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)
What does the State Board do after investigation?
- The board can conduct a formal hearing for formal disciplinary action.
- The board must find it was more-likely-than-not that there was misconduct.
- Proof beyond reasonable doubt is not required on criminal cases.
- Accountant entitled to due process.
- All adverse decisions are subject to judicial review.
What are the 5 penalties that State Board may impose for misconduct?
- Supension or revocation of license.
- Monetary Fine
- Reprimand or censure
- Probation
- Requirement for CPE.
* State board can’t send me to jail, only court!
AICPA Code of Conduct
Applies to all members, and it is adopted by state CPA societies.
What is JEEP?
Joint Ethics Enforcement Program
- Enforces code by a single investigation.
- Results of investigation are shared between AICPA, State CPA societies, and State Board.
What are AICPA and State CPA Societies disciplinary actions?
- They can’t revoke your license, but they can kick you out, without a hearing. (No license, no money, no jail).
What are IRS disciplinary actions?
- Criminal Penalties
- Civil Penalties
When are IRS Criminal Penalties imposed?
- When actions involve fraud (intentional, willful, reckless).
- Actions must be beyond reasonable doubt, and burden is on govt.
What are the IRS Civil Penalties?
- GR: Preponderance of the evidence, not beyond reasonable doubt)
- IRS may prohibit an accountant from practicing before the IRS.
- IRS may impose fines.
What are the SEC Civil Penalties?
- No jail
- Only investigate criminal activity, and turn info to US attorney’s office.
- SEC may suspend or revoke an accountant’s right from practicing before the SEC.
- SEC may impose fines of a max of $100K ($500K firms)
