Fed Tax Practice / Proced Flashcards
REG CPA Exam
Standards of Substantiation
Substantial Authority = 40%
Reasonable Basis = 20%
Tax Answers that can avoid liability
Reasonable Cause and good faith
Under common law for a 3rd party to sue a CPA for fraud he must prove?
damages were incurred
there was a material misstatement
or omission of a material fact
and that there was justifiable reliance on the f/s which led to the damages.
Intent or Scienter (necessary to prove fraud) will be met if the plaintiff can show
plaintiff may show that the defendant actually knew of the misrepresentation, OR may prove that the defendant acted recklessly. Both amount to intent and may be used to prove that element of a fraud action.
2018 Underpayment Est Tax Penalty
no penalty if the total tax shown on the return less the amount paid through withholding (including excess social security tax withholding) is less than $1,000.
no penalty if the amount of tax withheld plus estimated payments are at least equal to the lesser of (1) 90% of the current year’s tax (determined on the basis of actual income or annualized income), or (2) 100% of the prior year’s tax
Does a TP need to respond to a 30 day letter?
No, if there is no repsonse the IRS will follow up with a 90 day letter
A tax return preparer may disclose or use tax return information without the taxpayer’s consent to
(1) for quality or peer reviews; (2) for use in preparing state and local taxes and/or in declaring estimated taxes;(3) under code; and (4) under the order of a court of law.
TP may avoid the penalty for the underpayment of estimated tax if the timely estimated tax payments equal the required annual amount of
generally the lower of 90% of the tax shown on the tp’s current year return or 100% of the tax shown on the tp’s py return.
If the tp’s agi exceeded $150,000 in the py and the tp elects to base his/her required annual amount on the py, then the taxpayer would have to use 110% of the py’s return.
assessable penalties with respect to the preparation of income tax returns for other persons include:
(a) Failure to furnish copy to taxpayer; (b) Failure to furnish identifying number; (c) Failure to retain copy or list; (d) Failure to file correct information returns; (e) Negotiation of check
When performing an audit, a CPA
Must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances.
Section 7525 of the Internal Revenue Code
extends a modest testimonial privilege to clients of all tax advisers; Congress (in §7525) and about 15 states have statutorily enacted such privileges.
Generally Accepted Privacy Principles (GAPP) a CPA must:
Provide its clients notice of its privacy policies and procedures
Collect information only in compliance with its policies and procedures.
Provide clients with access to their personal information for review and update
Ultramares Rule
requires privity before an accountant is liable for negligence
Restatement rule,
allow foreseeable users who rely on a negligently false statement to sue
Contracts for services are governed by
common law
