R4 Professional Responsibilities & Fed Tax Procedures

Question 1

Characteristics of Best Practices for Tax Advisors

Answer 1

Communicating w/Client

Establishing Facts & arriving at a conclusion

Advising the client about the importance of conclusions reached

Acting Fairly & w/integrity in practice before the IRS

Taking reasonable steps to ensure everyone (members, associates and employees) are consistent with the above

Question 2

Taxpayer would 1st bring a lawsuit against IRS

Answer 2

Tax Court

US District Court

US Court of Federal Claims

Question 3

5 Elements for Fraud

In order to prove Fraud - must prove the 5 elements of fraud

Answer 3

1. Misrepresentation of a material fact
2. Scienter (intent to deceive)
3. Actual & justifiable reliance
4. Intent to induce reliance
5. Damages

Question 4

4 Elements of Negligence

Answer 4

1. Owed a duty of care
2. Breach of duty of care
3. Breach of duty of care was the reason the plaintiff has losses
4. Plaintiff suffered damages

Question 5

Reportable Transactions

Answer 5

Any transaction that the Secretary of the U.S. Treasury Department has determined as having a potential for either tax avoidance or tax evasion.

Question 6

An Internal Revenue Code (IRC) tax return preparer penalty can be assessed by the IRS

Answer 6

For failure to retain a copy of a taxpayer-client’s tax return For the period ending 3 years after the close of the return period

The tax preparer can keep a list, of name and TIN for the return prepared Instead of a copy of the return itself.

Question 7

Circular 230 regulations provide that a practitioner may not, with respect to any IRS matter, in any way use or participate

Answer 7

In the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim, or a misleading or deceptive statement or claim.

Question 8

With respect to the penalty for aiding and abetting an understatement of tax liability on a tax return

Answer 8

The burden of proof shifts to the IRS from the taxpayer.
Unless the law expressly states otherwise, the taxpayer has the burden of proof to establish by the preponderance of the evidence that the law and the evidence do not support the position of the IRS.

With respect to any criminal action, the government has the burden of proof to establish by evidence beyond a reasonable doubt that the taxpayer is guilty of the charges.

Note that these burdens of proof are different; criminal (beyond a reasonable doubt) is considerably higher than civil (preponderance of the evidence).

Question 9

Under majority position an accountant

Answer 9

Is liable for negligence only to third parties whom the accountant knows or should FORSEE will be relying on the accountant’s work.