R6 - Professional Responsibilities and TRP Penalties Flashcards
TRP
- Any person who preps a TR for comp or file forms to claim a refund.
- PTIN - Tax Prepper.
Unlimited Representation Rights
- Tax Practitiones: CPAs, EAs, Attorneys. Licensed.
Signing TRP
- Primary responsibility for overall accuracy.
Non-Signing TRP
- Not primary, somehow assist in prepping, but not merely mechanical.
- TRP that prep substantial portion of return.
TRP Compliance Penalties: Authority
The following is considered “Substantial Authority”.
What are the primary authoritative courses?
- IRC and statutory provisions.
- Proposed, temp, and final regs.
- Revenue Rulings.
- US Treasury Dept.
- Court cases.
What is a listed transaction?
A transaction specifically identified by the Secretary of the US Treasury Dept as a Tax Avoidance Transaction. (TAT)
What is a reportable transaction?
Any transaction in which information is required because the Secretary of the US Treasury Dept believes that is has a potential to be a TAT or tax evasion.
What does More-Likely-Than-Not mean?
You have a chance of +50% to win in court.
What is ordinary negligence?
Failure to:
- Make a reasonable attempt to comply with the IRC.
- Exercise ordinary and reasonable care in TR prep.
- Keep adequate support. (Books and records)
- NOT FRAUD! So penalties are different from fraud penalties.
What is reasonable basis?
You have a chance of +20% to win in court.
What is substantial authority standard?
You have between 33% and 50% to win in court.
What is Unreasonable Position? HEAVY ON EXAM!!!!!
A position is unreasonable except when:
- There is substantial authority. Undisclosed. +33-50%
- There is reasonable basis. Disclosed. +20%
- More-Likely-Than-Not is met. +50%
What is the penalty for Understatement Due to Unreasonable Position (Ordinary Negligence)?
Greater of $1,000 or 50% of compensation.
What is to Willful or Reckless Conduct?
- No good faith = Fraud
- Keys: Intentionally, knowingly.
Supporting Documentation
- You’re not required to obtain supporting documentation.
- BUT SPEAK UP! if you think information is not accurate, request supporting documentation.
What is the penalty for Understatement Due to Willful or Reckless Contruct (Fraud)?
Keys: Intentionally, knowingly.
Greater of $5,000 or 75% of compensation.
TRP Penalties for Unethical Behavior = $50
$50 per failure:
- Failure to provide a copy of TR.
- Failure to sign return.
- Failure to disclose PTIN.
- Failure to keep records (return copies or listing of clients).
- Failure to correct info returns (in regards to employee TRPs).
TRP Penalties for Unethical Behavior = $540
$540 per instance.
- Negotiation (endorse) an IRS Refund Check.
- Failure to perform DD on EIC. (Form on return).
Other TRP Penalties = $1,000 or $10,000
$1,000 for individuals and $10,000 for Corps
- Aiding and abetting understatement of tax liability. Applies to ANYONE! Not just TRPs.
- IRS has burden of proof.
Other TRP Penalties = $250
$250 per instance. 9. Wrongful disclosure: Disclose info for any purposes that is not preparing a TR. Exceptions: a Subpoena b. Allowable uses c If permitted by US treas regs. d. Client consent.
Can you disclose confidential information if you sell your practice?
- No, unless you have client’s consent.
- If buyer wants to see quality of work, you must black out client information.
What is the role of State Board?
- Power to grant, revoke or suspend a license.
- IRS can’t take your license.
What are the disciplinary power of the State Board?
3 broad categories of misconduct:
- While performing accounting services (negligence, fraud).
- Out of scope of accounting services (alcohol, drugs, insanity)
- Criminal conviction (felony, crime)
