Tax Return PREPARER Responsibilities Exam Q&A

Tax Return PREPARER
Responsibilities Exam Q&A
Penalty for understatement due to Unreasonable Position - Answer-Ordinary
negligence

Greater of:
- $1,000
- 50% of income the preparer received

Penalties for understatement due to Intentional (willfull/reckless) conduct - Answer-
Greater of:
- $5,000
- 75% of income the preparer received

(more stringent since willful)

Penalty for: failure to provide copy to taxpayer - Answer-$55

Penalty for: failure to sign return - Answer-$55

Penalty for: failure to furnish PTIN - Answer-$55

Penalty for: failure to property retain records - Answer-$55

Must retain a copy of return or name/ID for clients for 3 years

Penalty for: failure to file correct information returns - Answer-$55

Must produce information return describing: name, PTIN, place of work of preparer

Penalty for: negotiation of an IRS refund check - Answer-$560

This is not allowed!

Penalty for: failure to be diligent in determining client's eligibility for the earned
income credit - Answer-$560

Due diligence includes:
- eligibility checklists
- computation worksheets
- reasonable inquiries to client
- record retention

Penalty for: aiding and abetting understatement of tax liability - Answer-Civil penalty:
$1,000 ($10,000 corporations)

Applies to tax payers and preparers and anyone who assists.