Ethics 'n Shit Flashcards
5 “Best Practices” for Tax Advisors
1 - Have terms of engagement
2 - Establish facts & law supporting the conclusion
3 - State importance of conclusions reached
4 - Acting fairly & with integrity before IRS
5 - All members of firm adherent to the above
Contingent Fees
Generally not allowed… 3 exceptions:
1 - IRS examination or audit
2 - Claim solely for a refund
3 - Judicial proceeding
Treasury Department
Circular 230
Rules governing the authority to practice before the IRS
Duties & responsibilities relating to practice before the IRS
Sanctions for violation of the regulations
Rules applicable to disciplinary proceedings
“Disregard”
Careless, reckless, or intentional disregard of rules or regulations
More-likely-than-not standard
+50% of a position being upheld in court
Penalty for understatement due to unreasonable position
Greater of:
$1,000 or 50% of the income the preparer received
Penalty for “willful” or “reckless” conduct
Greater of:
$5,000 or 50% of the income the preparer received
Penalty for not providing copy to taxpayer
$50 per failure, max = $25,500 per year
Penalty for not signing a return
$50 per failure, max = $25,500 per year
Penalty for not providing ID# for preparer
$50 per failure, max = $25,500 per year
Penalty for not properly retaining records
$50 per failure, max = $25,500 per period
Penalty for not filing correct information returns
$50 per failure, max = $25,500 per period
Penalty for negotiation of refund check
$510 per check
Penalty for failure to be diligent in client’s eligibility for earned income credit
$510 per failure
Penalty for aiding and abetting understatement of tax liability
$1,000 for taxpayers
$10,000 for corporations
Penalty for wrongful disclosure and/or use of tax return information
$250 per disclosure, max $10,000 per year
Penalty for failure to file
5% of the amount due for each month late, max 25%
Penalty for failure to pay
1/2% per month, max 25%
Penalty for negligence with respect to understatement of tax (same for substantial)
20% of understatement
Penalties for fraud
Civil:
at least 75% of the understatement due to fraud
Criminal:
as high as $100k / $500k for corporations
Reasonable basis standard
Tax position with at least 20% chance of succeeding
Substantial authority standard
More than 1/3 chance of succeeding
Ultramares
minority of states allow this
limits CPA’s liability to persons in privity of contract with CPA and intended 3rd party beneficiaries
Difference between fraud and constructive fraud
Constructive is from acting recklessly, actual is intentional
