Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

REG > R6 - Ethics > Flashcards

R6 - Ethics Flashcards

1
Q

What is Circular 230?

A

“Regulations Governing Practice before the Internal Revenue Service. Addresses practice before the IRS with regard to:

  1. ) authority to practice before IRS
  2. ) duties and restrictions of practicing
  3. ) sanctions & violations
  4. ) disciplinary proceedings

*only for tax practitioners (licensed)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

If the IRS requests information or records, what is the one exception where the tax practitioner does not have to provide it?

A

The practitioner may withhold information or records he believes in “good faith” and on reasonable grounds to be privileged.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

RECALL:

recall the three restrictions that former gov. employees have regarding their conflicts of interest:

A
  1. ) “Personally and Substantially participated”: can NEVER represent or assist those parties with respect to that particular matter
  2. ) “Official responsibility”: two years cooling off period for that specific party/matter
  3. ) “Participated in the development”: one year cooling off period
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the three situations in which charging a contingent fee would be ok?

A
  1. ) IRS audit
  2. ) Claim solely for a refund
  3. ) Judicial proceeding
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

A tax practitioner is allowed to accept client info if it appears reasonable without verification. What if the information looks unreasonable?

A

Must make reasonable inquiries if the client info appears questionable or incomplete.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What if a tax practitioner knows a client is withholding or omitting some information?

A
  1. ) Do NOT notify the IRS
  2. ) Consider withdrawing if the client will not rectify
  3. ) advise client promptly of omission AND consequences
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What do practitioners have to do with regard to circular 230 to ensure compliance?

A
  1. ) have adequate procedures to comply
  2. ) ensure procedures are followed
  3. ) test and fix along the way
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a key distinction of a tax preparer?

A

Any person who prepares for COMPENSATION of who employs one or more persons to prepare for compensation

*this does not include persons in a firm doing clerical work (typing, entering info into tax returns, etc). Person must offer TAX ADVICE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does PTIN stand for?

A

Preparer tax identification number

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Who should ultimately sign a tax return?

A

The preparer with the primary responsibility for the overall substantive accuracy of the return (could be other nonsigning preparers who assisted)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the primary authoritative sources that determine the treatment of tax positions?

A

1.) IRC
2.) Regulations construing statutes
3.) Revenue rulings - US Treasury Dpt
4,) Court cases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are not primary authoritative sources that determine the treatment of tax positions?

A
  1. ) Press releases

2. ) Admin pronouncements by Internal Rev. Bulletin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a listed transaction?

A

A transaction specifically identified by the Secretary of the US Treasury Dept as a tax avoidance transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a reportable transaction?

A

A transaction that requires information to be included with a return or statement because such transaction is of a type that the Secretary of the U.S Treasury Dept has determined as having a potential for either tax avoidance (legal), or tax evasion (illegal)

*this refers to tax shelters as well

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the difference between a listed transaction and a reportable transaction?

A

Listed = Flagged by US Treasury, for tax avoidance strategies

Reportable = Flagged by US Treasury, for tax avoidance/tax evasion strategies

*if a transaction is reportable, it is inherently listed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in preparation is:

A

Negligence (ordinary)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

To have a reasonable basis on a tax position, a preparer/taxpayer must have what % likelihood of the position being upheld?

A

> 20%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

To have a substantial authority on a tax position, a preparer/taxpayer must have what % likelihood of the position being upheld?

A

> 33% - 50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

To have a more-likely-than-not on a tax position, a preparer/taxpayer must have what % likelihood of the position being upheld?

A

> 50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How can a penalty for an unreasonable tax position be avoided?

A
  1. ) Reasonable basis disclosed (>20%)
  2. ) Substantial authority disclosed or not (>33%-50%)
  3. ) More-likely-than-not disclosed or not (>50%) (applies to tax shelters and reportable transactions)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

If found liable for a penalty for understatement due to an unreasonable position taken on a tax return, what would be the penalty amount if for ordinary negligence (not willful or reckless)?

A

Greater of $1,000 or 50% of the income the preparer got for the return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

If found liable for a penalty for understatement due to an unreasonable position taken on a tax return, what would be the penalty amount if for willful or reckless conduct (fraud)?

A

Greater of $5,000 or 50% of the income the preparer got for the return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for not providing a taxpayer with a copy of their return?

A

$50 for each instance (maximum $25,500 per year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for failing to sign a tax return as a preparer?

A

$50 for each instance (maximum $25,500 per year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for not providing a PTIN on a return you prepared?

A

$50 each (maximum $25,500 per year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How long is a preparer required to keep copies of clients records for?

A

Three years (tax)

Seven years (audit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for not maintaining copies of clients records for 3 years?

A

$50 each (maximum $25,500 per year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for endorsing or otherwise negotiating an IRS refund check?

A

$510 per check

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for failure to be diligent in determining a client’s eligibility for the earned income credit?

A

$510 for each failure

30
Q

What is the penalty for aiding and abetting understatement of a tax liability?

A
  • Applies to any person, not just tax preparers.
  • IRS has the burden of proof (only time they do, usually is the taxpayer/preparer for civil cases)
  • Civil penalty imposed by IRS of $1,000 for all taxpayers, and $10,000 for corps
31
Q

In a criminal case regarding taxes, who has the burden of proof? (IRS or taxpayer)

A

IRS.

Taxpayer has burden of proof in civil cases (unless for aiding and abetting and understatement of a tax liability)

32
Q

Tax preparers are subject to certain penalties for unethical behavior from the IRS.

What is the penalty for wrongful disclosure and or use of tax return information?

A

$250 for each disclosure

33
Q

What are exceptions to the penalty and/or fine for wrongful disclosure and or use of tax return info?

A

If disclosure was for:

  1. ) Court order (subpoena)
  2. ) For state & local returns
  3. ) For quality and peer reviews
34
Q

Who has the sole power to license and revoke CPAs?

A

The State Boards of Accountancy

35
Q

What are the 5 penalties that a state board of accountancy may impose for professional misconduct?

A
  1. ) Suspension, revocation of license (sole power)
  2. ) Monetary fines
  3. ) Reprimand or censure
  4. ) Probation
  5. ) Requirement for CPE

*notice how they can’t throw you in jail

36
Q

Can the AICPA or state CPA societies suspend / revoke CPA licenses?

A

No, the state board of accountancy have the sole power to do so

*notice how state board of accountancy is not the same as state society

37
Q

Can the AICPA or state CPA societies sanction their members?

A

Yes, can suspend their state society membership but not their CPA license

38
Q

When do most IRS audits occur in regard to the returns that are being audited?

A

Generally within two years from the date of filing the return

39
Q

What is a correspondence audit?

A

Review for mathematical errors (least serious audit)

40
Q

What form is signed by a taxpayer at the conclusion of an IRS audit that does not need to be appealed?

A

Form 870 (normally closes the case)

41
Q

If a field agent comes to audit you and you cannot resolve the matter with that agent, what is the next step in the audit process?

A

Taxpayer is issued a 30 day letter for right to appeal. Agreement is then tried to be reached at the office of appeals (WITHOUT LITIGATION). If resolved there, a Form 870-AD is signed by the taxpayer (indicating matter was resolved at appeals division)

42
Q

If resolution can not happen at the appeals division, what is the next step in the audit process?

A

90-day letter issued to taxpayer (notice of deficiency).

Taxpayer has 90 days to pay, or 90 days to file a petition with the U.S Tax court/US District court/US Court of Federal Claims

43
Q

Who has the burden of proof in any court proceedings on income, gift, and estate tax issues?

A

IRS (usually the party bringing the case has the burden of proof)

44
Q

What is the advantage of using the US tax court for your hearing after your 90 day letter is issued? what is the disadvantage?

A

Don’t have to pay first, but no jury (trial by tax expert judge)

45
Q

The US tax court issues two types of decisions, what is a “regular” decision?

A

Involves new or unusual point of law

46
Q

The US tax court issues two types of decisions, what is a “memorandum” decision?

A

Application of an existing law

47
Q

What is the advantage of using the US District Court for your hearing after your 90 day letter is issued? what is the disadvantage?

A

Can have a jury trial and the judges are not tax experts, disadvantage is you have to pay the tax bill first and then if you win sue to get a refund later

48
Q

What is the advantage of using the US Federal Claims Court for your hearing after your 90 day letter is issued? what is the disadvantage?

A

Not really much advantages. You have to pay the bill first, and no jury is available. Generally handles tax claims for high net worth individuals and for national/multinational companies

49
Q

If you appeal the ruling at the US Tax Court, who hears the appeal?

A

Court of Appeals

50
Q

If you appeal the ruling at the US District Court, who hears the appeal?

A

Court of Appeals

51
Q

If you appeal the ruling at the US Court of Federal Claims, who hears the appeal?

A

US Court of Appeals for the Federal Circuit

52
Q

How can you avoid penalties for failure to make sufficient estimated income tax payments?

A
  1. ) If the liability is less than or equal to $1,000
  2. ) If you make pmts of at least 90% of current years tax
  3. ) If you make pmts of at least 100% of last years tax (110% if AGI over $150k)
53
Q

What is the failure to file penalty for individuals?

A

5% per month of amount of tax due

54
Q

What is the failure to pay penalty for individuals?

A

Half of 1% per month of amount of tax due

(if taxpayer hasn’t filed also, they are only subject to 5% each month from failure to file penalty and this penalty is ignored - no doubling up)

55
Q

What is the penalty for an individual for negligence with respect to an understatement of tax? (not substantial understatement)

A

20% of understatement of tax

56
Q

What is the penalty for an individual for negligence with respect to an understatement of tax? (substantial understatement)

A

20% of understatement of tax

*note here this is the same as if it were not substantial. Difference is that this is much harder to avoid

57
Q

What is the penalty for fraud cases of the understatement of tax due?

A

At least 75% of the understatement of tax due to fraud and criminal penalties ($100k for indiv, $500k for corps)

58
Q

What is the difference between constructive fraud and fraud?

A

Constructive fraud = reckless (gross negligence)

Fraud = intent, willful

59
Q

What is the best defense for a CPA being sued for breach of contract?

A

Failure to cooperate

60
Q

What is a tort?

A

Wrongful act (either unintentional or intentional)

61
Q

Who can generally sue a CPA for breach of contract?

A

Generally, only the client and and named third party beneficiaries (generally requires privity)

62
Q

What is a CPAs best defense to ordinary negligence?

A

Due diligence (workpapers)

63
Q

To whom is the duty of due diligence owed?

A

Generally runs only to clients and to any person or limited foreseeable class of persons whom the CPA knows will be relying on the CPAs work (creditors, investors, etc)

64
Q

What is the ultramares decision?

A

Limits a CPAs liability more narrowly to persons in privity of contract with the CPA (named)

65
Q

What are the five elements of fraud?

A

MAIDS:

Misrepresentations of material fact
Actual and justifiable reliance by a plaintiff on misrepresentations
Induce plaintiffs reliance
Scienter

66
Q

What is a major difference between constructive and regular fraud?

A

Constructive = reckless, but not intentional (gross negligence)

Fraud = intent, willful

67
Q

What is a CPAs best defense for fraud?

A

Lack of scienter - acted in good faith

68
Q

Is privity a defense for fraud? (persons weren’t named in contract with CPA)

A

No, privity is not a defense for fraud. Fraud is a much broader liability than negligence. Liability is not limited to persons in privity

69
Q

What damages can a CPA be liable for if guilty of malpractice?

A
  1. ) Taxes (if client paid to much and can’t get a refund)
  2. ) Penalties
  3. ) Interest
  4. ) Costs incurred to correct returns
  5. ) Consequential damages (lost investment or income opportunities)
70
Q

Does a taxpayer have privileged communications with a CPA?

A

Yes but only to the extent of the tax advice discussed (criminal)

If noncriminal (civil), the tax practitioner privilege is just as good as the attorney-client privilege

REG (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions