A revenue agent determined that Ms. Osaka underpaid income tax by $48,100 and concluded that $9,200 was caused by inadequate record keeping while the remainder was caused by an understandable misapplication of a complex rule of law. Required: Compute the negligence penalty that the revenue agent can impose on Ms. Osaka. Accuracy-related penalty
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- Taxpayers face the risk of the 20% accuracy-related penalty when they take return positions that are too aggressive or otherwise problematic... (a) Section 6662 itself contains no escape mechanisms whatsoever, so a tax-payer’s only available defense against the penalty is “good faith and reasonable cause” per § 6664(c). (b) Section 6662 contains two stated triggers, “negligence” and “substantial understatement,” and the IRS cannot assert the penalty unless both are present. (c) Unless a taxpayer ultimately wins with respect to the underlying tax issue(s) (the asserted tax deficiency), it is impossible to win on the penalty issue. (d) If a taxpayer does win with respect to the underlying tax issue(s), the penalty assertion becomes moot.Jack made a mathematical mistake in computing her tax liability. Which audit program will likely catch Jack's mistake? A. DIF system B. Mathematical correction C. Document perfection D. Information matching E. None of theseKlawz received a 1099-DIV from Nike Corporation for $1,000 and a 1099-INT from his Bank of $500. If Klawz's neglects to enter the 1099-DIV on his US Income Tax Return (Form 1040), which audit program likely adjusted Klawz's tax return? Document perfection. None of the choices are correct. Deduction Detective. Information matching. DIF system.
- According to the AICPA's Statements on Standards for Tax Services, what duties does the tax practitioner owe the client? (If an input field is not used leave the input field(s) empty.) not to disclose tax-related errors without the client's consent. to inform the client of corrective measures to be taken. C to inform the client of errors in a previously filed tax return. to inform the client of how the client can avoid a penalty through disclosure. to inform the client of the potential adverse consequences of a tax return position. to inquire of the client when information provided by him or her appears incorrect, incomplete, or inconsistent on its face. to inquire of the client when the client must satisfy conditions to take a deduction. to instruct the client to file an extension based on refunds that are expected. to instruct the client whether or not to file a tax return.Which of the following statements about the Commissioner’s powers is most correct? a. The Commissioner cannot request a taxpayer to provide information in writing. b. The Commissioner can remove documents from a taxpayer’s premises. c. The Commissioner is entitled to access a taxpayer’s premises at any reasonable time without notice. d. The Commissioner needs to obtain a search warrant in order to enter a taxpayer’s premises.For each of the following situations, indicate the amount of the penalty that could be imposed on the tax return preparer: a. A tax return preparer understates the taxpayer's tax liability with a frivolous position and does not disclose the position. The greater of $ percent of the income derived by the tax preparer for an undisclosed unrealistic position. or b. A tax return preparer fails to furnish his identifying number. c. A tax return preparer aids a taxpayer (an individual) in understating a tax liability. d. A tax return preparer endorses and cashes a client's tax refund check.
- A former longstanding client of an accounting practice is being investigated by the tax authorities. The former client requests the assistance of the practice in representing them. The client promises that, if the outcome is favourable, he will pay a substantial fee and re-appoint the practice as his accountants in the future. (Any tax payable will be deducted from the fee.) Which THREE threats to the fundamental principles are involved? OSelf-review OSelf interest O Intimidation OFamiliarity AdvocacyA tax return client was audited for a prior year return and assessed a tax deficiency because a material deduction was disallowed. Nevertheless, the client insists on taking the very same kind of deduction on this year’s return... (a) A CPA absolutely may not prepare or sign the client’s return for this year un-less it conforms to the audit result for the prior year. (b) A CPA may prepare and sign the client’s return for this year claiming a de-duction that previously was disallowed if the CPA determines as a matter of in-dependent professional judgment that the deduction is proper. (c) A CPA may prepare and sign the client’s return for this year claiming a de-duction that previously was disallowed if the CPA receives a formal tax opinion from a law firm or from an unaffiliated CPA affirming that it is more likely than not that the deduction would be sustained on its merits if litigated.alculator Which of the following is not a preparer penalty? a.Tax preparers may be assessed a penalty for endorsing or cashing a refund check issued to a taxpayer. b.Tax preparers may be assessed a penalty for failing to give the taxpayer the preparer's workpapers. c.Tax preparers may be assessed a penalty for failing to keep a copy of the prepared return. d.Tax preparers may be assessed a penalty for failing to sign a tax return.
- Taxpayers face the risk of the 20% § 6662 accuracy-related penalty when they take too-aggressive return positions. Which of the following generally would not be an adequate defense against the IRS’s assertion of that penalty? (a) Establishing that the taxpayer had either (i) a “reasonable basis” (if the posi-tion was adequately disclosed) or (ii) “substantial authority” for the position when taken. (b) Establishing that the taxpayer used TurboTax or other commercial software in preparing the return. (c) Establishing that the taxpayer had hired and paid a reputable and experienc-ed CPA to prepare the return and had provided all relevant information to that CPA. (d) Winning on the underlying substantive issue(s) – i.e., successfully defending the return as filed (no deficiency, no penalty). (e) Actually, a taxpayer cannot escape the accuracy-related penalty once the IRS asserts it.An audit client is being sued for $500,000 for discriminatory hiring practices. Indicate the appropriate action the auditor should take for each of the following independent responses to the letter of audit inquiry: c. The lawyer stated that there is a reasonable possibility that the client will lose. The client disclosed this situation, but did not accrue a loss.You are assisting a client with a transaction that produces a most favorable tax result. The client told you the outcome is dependent on one court case. What should you do? a. Nothing. Your due diligence obligations allow you to rely in good faith on information furnished to you by the client; you are permitted to rely on the client's judgment. 6. Check with the client's auditor to ensure the numbers are valid; then you can recalculate intended tax benefits. c. Help the client by getting a head start on the tax return presentation of the transaction; the better the presentation, the less likely it will be audited by the IRS. d. Analyze the case to make sure the holding has not been reversed, the client's facts are similar to those described in the case, and the law cited in the case is still valid.