Penalties

Question 1

Penalty for TRP that aids or abets tax evation.

Answer 1

1. Prohibited from working as a preparer.

2. Can face federal criminal charges/prosecution.

Question 2

Penalty for endorsing/negotiating refund checks.

Answer 2

Fine of $510 each time.

Question 3

Penalty for understated tax liability due to UNREASONABLE POSITION taken by TRP.

Answer 3

The greater of:

• $1,000
• 50% of the income derived by TRP (our fee) with respect to the TR or the claim for refund.

Question 4

Penalty for understated tax liability due to WILLFUL OR RECKLESS CONDUCT by TRP.

Answer 4

The greater of:

• $5,000
• 75% of the income derived by TRP (our fee) with respect to the TR or the claim for refund.

Question 5

Penalty for failure to furnish a copy of the tax return to client.

Answer 5

$50 each instance

Question 6

Penalty for failure to sign return.

Answer 6

$50 each instance

Question 7

Penalty for failure to provide PTIN.

Answer 7

$50 each instance

Question 8

Penalty for failure to retain a copy of the TR.

Answer 8

$50 each instance

Question 9

Failure to file correct information return on those preparing tax returns under them. What is this and what is the penalty?

Answer 9

Proper filing includes names and social security numbers of each employee and failure to do this results in a $50 fine for each employee not disclosed.

Question 10

Penalty for failure to performing due diligence on eligibility for EIC.

Answer 10

$510 each instance

Question 11

Penalty for planning or arranging abusive tax shelters.

Answer 11

$1,000 each instance

Question 12

Penalty for aiding and abetting the understatement of tax liability.

Answer 12

$1,000 each instance

Question 13

Penalty for disclosing unauthorized information by a TRP from a client to others not resulting in a prepared/filed tax return.

Answer 13

• $250 for each use of such info

- can be a misdemeanor with a fine of up to $1,000 and possible imprisonment of up to a year.

Question 14

Penalty for fraud and false statements.

Answer 14

This is a felony and, if convicted, is punishable by:

• a fine of up to $100,000 and
• possible imprisonment of up to 3 years.

Question 15

Penalty for fraudulent returns or statements.

Answer 15

This is a misdemeanor and, if convicted, punishable by:

• up to $10,000 and
• possible imprisonment of up to 1 year.

Question 16

Non-filing penalties

Answer 16

5% a month, up to 25%, of tax due. If filed more than 60 days late, penalty is the lesser of $205 or 100% of the unpaid tax. No penalties if no tax due or refund.

Question 17

Non-payment penalties

Answer 17

0.5% a month, up to 25% of the tax owed. If both non-filing and non-payment, only non-filing applies.

Question 18

Underpayment penalties

Answer 18

If owe over $1,000, must make estimated tax payments or have it withheld.
No penalties if withholding/est’d tax payments were:
- $150,000 AGI: 110% of last year’s tax due.

Question 19

Accuracy penalties

Answer 19

• 20% of tax due for negligence-waived if reasonable basis.
• 20% of tax due for substantial overstatement-waived if substantial authority or if position appropriately disclosed on TR.
• 20% of tax due if substantial overstatement (150% or more of actual value)
• 40% of tax due for gross overstatement (400% or more of actual value) of value/basis of any property.
• 75% of tax due if fraud