professional responsibilities and tax preparer penalties Flashcards Preview

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Flashcards in professional responsibilities and tax preparer penalties Deck (19):


The IRS does not impose a penalty on a CPA for making an error in calculating a
tax return.



A CPA must sign tax returns that the CPA prepares. Willful violation of this rule
can result in imposition of a penalty


revoke CPA license ( different ways and from different sections within the industry)

Only a state board of accountancy has the authority to suspend or revoke a CPA'S license to practice public accounting. The SEC may only suspend or revoke a CPA'S authority to practice before the SEC with respect to public companiesThe AICPA and a state society may only suspend or revoke a CPA'S
membership in the AICPA or the state society, respectively.


Disclosure of information

An accountant may disclose confidential client information to any party if the client specifically consents to the release of information. Generally, confidential client information should not be disclosed to a court unless it is subpoenaed or the client consents


disclosure of info

The CPA generally cannot give out a client's confidential information to anyone
without the client's consent. However, exceptions are generally made for court subpoenas and state CPA
society quality control panels.


Copy of return

The CPA must retain a completed copy of each return for three years after the
close of the return period (IRC Section 6107)



Tax preparer penalties may be assessed for improper use or disclosure of
information. Acceptable circumstances for disclosure include:
1. Computer processing
2. Peer review
3. Administrative order (court order)


information retained by tax preparer

For each tax return prepared, a tax preparer must retain either the taxpayer's name
and identification number, or a copy of the return.


due diligence

The due diligence requirements address eligibility checklists, computation worksheets, and record


burden pf proof

With respect to the penalty for aiding and abetting an understatement of tax liability
on a tax return, the burden of proof shifts to the IRS from the taxpayer


Which of the following statements is correct for the disciplinary power of the state boards of

The three broad categories of misconduct are misconduct while performing
accounting services, misconduct outside the scope of performing accounting services, and a criminal


state board

The state board of accountancy can conduct a formal hearing for possible
disciplinary action



Membership in the AICPA can be suspended or terminated without a hearing forvcertain offenses. These offenses include but are not limited to (1) proof of conviction of a crimevpunishable by imprisonment for more than one year, (2) proof of conviction for willful failure to file anyvincome tax return, (3) proof of conviction for filing a false or fraudulent income tax return or aiding in thevpreparation of a false or fraudulent income tax return of a client


tax prep responsibilities

Rule: A compensated preparer is liable for a penalty if his understatement of taxpayer liability on a return
or claim for refund is due to negligent or intentional disregard of rules and regulations. A preparer is not
required to obtain supporting documentation unless he has reason to suspect the accuracy of the
taxpayer's figures; however, the preparer must make reasonable inquiries if the taxpayer's information
appears incorrect or incomplete


tax preparer only if received compensation

. Joe is the trustee of the trust. He is not a tax return preparer because he is not
preparing the return for compensation.



A tax preparer is liable for the penalty for "willful or reckless" conduct (which is the
greater of $5,000 or 50 percent of the income derived with respect to the tax return or refund claim on
which the "willful or reckless" conduct exercised) for conduct that is either 1) a willful attempt to
understate the tax liability; or 2) a reckless or intentional disregard of tax rules and regulations.
Knowingly deducting personal expenses as business expenses could constitute such "willful or reckless"


License fees

t. State boards of accountancy have the sole power to license CPAs; thus, the only
body to which the CPA must pay fees in order to maintain the CPA license is to the state board of
accountancy for the state in which the CPA is licensed


more than one preparer

More than one person can be deemed to be a preparer of a tax return because
anyone who prepares a substantial portion of a return will be treated as a preparer


CPE requirements

State boards of accountancy have the sole power to license certified public
accountants and thus have the sole responsibility for determining the continuing professional education
requirements for certified public accountants practicing in their states.