CHAPTER 2 TAX PREPARERS AND PENALTIES

A tax return preparer recklessly discloses taxpayer information without the consent of the taxpayer. What is the penalty imposed on the preparer?

$1,000 FINE AND A YEAR IN PRISON

what is the penalty for aiding and abetting the understatement of tax liability?

$1,000 penalty or $10,000 if it related to a corporate tax payer's liability

Which of the following is NOT a tax return preparer?

SOMEONE WHO PREPARES A RETURN OR CLAIM FOR REFUND FOR HIS EMPLOYER

Which action by a tax return preparer would NOT be considered misconduct for which a court may issue an injunction?

UNDERSTATING TAX DEDUCTIONS

if a candidate for EA is given a denial letter how long do they have to appeal the letter ?

a written appeal may be filed within 30 days of receipt

Which of the following statements is true regarding the confidentiality privilege? The privilege

is extended to certain nonattorneys

Which of the following does NOT describe one of the five major categories of reportable transactions?

tax evasion transactions identified by the irs that are expected to obtain the same or similar tax consequences.

Which of the following statements is false with respect to tax return preparer penalties?

the irs has the burden of proof (the burden of proof is always on the preparer)

A taxpayer specifically authorized, on a Power of Attorney form, the preparer of the taxpayer's return to receive the taxpayer's refund check. What is the amount of the penalty that will be imposed on the preparer for receiving the taxpayer's refund check?

$0 (taxpayers may authorize with a POA to receive a refund check but the preparer may not endorse the check or cash it)

WHAT IS THE MINIMUM PENALTY FOR A TAX RETURN PREPARER WHO DISCLOSES OR USES ANY TAX INFO WOTHOUT CONSENT OF TAXPAYER?

$250 PER DISCLOURE MAX $10,000 PER YEAR

For a single calendar year, what is the maximum penalty that can be imposed on a tax preparer for failing to sign the tax return he or she prepares?

$28,000 MAX PER YEAR OR $55 FOR EACH FAILURE TO SIGN

8: Bernard is a tax return preparer. While preparing a 2022 tax return for a client, Bernard determines the client owes a substantial amount of tax. In order to generate a refund for the client, Bernard substantially overstates itemized deductions and expenses claimed on the Schedule C. Bernard is subject to a penalty of

$5,000 or 75% of his fee, whichever is greater. Section 6694(b) provides for a penalty of the greater of $5,000 or 75% of income derived by the preparer as to the return, to be assessed against a return preparer whose willful or reckless conduct in preparing a tax return causes an understatement of liability. The penalty is applied if the understatement is due either to a willful attempt to understate the tax liability or to any reckless or intentional disregard of rules or regulations by the return preparer. The penalty is assessed against each return containing an understatement of liability caused by the return preparer's willful or reckless conduct.

What is the amount of the penalty imposed on a return preparer for negotiating a taxpayer's refund check?

$560

John is an income tax return preparer. He prepares a tax return for a client and takes a position that he does not believe has a more likely than not chance of being sustained on its merits. He does not disclose this position on the tax return. The position John takes causes the client's tax liability to be substantially understated. John is subject to a penalty of

1,000 or 50% of fee whichever is greater

what are the 4 elements that need to be present for a penalty to apply ?

1. understatement of tax liability 2. a position with no reasonable belief of success 3. knowledge or a frivolous position 4. nondisclosure or a frivolous position

WHAT OS THE GENERAL ACCURUACY RELATED PENALTY

20% OF UNDERPAYMENT

WHAT IS A TAX RETURN PREPARER ?

ANY PERSON WHO PREPARES RETURNS FOR COMPENTSATIONOR EMPLOYS OTHERS WHO PREPARE RETURNS FOR COMPENSATION

Which of the following statements is true regarding the confidentiality privilege? The privilege

IS EXTENDED TO CERTAIN NON ATTORNEYS

What is the statute of limitations for assessing penalties for understatement due to willfulness or reckless conduct under Sec. 6694(b)?

NO PERIOD OF LIMITATION

Identify the item below that does NOT describe information a preparer must maintain about every return prepared.

THE DATE THE RETURN OR CLAIM FOR REFUND WAS PREPARED.

The IRS began an examination of Mr. Honeycutt's Year 1 income tax return. Mr. Honeycutt hired Tyler, an enrolled agent and former IRS employee, to represent him before the IRS. Tyler wrote a memorandum to Mr. Honeycutt outlining the issues that might be raised by the IRS and how to address these issues. Tyler correctly marked this memorandum as confidential and privileged under the Internal Revenue Code. During the examination, the Revenue Officer assigned to the case asked Tyler for a copy of the memorandum. Mr. Honeycutt, invoking the confidentiality privilege, told Tyler not to disclose it to the Revenue Officer. Tyler is not required to provide the Revenue Officer with a copy of the memorandum because

THE IRC EXTENDS THE ATTORNEY-CLIENT PRIVILEGE TO FEDERALLY AUTHORIZED TAX PRACTICITIONERS

Which of the following situations describes a disclosure of tax information by an income tax preparer that would subject the preparer to a penalty?

ron died after furnishing tax return info to his preparer. ron's tax preparer disclosed info to his nephew who is not a fiduciary of the estate

which of the following is not a tax preparer

someone who prepares a return as a fiduciary, a return or claim for refund for any person (under sec 7701(a)(36) a tax return preparer is someone who prepares a return for comp. a fiduciary is excluded from this criteria )

Which of the following is NOT an element that must be present for the underpayment penalty imposed by Sec. 6694(a) to apply?

willful or reckless conduct