EA PART 3 EXAM AND SOLUTIONS
100% CORRECT
Preparer penalty for unauthorized disclosures or use of taxpayer info (civil, not
necessarily knowing and recklessly) (6713.. lesser of the two) - Answer - ✔✔$250 each,
up to $10,000 annually max
Preparer penalty for understating tax liability due to unreasonable position that the
preparer knew about or should have known about - Answer - ✔✔Greater of $1000 or
1/2 of the preparers fee
For a disclosed position, the position needs to have at least - Answer - ✔✔Reasonable
basis
Annual minimum hours of continuing education - Answer - ✔✔Minimum of 16 hours,
and at least 2 hours must be for ethics or professional conduct. (Ethic hours can't apply
to other category, it's its own separate requirement)
CPE hours required in a 3 year enrollment cycle - Answer - ✔✔72 hours
Form 8275 - Answer - ✔✔Disclosure Statement (explain potentially questionable tax
deduction and avoid tax penalty)
Form 8275-R - Answer - ✔✔Regulation Disclosure Statement
Tax Shelters and Disclosures.. what standard must it be based on - Answer -
✔✔Substantial Authority is not good enough. When it comes to tax shelters, it needs to
be "more likely than not", or 50% likelihood
Which is higher, substantial authority or More likely than not - Answer - ✔✔More likely
than not
Section 7206 - Answer - ✔✔Fraud and False statements
(preparer willfully performs these acts)
Section 6694 - Answer - ✔✔Understatement of liability
Section 6694 understatement of liability penalties - Answer - ✔✔Unreasonable positions
- $1000 or 50% of preparer fees
, Unreasonable positions - Answer - ✔✔For undisclosed positions: position does not
have substantial authority
For disclosed positions: the position does not have reasonable basis
For tax shelters: there was not a reasonable belief that the position is more likely than
not sustained on its merits
All of these have $1000 penalty or 50% of preparer fee, whichever is greater
7206 fraud and false statement penaltys - Answer - ✔✔$250,000 (500k if corp) and up
to 3 yrs in prison (difference between 7207.. this ones more serious, signed penalty of
perjury)
Section 7207 penalty - Answer - ✔✔$10,000 (50k corp) misdemeanor, up to one yr jail
Penalty for "Willful or Reckless" Conduct (section 6694) - Answer - ✔✔Greater of
$5,000 or 75% of the income the preparer derived with respect to the tax return or
refund claim
Section 6701 - Answer - ✔✔punishes TRPs and others for aiding and abetting an
understatement of tax liability- basically providing a document that helps understate tax
Penalty is: $1000 per document (10k for corps)
section 7207 - Answer - ✔✔Fraudulent returns, statements or other documents.. this is
more broad
Section 6695- $60 penalty reasons (up to 30k a year) - Answer - ✔✔-Failure to furnish a
copy of return
-failure to sign return
-failure to furnish identifying number (PTIN)
-failure to retain copy or list
-failure to file (hold on to )correct info on a return (60 per return and 60 per item in
return)
6695- negotiation of check penalty - Answer - ✔✔$600 per check, no maximum
6695- failure to due dilligence for certain tax benefits (EIC, AOTC, CTC, ACTC, ODC,
HOH) - Answer - ✔✔$600 per failure, no maximum penalty. Note: reasonable cause
does not apply
How long to retain 8879 due diligence ? - Answer - ✔✔3 years from the latest of:
-Due of return, with out extensions
-Date return was filed
100% CORRECT
Preparer penalty for unauthorized disclosures or use of taxpayer info (civil, not
necessarily knowing and recklessly) (6713.. lesser of the two) - Answer - ✔✔$250 each,
up to $10,000 annually max
Preparer penalty for understating tax liability due to unreasonable position that the
preparer knew about or should have known about - Answer - ✔✔Greater of $1000 or
1/2 of the preparers fee
For a disclosed position, the position needs to have at least - Answer - ✔✔Reasonable
basis
Annual minimum hours of continuing education - Answer - ✔✔Minimum of 16 hours,
and at least 2 hours must be for ethics or professional conduct. (Ethic hours can't apply
to other category, it's its own separate requirement)
CPE hours required in a 3 year enrollment cycle - Answer - ✔✔72 hours
Form 8275 - Answer - ✔✔Disclosure Statement (explain potentially questionable tax
deduction and avoid tax penalty)
Form 8275-R - Answer - ✔✔Regulation Disclosure Statement
Tax Shelters and Disclosures.. what standard must it be based on - Answer -
✔✔Substantial Authority is not good enough. When it comes to tax shelters, it needs to
be "more likely than not", or 50% likelihood
Which is higher, substantial authority or More likely than not - Answer - ✔✔More likely
than not
Section 7206 - Answer - ✔✔Fraud and False statements
(preparer willfully performs these acts)
Section 6694 - Answer - ✔✔Understatement of liability
Section 6694 understatement of liability penalties - Answer - ✔✔Unreasonable positions
- $1000 or 50% of preparer fees
, Unreasonable positions - Answer - ✔✔For undisclosed positions: position does not
have substantial authority
For disclosed positions: the position does not have reasonable basis
For tax shelters: there was not a reasonable belief that the position is more likely than
not sustained on its merits
All of these have $1000 penalty or 50% of preparer fee, whichever is greater
7206 fraud and false statement penaltys - Answer - ✔✔$250,000 (500k if corp) and up
to 3 yrs in prison (difference between 7207.. this ones more serious, signed penalty of
perjury)
Section 7207 penalty - Answer - ✔✔$10,000 (50k corp) misdemeanor, up to one yr jail
Penalty for "Willful or Reckless" Conduct (section 6694) - Answer - ✔✔Greater of
$5,000 or 75% of the income the preparer derived with respect to the tax return or
refund claim
Section 6701 - Answer - ✔✔punishes TRPs and others for aiding and abetting an
understatement of tax liability- basically providing a document that helps understate tax
Penalty is: $1000 per document (10k for corps)
section 7207 - Answer - ✔✔Fraudulent returns, statements or other documents.. this is
more broad
Section 6695- $60 penalty reasons (up to 30k a year) - Answer - ✔✔-Failure to furnish a
copy of return
-failure to sign return
-failure to furnish identifying number (PTIN)
-failure to retain copy or list
-failure to file (hold on to )correct info on a return (60 per return and 60 per item in
return)
6695- negotiation of check penalty - Answer - ✔✔$600 per check, no maximum
6695- failure to due dilligence for certain tax benefits (EIC, AOTC, CTC, ACTC, ODC,
HOH) - Answer - ✔✔$600 per failure, no maximum penalty. Note: reasonable cause
does not apply
How long to retain 8879 due diligence ? - Answer - ✔✔3 years from the latest of:
-Due of return, with out extensions
-Date return was filed
