Internal Revenue Service Code of 1986 as amended, and regulations related to Tax return preparers

Question 1

A CPA will be liable for damages for

Answer 1

1) Failure to timely file a tax return
2) failing to advise a client of certain tax elections
3) neglecting to evaluate options of preparing joint or separate returns which would result in substantial savings
4) Understatement of tax liability if the preparer knew or should have known that deductions or credits have no realistic possibility of being sustained on merit

Question 2

A taxpayer info may be disclosed without penalty if info

Answer 2

1) to a tax processor is filed electronically
2) for peer review
3) administrative order by court or state agency

Question 3

IRS section 6695

Answer 3

requires that taxpayer records (Name, TIN or a copy of the tax return) be maintained for at least 3 years. Penalties range from $50 to $25,000.

Question 4

A calculating error

Answer 4

does not incur a penalty for a CPA but the client can incur a penalty