105 SURGENT STUDY GUIDE 104 (4112)

Question 1

4112.01

Answer 1

A compensated tax return preparer can be liable for civil and criminal penalties for negligently or intentionally understating a taxpayer’s liability.

Question 2

4112.02

Answer 2

A compensated preparer can be liable for the greater of $1,000 or a 50% penalty of income derived (first-tier penalty) for each tax return or claim for refund that understates the taxpayer’s liability due to unreasonable positions. There is a second-tier penalty of $5,000 or 75% penalty of income derived if the preparer willfully or recklessly understated the liability. This penalty applies if the preparer did the following:

-Understated tax liability by taking a position that does not have a realistic possibility of being sustained
-Knew or should have known of this position
-Did not disclose the position in the return or an attachment to the return

Question 3

4112.03

Answer 3

The following are some of the compensated tax return preparer’s requirements under the Internal Revenue Code; under Title 26, failure to comply can result in a penalty of $55 for each failure, with a maximum penalty imposed on any tax return preparer not to exceed $28,000 (for calendar year 2023) in a return period:

-Sign the return, and give the address and IRS identification number of self or employer.
-Furnish the taxpayer a copy of the prepared return no later than the time the original return is presented for signing.
Example: J, a return preparer, fails to send copies to all clients. J will be penalized $55 for each client, up to $28,000 total for a calendar year.
-Maintain a file of returns and log of all returns prepared for three years following the close of the return period. The penalty assessed for failure to comply with the requirements of sections a.–b. is $55 per occurrence. The penalty will not apply if the failure is due to reasonable cause and not to willful neglect.
-Do not cash another person’s tax refund check. A penalty of $560 is assessable against a preparer who violates this provision.

Question 4

4112.04

Answer 4

Criminal penalties can be imposed for the following:

Tax evasion
Perjury on a tax return
Bribery of an IRS employee