Penalties

Question 1

Understatement due to Unreasonable Position (preparer)

Answer 1

Greater of $1000 or 50% of income preparer received

Question 2

Understatement due to Willful or Reckless Conduct (preparer)

Answer 2

Greater of $5,000 or 75% of income preparer derived

Question 3

Failure to provide copy to tax payer

Answer 3

$50 for each failure, maximum of $27,000 per year

Question 4

Failure to furnish preparer’s identification number

Answer 4

$50 for each failure, maximum of $27,000 per year

Question 5

Failure to properly retain records

Answer 5

Must keep records for 3 years.

$50 for each failure, maximum of $27,000 per year

Question 6

Failure to file correct information returns

Answer 6

$50 for each failure, maximum of $27,000 per year

Question 7

Endorsing a IRS refund check

Answer 7

$545 for each check endorsed

Question 8

Failure to use due diligence in determining client’s eligibility for eared income credit

Answer 8

$545 for each failure

Question 9

Aiding and Abetting Understatement of Tax liability

Answer 9

Applies to anyone, not just preparers.

$1,000 for persons, $10,000 for corporations

Question 10

Wrongful disclosure/use of tax return information

Answer 10

Civil penalty: $250 for each disclosure, maximum of $10,000

+ Misdemeanor: Max 1 year imprisonment and max $1,000 fine

Question 11

Criminal penalty of making a false or fraudulent statement relating to a tax return

Answer 11

Any person, not just a tax return preparer.
Maximum fine of $100,000
Maximum imprisonment of 3 years

Question 12

Failure to file taxpayer penalty

Answer 12

5% of tax amount due each month return is late

Reduced by the amount of failure-to-pay penalty

Question 13

Failure to pay taxpayer penalty

Answer 13

0.5% per month the tax is paid late
If filing date is extended, and 90% is paid by April 15 and the remainder is paid by the extended filing date, penalty is waived, but interest is still due.

Question 14

Understatement of tax accuracy related penalties (taxpayer)

Answer 14

20% of understatement of tax

Same penalty for substantial understatement, negligently understated, substantial valuation misstatement

Question 15

Fraud/ tax evasion (taxpayer)

Answer 15

Civil: minimum 75% of understatement of tax
Criminal: Maximum of $100,000, $500,000 for corporations

Question 16

Substantial understatement of tax thresholds

Answer 16

Individual: Greater of $5000 or 10% of correct tax

C Corporation: Greater of $10,000 or 10% of the correct tax, maximum threshold of $10 million