REG Deck 3 Flashcards
An individual tax return preparer must include the preparer’s ________ on any tax returns prepared for compensation.
PTIN
any transaction that the Secretary of the U.S. Treasury Department has determined as having a potential for either tax avoidance or tax evasion.
reportable transaction
What is the penalty when a tax preparer is liable for willful or reckless conduct
Greater of $5,000
75% of the income derived with respect to the tax return or refund claim on which the willful or reckless conduct exercised
How long must a CPA retain a completed copy of each return after the close of the return period (IRC Section 6107)
3 years
Internal Revenue Code (IRC) Section 6695(b) provides a penalty of ________ for each failure of a preparer to sign a tax return [maximum penalty of _________ per calendar year (2024)].
$60
$31,500
The penalty for failure to comply with the IRS’ “due diligence” requirements with respect to determining a client’s eligibility for the earned income credit is a penalty of _______ (2024) for each such failure
$635
When can a CPA disclose confidential client information without the consent of the client
Preparation of state and local tax returns
Quality and peer reviews
Court order or administrative order
Which regulatory body coordinates the state boards of accountancy in their role of licensing and regulation for CPAs?
National Association of State Board of Accountancy (NASBA)
A tax return preparer who discloses taxpayer information without the taxpayer’s formal consent is subject to a civil penalty under Internal Revenue Code (IRC) Section 6713 of ______ for each such disclosure (maximum annual penalty of _________) and a criminal penalty under IRC Section 7216 of a fine up to ________ and/or imprisonment up to one year.
$250
$10,000
$1,000
Where, if any location is personal property tax on personal automobile deductible?
On Schedule A, as an itemized deduction
Where, if any location is current-year state and city income taxes withheld deductible?
On Schedule A, as an itemized deduction
The accumulated earnings tax is a penalty tax:
On C-Corps
Excess of retained earnings of $250,000 without a valid reason
The tax rate is 20% for the penalty
The reasonable basis standard is a tax position that has at least a __________ percent chance of succeeding, one that is arguable but fairly unlikely to prevail in court
20%
The substantial authority standard is a position that has more than a ______ percent chance of succeeding in court.
40%
The more likely than not standard is met when there is greater than a ______ percent likelihood of a tax position being upheld by the courts
50%
If an individual taxpayer rejects the IRS examiner’s findings in an audit of the taxpayer’s tax return, the IRS will issue the taxpayer a ___________________________ notifying the taxpayer of the right to appeal.
30 day letter (preliminary notice)
If the taxpayer agrees with the conclusions reached by the IRS agent in an audit, the taxpayer will sign _______________ and pay any additional tax assessed (plus interest and penalties).
Form 870
Which of the following is a list of courts that are referred to as courts of original jurisdiction, or trial courts, for tax matters?
The Tax Court
U.S. District Court
U.S. Court of Federal Claims
Upon receipt of a notice of deficiency from the IRS, the taxpayer has _________________ to pay the deficiency or ______________________________________ for a redetermination of the deficiency.
90 days
File a petition with the Tax Court
The IRS issues a _____________________________ in response to a taxpayer’s request for guidance on the tax treatment of a proposed transaction, typically one with significant tax consequences.
private letter ruling (PLR)
Interest on a tax deficiency begins to accrue _______________________________________________, even if an extension of time to file was filed.
on the date the original tax was due
What are the types of IRS audits?
Correspondence audit
office audit
field audit
Taxpayers who file petitions with the U.S. Tax court have the option of having the case heard before the informal small cases division if the amount of tax in dispute does not exceed ___________ for any one tax year
$50,000
A taxpayer who disagrees with the IRS may take his or her case to a _______________ only after paying the disputed tax liability and then sue the IRS for a refund.
U.S. District Court
_____________ cases are heard before one judge, not a panel of judges
U.S. District Courts
Which types of entities are reported on Schedule C?
unincorporated sole proprietorship and general partnerships
failing to take proper care in doing something
negligent
a writ ordering a person to attend a court
subpoena
When a CPA breaches a contract for professional services, the client and any third party beneficiary of the contract are entitled to compensatory ___________ ______________.
money damages
Ultramares limits the accountant’s liability for negligence to:
parties in privity
intended third party beneficiaries
a relation between two parties that is recognized by law, such as that of blood, lease, or service.
privity
knew that the statement was wrong or recklessly disregarded the truth
scienter
Reckless departure from standards of due care constitutes ____________________ _________________, which is also called constructive fraud
gross negligence
A plaintiff must show four elements to make a case for negligence against a CPA. The plaintiff must show that
The defendant owed a duty of care to the plaintiff
the defendant breached that duty by failing to act with due care
breach caused the plaintiff’s injury
plaintiff suffered damages
If a CPA recklessly departs from the standards of due care when conducting an audit, the CPA will be liable to third parties who are unknown to the CPA under the law of:
Gross negligence
What’s the difference between constructive fraud and actual fraud?
Actual fraud requires intent in making a material misstatement
A CPA who commits fraud is liable to anyone who can prove the case for fraud. Fraud has five elements:
a misrepresentation of material fact
intent to deceive
actual and justifiable reliance by the plaintiff on the misrepresentation
an intent (also known as scienter) by the defendant to induce plaintiff’s reliance on the misrepresentation
damages to the plaintiff
The ___________ __________ is the rule followed by a majority of jurisdictions providing that if a CPA performs an audit negligently, the CPA is liable to the client and to any foreseeable class of persons whom the CPA knows will be relying on the audit.
restatement rule
Which of the following is an evidentiary privilege that protects communication between a CPA and the CPA’s taxpayer-client in a noncriminal tax matter before the IRS?
tax practitioner privilege
. Work papers belong to the __________ who prepares them, not the client. Thus, as the owner of the workpapers, the ______ does not have to disclose them to the client.
accountant
accountant
any written or electronic advice concerning transactions specified by the IRS as listed transactions.
covered opinion
Tax return preparer checklists for whether a person is one or not
compensation
employs people who are compensation for preparing returns
signing tax return preparer
An _____________ may be terminated by the offeror at any time unless the offeree gave ______________ to keep the offer open.
offer
consideration
To be effective, consideration must be __________ ___________, which means something that the law recognizes as consideration.
legally sufficient
A unilateral contract is formed when a __________ is made in exchange for an ________.
promise
act
___________________ are generally not offers, but invitations to negotiate
advertisements
The death of an offeror prior to acceptance ________________ the offer by operation of law without notice to the offeree.
terminates
person that receives an offer
offeree
person that makes an offer
offeror
What is the mailbox rule?
acceptances are effective upon dispatch
Generally, under the ________ _________, acceptance is effective when sent. However, an offeror may opt out of the __________ ___________ by stating that the acceptance must be received by a certain date to be effective
mailbox rule
