Ethics 'n Shit

Question 1

5 “Best Practices” for Tax Advisors

Answer 1

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

Question 2

Contingent Fees

Answer 2

Generally not allowed… 3 exceptions:
1 - IRS examination or audit
2 - Claim solely for a refund
3 - Judicial proceeding

Question 3

Treasury Department

Circular 230

Answer 3

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

Question 4

“Disregard”

Answer 4

Careless, reckless, or intentional disregard of rules or regulations

Question 5

More-likely-than-not standard

Answer 5

+50% of a position being upheld in court

Question 6

Penalty for understatement due to unreasonable position

Answer 6

Greater of:

$1,000 or 50% of the income the preparer received

Question 7

Penalty for “willful” or “reckless” conduct

Answer 7

Greater of:

$5,000 or 50% of the income the preparer received

Question 8

Penalty for not providing copy to taxpayer

Answer 8

$50 per failure, max = $25,500 per year

Question 9

Penalty for not signing a return

Answer 9

$50 per failure, max = $25,500 per year

Question 10

Penalty for not providing ID# for preparer

Answer 10

$50 per failure, max = $25,500 per year

Question 11

Penalty for not properly retaining records

Answer 11

$50 per failure, max = $25,500 per period

Question 12

Penalty for not filing correct information returns

Answer 12

$50 per failure, max = $25,500 per period

Question 13

Penalty for negotiation of refund check

Answer 13

$510 per check

Question 14

Penalty for failure to be diligent in client’s eligibility for earned income credit

Answer 14

$510 per failure

Question 15

Penalty for aiding and abetting understatement of tax liability

Answer 15

$1,000 for taxpayers

$10,000 for corporations

Question 16

Penalty for wrongful disclosure and/or use of tax return information

Answer 16

$250 per disclosure, max $10,000 per year

Question 17

Penalty for failure to file

Answer 17

5% of the amount due for each month late, max 25%

Question 18

Penalty for failure to pay

Answer 18

1/2% per month, max 25%

Question 19

Penalty for negligence with respect to understatement of tax (same for substantial)

Answer 19

20% of understatement

Question 20

Penalties for fraud

Answer 20

Civil:
at least 75% of the understatement due to fraud

Criminal:
as high as $100k / $500k for corporations

Question 21

Reasonable basis standard

Answer 21

Tax position with at least 20% chance of succeeding

Question 22

Substantial authority standard

Answer 22

More than 1/3 chance of succeeding

Question 23

Ultramares

Answer 23

minority of states allow this

limits CPA’s liability to persons in privity of contract with CPA and intended 3rd party beneficiaries

Question 24

Difference between fraud and constructive fraud

Answer 24

Constructive is from acting recklessly, actual is intentional