I - Ethics, Professional Responsibilities, Federal Tax Procedures Flashcards
Circular 230 SubPar A Section 103 provides that a certified public accountant who is not suspended or disbarred..
may practice by filing a written declaration that they’re qualified and is authorized to represent
Who may practice before the IRS?
attorneys cpa enrolled agent enrolled actuary enrolled retirement plan agents (limited to employee plans)
Practicing before the IRS includes
preparing documents filing documents corresponding w/irs written advice with regard to transactions that have potential for tax avoidance or evasion representing client
what section for contingent fees
section 10.27
when can contingent fee be charged
IRS examination or challenge to original tax return or amended
claim for refund filed (only for interest and penalties)
when representing client in judicial proceedings
Circular 230 Subpart C Section 10.50
monetary penalty on practitioners. max penalty 100% gross income, can be added to the 50% penalty of gross income from Section 6694
Circular 230 Subpart C Section 10.51
acts of disreputable conduct - includes conviction of crimes, willfully evading taxes, being disbarred
Which section is understatement of taxpayer liability
Section 6694
Section 6694 (a) punishes understatement for:
unreasonable position = if no substantial authority = <40% chance of being challenged
penalty is greater of 1k or 50% income
Section 6694(b) punishes understatement for:
willful or reckless understatement.
Penalty is greater of 5K or 75% income
which section abuses TRPs for abusive tax shelters
Section 6700.
Punish if promote, organize or participate in, engage in gross overvaluation (2x)
3 unreasonable positions
no substantial authority (40%) for position
no reasonable basis (20%) for disclosed position
no more likely than not (50%) for tax shelter
What is the penalty for fraudulent understatement
75% of understatement
a substantial understatement on an individual return =
greater of 10% of the tax or 5k
a substantial understatement for a c corp
lesser of 10% of tax, 10k, or 10M
Form used to disclose a tax position
form 8275 or 8275-R
a plaintiff must prove the following elements in order to win a breach of contract suit:
1 - existence of an enforceable contract (oral contract usually ok)
2 - plaintiff client complied with contracted obligations
3 - defendant accountant breached the contract (may be intentional)
4 - damages were caused by the breach
burden of proof needed for most civil cases
preponderance of evidence (more likely true tan not true > 50%)
statute of limitations for breach of contract
oral = 2 years written = 4 years from breach
3 defenses to breach of contract claims
statue of limitations, justifiable breach, substantial performance
4 elements of a cause of action for professional negligence
1 - accountant owed a duty of care to the plaintiff
2- defendant breached the standard of care
3 - breach proximately caused injury
4 - client suffered damages
how does a breach proximately cause an injury?
2 parts: factual and legal
“but for” the accountant’s breach, loss would not have occured. and if injury was reasonably foree result of breach
the main difference between negligent misrepresentation claim and negligence claim:
plaintiff relied on the information
basic elements of fraud claim
1 - misrepresentation or omission of fact (includes false statement of expert opinion)
2 - materiality
3 - accountant knew or recklessly endangered the falsity (scienter)
4 - there was reasonable reliance
5 - damages
other word for knew or recklessly disregarded the falsity
scienter = knowledge = actual fraud
reckless disregard or gross negligence = constructive fraud
if fraud, can you have both types of damages?
yes both compensatory and punitive damages