R4 M2- Professional Responsibilities & Tax return preparer Pen. Flashcards
What is the fine for failure to file?
The fine is $60 for each failure, with a maximum of $31,500 for each return period.
When a person (individual, trust, estate, partnership association, company, or corporation) who employed a tax return preparer during the return period must send what to the IRS?
return containing the name, taxpayer identification number or Social # and place of work for each tax return employed
What is a tax return preparer?
A tax return preparer is any person who prepares tax for compensation.
Which of the following is an unreasonable position as defined by the Internal Revenue Code?
A. There is substantial authority for the position, and it does involve a tax shelter. It does not appear that there is a more likely than not chance that the position will be sustained on its merits.
B. The position involves a tax shelter and there is a more likely than not chance that it will be sustained on its merits.
C. There is substantial authority for the position, and it does not involve a tax shelter or reportable transaction.
D. The position is disclosed, there is a reasonable basis for it, and it does not involve a tax shelter or reportable transaction.
Choice “A” is correct. Generally, a position that has substantial authority will not be an unreasonable position. However, because this involves a tax shelter and there is not a more likely than not chance that it will be sustained on its merits, it will be deemed to be an unreasonable position.
Choice “B” is incorrect. This position involves a tax shelter. It does meet the threshold of more likely than not that it will be sustained on its merits. Therefore, it will not be deemed to be an unreasonable position.
Choice “C” is incorrect. This position has substantial authority and does not involve a tax shelter or reportable transaction. Therefore, it will not be deemed to be an unreasonable position. Note that it is irrelevant whether this type of position is disclosed or not.
Choice “D” is incorrect. A disclosed position that has a reasonable basis and does not involve a tax shelter or reportable transaction will not be deemed to be an unreasonable position.
Which of the following statements is correct for the disciplinary power of the state boards of accountancy?
A. The state board of accountancy must find, by proof beyond a reasonable doubt, that the CPA's actions constituted professional misconduct. B. Adverse state board decisions cannot be reviewed by the courts. The state board's decision is final. C. The state board of accountancy can conduct a formal hearing for possible disciplinary action. D. The state board of accountancy does not have to provide due process of law.
Explanation
Choice “C” is correct. The state board of accountancy can conduct a formal hearing for possible disciplinary action.
Choice “A” is incorrect. The state board of accountancy must find, by the preponderance of the evidence, not by proof beyond a reasonable doubt, that the CPA’s actions constituted professional misconduct.
Choice “B” is incorrect. Adverse state board decisions can be reviewed by the courts. The state board’s decision is not final.
Choice “D” is incorrect. The state board of accountancy does have to provide due process of law.
What is the role of the State Boards of Accountancy
- Sole power to license a CPA
- Power to suspend or revoke a CPA’S license
- A monetary fine
- Probation of license
- CPE course annually
What is the disciplinary power of state boards?
If ever the accountant acted in bad faith such as
- Misconduct while performing his duties (dishonest, fraudulent or negligent)
- Criminal Conventions (failure to file tax returns, commit crime related to his practice)
- Misconduct outside of work (drunkenness or illegal drugs that impairs his work, insanity
After an investigation, the state board of accountancy can conduct a formal hearing for possible disciplinary action. The board will give the accountant to a due process of law to give him a chance to defend himself.
With respect to the penalties for failure to file information returns of tax preparers, which of the following provisions is correct for any person who employed a tax return preparer during the return period?
A. The fine for failure to file such information returns is a penalty of $50 for each failure, with no maximum for each return period. B. The penalty for failure to file information returns does not apply to the extent that the failure is due to reasonable cause and not due to willful neglect. C. Each such person must send to the IRS an information return containing the name, address, and social security number of each tax return preparer employed for at least 3 months during the year. D. The fine for failure to file such information returns is a penalty of $100 for each failure, with a maximum of $50,000 for each return period.
Choice “B” is correct. The penalty for failure to file information returns of tax preparers does not apply to the extent that the failure to file is due to reasonable cause and not due to willful neglect.
Choice “A” is incorrect. The fine for failure to file such information returns is a penalty of $60 for each failure, with a maximum of $31,500 (2024) for each return period, not $50 with no maximum.
Choice “C” is incorrect. Each person (individual, trust, estate, partnership, association, company, or corporation) who employed a tax return preparer during the return period must send to the IRS an information return containing the name, taxpayer identification number, and place of work for each tax return preparer employed during the return period. There is no 3-month provision.
Choice “D” is incorrect. The fine for failure to file such information returns is a penalty of $60 for each failure, with a maximum of $31,500 (2024) for each return period, not $100 with a maximum of $50,000.
What does the term reportable transaction mean?
It is a mean to try to avoid paying tax (tax evasion) or finding an illegal way not to pay tax
What is the civil penalty for aiding and abetting an understatement of tax liability?
The civil penalty is $1,000 for all taxpayers and $10,000 for Corporations
How long is a tax preparer meant to retain earned income credit documentation and is the tax preparer meant to document the calculation of the earned income credit, including the method and information used to make the Calculation
-The tax preparer is meant to keep copies of the earned income credit documentation for three years.
-Yes, a tax return preparer is required to document the calculation of the earned income credit with the method and information used to make the calculation
What is the penalty for failure to comply with the IRS “due diligence” requirements with respect to determining a client’s eligibility for the earned income credit?
The penalty for not comply with the IRS’s “due diligence” is $635 (2024)
What does the “due diligence” requirements address?
The due diligence requirements address eligibility checklists, computation worksheets, and record retention.
What are the three board categories of misconduct that can push the state board to conduct a formal hearing?
- Misconduct while performing the accounting service (fraud, dishonesty)
- Misconduct outside the scope of performing the accounting service (intoxication or drug impair the accountant ability to do his job)
- Criminal convictions
What is the difference between the AICPA and state CPA societies and the State Board of Accountancy?
The AICPA and state CPA societies cannot revoke your license. They can however suspend and terminate your membership without hearing due to criminal convictions, proof of conviction for purposely filing false information and proof of conviction for avoiding to file income tax return
The state board of accounting has the power through a formal hearing if need to revoke or suspend your CPA license.
