Ethics and Responsibilities

Question 1

Unreasonable Position
definition

R5-5

Answer 1

A position is unreasonable unless:

• -there is substantial authority and no tax shelter or reportable transaction
• -position is disclosed, there is reasonable basis, and no tax shelter or reportable transaction
• -tax shelter or reportable transaction is more likely than not to be sustained on its merits

Question 2

What is the penalty to the Preparer for understatement of taxpayer liability due to an Unreasonable Position?

R5-6

Answer 2

Greater of:
–$1,000
or
–50% preparation fee income

Question 3

What is the penalty for the understatement of taxpayer’s liability due to Wilful or Reckless Conduct of the tax Preparer?

R5-6

Answer 3

--no penalty if error in calculation is made in good faith
Penalty is greater of:
--$5,000
or
--50% preparation fee income

Question 4

What is the penalty if the tax Preparer fails to provide a completed Copy of the tax return?

R5-6

Answer 4

$50 for each failure

max $25,500 per yr

Question 5

What is the penalty if the tax Preparer fails to Sign the tax return?

R5-6

Answer 5

$50 for each failure

max $25,500

Question 6

What is the penalty if the Preparer fails to Furnish the tax identification number on the tax return?

R5-7

Answer 6

$50 for each failure

max $25,500

Question 7

What is the penalty if the Preparer fails to Retain Records Properly the tax return?

R5-7

Answer 7

$50 for each failure
max $25,500

• -must retain for 3 yrs following the last day of the return period (July 1)
• -must retain copy of return or listing of name and ID of taxpayer

Question 8

What is the penalty if the Preparer fails to File Correct Information Returns?

R5-7

Answer 8

$50 per each failure
max $25,500

–must submit listing of ID, taxpayer ID #, and place of work for each preparer employed by preparer

Question 9

What is the penalty to the Preparer for Endorsing or Negotiating IRS Refund Check?

R5-7

Answer 9

$510 for each check

Question 10

What is the penalty to the Preparer for failure to be Diligent in determining taxpayer EIC?

R5-7

Answer 10

$510 for each failure

–addresses eligibility checklists, computation worksheets, reasonable inquiries, and record retention