Responsibilities of Tax Preparers Flashcards
A Tax preparer will be subject to a penalty if
the preparer knowingly or recklessly
1) disclosed info in connection with the tax return
2) Enable a 3rd party to solicit business from the taxpayer
A Tax preparer will also be subject to penalty if
If any part of an understatement of liability with respect to a return or refund claim is due to the preparer willful attempt to understate tax liability or reckless/intentional disregard of the rules.
When must a Tax preparer give up a tax return?
when ordered by
1) quality or peer review
2) regulatory agency administrative order
3) Court order
If a CPA knows that a client has failed to prepare a prior tax return
the CPA should consider withdrawing from the preparation of the current return until the issue is resolved.
To avoid penalties the Tax preparer should
inquire if client information is
1) incomplete
2) appears to be incorrect
A CPA can avoid tax preparer penalities if they
In good faith they relied on the client’s information
UNLESS it appears incomplete on it’s face
Under IRC 6695(f)
A tax preparer who endorses or negotiates a tax payer check shall pay a penalty of $500
A CPA who prepares a tax return for a fee must
keep a completed copy of the return for a minimum of 3 years
A CPA owes a duty to
Inform the client of any errors in prior Tax returns
A client who recieves a 30 day IRS letter has what options
1) Request a conference with an appeals letter or write a protest letter
2) Do nothing and wait for the 90 day letter
The Tax payer would then have 90 days to file a petittion
When is a CPA liable to the tax client
1) Failure to file a tax return on time
2) Gross negligence or fraud resulting in losses
3) Bad advice or failure to advise clients on tax breaks
4) wrongful disclosure or use of confidential information
According to the AICPA statement of standards for Tax Services
A CPA should not recommend a position unless there is a realistic possibility of it being sustained if it is challenged
Understating a client’s tax liability due to an error in calculation
Will not result in a CPA incurring a IRS Tax penalty
What should a CPA consider before signing a Tax Return
1) Information known to the CPA from the tax return of another client
2) Information provided by the client that appears to be correct based on prior years returns
Circular 230 basics states
1) May charge a contingent fee for representing a client in a judicial case (IRS audit)
2) Limits practice before the IRS to Accountants, Attorneys and Enrolled Agents/Actuaries/Retirement plan agents and
3) Registered Tax returns preparers
