REG: Chapter 1 Flashcards
Tax Return Preparers
What qualifies a practitioner as a tax return preparer?
- If the practitioner receives compensation for any tax return or claim of refund
- Prepares or assists with the preparation of all, or a substantial portion, of any tax return
- A person who prepares another return where the entries directly relate to the second tax return
- Estate or gift taxes; Witholding tax returns or Excise Tax returns do not qualify
Tax Return Preparers
What qualifies as substantial or unsubstantial?
The test to determine substantial or unsubstantial is whether a portion of any return or claim for refund is either
* Less than $10,000 or
* Less than $400,000 and less than 20% of the gross income on the return or claim
Tax Return Preparers
What type of documentation is a tax return preparer required to keep?
- A completed copy of the tax return or
- A listing of the specified return information for each return prepared
Tax Return Preparers
What type of information is included when a summarized list is kept by the tax return preparer?
- The taxpayers names
- The taxpayers identification numbers
- The tax year(s) filed
- Types of returns or claims filed
Tax Return Preparers
What type of acts will cause penalties for a tax return preparer?
- Giving or participating false, misleading information to a tax or treasury official
- Conviction due to dishonesty or breach of trust
- Negotiating the client’s refund and not giving the client the check
- Libelous or malicious advertising
- Abusive language
- Having a partnership with a convicted person
- Filing false complaints
Tax Return Preparers
When will a CPA be prohibited from giving written advice about an IRS issue?
If the CPA believes that the return will not be audited
Tax Return Preparers
What are the exceptions as to when a practitioner may accept a contingent fee?
When the IRS examination is in relation to:
* An original return
* An amended return
* A claim for a refund or credit
* A judicial proceeding
Tax Return Preparers
When is a penalty not imposed on a tax return preparer?
The prepare proves
* They acted in good faith
* A reasonable cause exists for the error
Tax Return Preparers
When would a tax return preparer incur a $60 penalty for each occurrence?
- Failing to furnish a copy of a tax return or refund claim to a taxpayer
- Does not sign a tax return or refund claim
- Omits the PTIN on a tax return or claim
- Fail to retain a copy or list of a tax return or claim they prepared
- Does not file the correct information on the tax return
Tax Return Preparers
What is the penalty if a tax return preparer takes an undisclosed position when substantial authority does not exist to support their position?
- Greater of $1,000 or
- 50% of the income derived
Tax Return Preparers
What is the penalty for the tax return preparer if they acted with willful or reckless conduct?
- Greater of $5,000 or
- 75% of the income to be derived
Tax Return Preparers
What is the penalty if a preparer negotiates any check issued to the taxpayer?
- $600 for each occurrence
- This penalty also applies to any tax return preparer who operates a check cashing company
Tax Return Preparers
What is the penalty if a preparer is not diligent in determining a taxpayer’s eligibility for specific benefits (i.e. filing status, dependent credits, AOC, Earned Income Tax Credit and Lifetime Learning Credit)?
$600 for each failure to determine eligibility
Tax Return Preparers
What is the preparer penalty for filing fraudulent or false statements?
Greater of:
* $250,000 for an individual client
* $500,000 for a corporate client
* Imprisonment of not more than 3 years, or both
Tax Return Preparers
What is the penalty for when a preparer discloses taxpayer information?
- $250 per disclosure/per year ($10,000 Maximum)
- $1,000 for misappropriation of identity/per year ($50,000 Maximum)
- $1,000 and up to a year in prison if the preparer pleads guilty of a misdemeanor
