SU 1

Get a hint

A penalty applies to the portion of tax underpayment attributable to

I. Negligence or a disregard of the tax rules or regulations
II. Willful understatement of income tax

A. I only.
B. Neither I nor II.
C. II only.
D. Both I and II.

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D. Both I and II.

A penalty may be assessed when taxes are underpaid due to acting with negligence, disregarding rules and regulations, or making a willful understatement of income tax liability.

Which of the following acts, if any, constitute grounds for a tax preparer penalty?

I. Without the taxpayer's consent, the tax preparer disclosed taxpayer income tax return information under an order from a state court.
II. At the taxpayer's suggestion, the tax preparer deducted the expenses of the taxpayer's personal domestic help as a business expense on the taxpayer's individual tax return.

A. II only.
B. Both I and II.
C. Neither I nor II.
D. I only.

A. II only.

A penalty equal to the greater of $5,000 or 75% of the income derived is imposed on a tax return preparer if any part of an understatement of tax liability resulted from a willful attempt to understate the liability or from an intentional disregard of rules or regulations. A penalty will not be imposed if client information is disclosed under a court order.

Which, if any, of the following could result in penalties against an income tax return preparer?

I. Knowing or reckless disclosure or use of tax information obtained in preparing a return
II. A willful attempt to understate any client's tax liability on a return or claim for refund

A. II only.
B. Neither I nor II.
C. Both I and II.
D. I only.

C. Both I and II.

A tax return preparer who knowingly or recklessly discloses or uses tax information obtained in preparing a return is subject to criminal penalties. A penalty equal to the greater of $5,000 or 75% of the income derived or to be derived is imposed on the preparer if any part of an understatement of tax liability results from a willful attempt to understate it or from reckless or intentional disregard of rules or regulations.

The IRS requested client records from a CPA who does not have possession or control of the records. According to Treasury Circular 230, the CPA must

A. Require the client to submit the records to the IRS or withdraw from the engagement.
B. Notify the IRS of the identity of any person who, according to the CPA's belief, could have the records.
C. Obtain the records from the client and submit them to the IRS.
D. Contact all third parties associated with the records, such as banks and employers, to obtain the requested records for submission to the IRS.

B. Notify the IRS of the identity of any person who, according to the CPA's belief, could have the records.

A practitioner is required to provide information regarding the identity of persons that the practitioner reasonably believes may have possession or control of the requested documents if the practitioner does not have possession or control of the documents.

With respect to any given tax return, which of the following statements is correct?

A. The two individuals who have done the most work in preparing the return will be deemed to be the only preparers.
B. The final reviewer of a tax return is automatically considered the preparer of the return.
C. More than one person may be deemed to be a preparer of a tax return.
D. Only one person may be deemed to be a preparer of a tax return.

C. More than one person may be deemed to be a preparer of a tax return.

A tax return preparer is any person (can be more than one person) who prepares for compensation, or employs one or more persons to prepare for compensation, all or a substantial portion of any return of tax or claim for refund under the Internal Revenue Code (IRC). An example of multiple preparers is when you have a signing tax return preparer and a nonsigning tax return preparer.