without authorization. This sequence is an editorial problem-solving method built from the individual duties, not an official IRS algorithm that overrides the facts.
Practice switching between different duty triggers
Read the cases below by changing only the decisive fact. In the first, the prior-return error is known. In the second, the information is contradictory and requires inquiry. In the third, the request itself concerns a prohibited act. Treating all three as "ask the client for consent" would miss why the rule changes.
After choosing an action, explain why the tempting alternative fails. This makes the exercise transferable: you are learning how a fact activates a duty, rather than memorizing a sentence. It also reveals answers that solve a different problem. Obtaining a signature may be useful for one purpose, but it does not answer whether the underlying representation or refund handling is permitted.
| Triggering fact | Next-action reasoning | Why the shortcut fails |
|---|---|---|
| You know a prior return omitted income. | Promptly advise the client about the error and consequences. | Amending immediately skips taxpayer authority. |
| Two documents give incompatible expense figures. | Make reasonable inquiries before relying on the amount. | Choosing the smaller figure does not resolve which fact is correct. |
| A client wants the refund deposited into your own account. | Recognize the refund-negotiation restriction. | A fee agreement does not remove section 10.31. |
| A joint engagement becomes directly adverse. | Reassess the conditions for permissible representation. | An old consent is not proof that the changed engagement is permissible. |
Swipe the table to compare all columns.
A tax opinion needs reasonable facts and assumptions
Section 10.37 requires written advice to rest on reasonable factual and legal assumptions and to consider relevant facts and circumstances. It does not ban every assumption. The problem arises when an assumption is unreasonable, a known contradiction is ignored, or the practitioner relies on a representation when reliance is not reasonable. Labeling a document "informal" does not make its factual foundation sound.
Suppose a client asks for written advice assuming equipment is used entirely for business, while an earlier interview describes substantial personal use. The next step is to resolve or appropriately account for that fact, not to erase the interview note. Likewise, using another adviser’s work requires a reasonable reliance assessment. In a multiple-choice question, focus on the known contradiction and the requested advice rather than guessing the chance that the IRS will audit the client.
Handle urgency without skipping the governing condition
An approaching deadline, disputed fee or long client relationship explains the pressure in a scenario; it does not replace the duty. A client-records question still turns on which records are needed for federal tax compliance and the applicable exceptions. A competence question still turns on whether the practitioner has or obtains the preparation and expertise needed. Identify those conditions before choosing an emotionally appealing response.
For a final check, write one sentence with three parts: "Because this fact is present, this duty applies, so this is the next permitted action." If the sentence relies only on "the client requested it," revisit the rule. Then change one fact and solve again. A request for copies of supporting invoices may require a different analysis from a demand for an unpaid, newly prepared deliverable. Good ethics reasoning preserves those distinctions instead of treating every document or engagement as identical.
Original worked example
An unsupported deduction and an unpaid invoice
A client asks the EA to keep an unsupported deduction on a new return and refuses to pay an outstanding fee unless the EA complies.
- 1The fee dispute does not establish that the deduction is valid.
- 2Ask reasonable questions about the missing support.
- 3Do not sign a return taking a position that violates the applicable §10.34 standards.
Resolve the tax-position issue using the relevant standard. Payment pressure is not evidence supporting a deduction.
Questions about this topic
Are these official SEE questions?
No. These are original teaching scenarios illustrating cited rules. They are not IRS or PSI exam items or predictions of what will appear.
Sources and editorial notes
Prepared by MiloPrep editorial team. The linked provisions support the rules; examples and study methods are editorial teaching material. This page does not claim review by an enrolled agent.
- Treasury Circular 230
- §§10.21, 10.22, 10.28, 10.29 and 10.34.
- §§10.22, 10.29 and 10.34.
- §§10.20-10.22, 10.29, 10.34-10.35.
- §§10.21, 10.29, 10.31 and 10.34.
- §10.37: written advice, reasonable assumptions and reliance.
- §§10.28 and 10.35: client records and competence.
- §§10.22 and 10.34.
For the 2026 SEE cycle, the IRS specifies law through 31 December 2025 and generally calendar year 2025. Procedural sources can be revised; use the active bulletin and the exact notice or form instructions for the applicable period.