Federal Tax Practice and Procedures

Question 1

What are the Tax Return Preparer Penalties?

Answer 1

Maximum fine is the greater of:
$1,000
50% of income

Question 2

What are the Taxpayer’s Penalties?

Answer 2

1) Late filing/failure to file:
- 5% net tax due per month (up to 25% of unpaid
taxes)
2) Failure to file fraudulent
- 15% (up to 75%)
3) Understatement of Income Tax - Individuals
- greater of:
a) 10% of tax
b) $5,000
4) Understatement of Income Tax - Non Chapter S
Corporation
- lesser of:
a) 10% of tax ($10,000)
b) $10 mil

Question 3

What is the minimum estimated tax corporations must pay to avoid understatement of tax?

Answer 3

100% of PY taxes; or

90% of CY taxes