Chapter 12, Problem 9P

a.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The imposed penalty on tax return preparer.

Answer to Problem 9P

The tax return preparer will be charged with a penalty higher than half of the derived income fraudulently or $1,000 using an undisclosed or unrealistic income position.

Explanation of Solution

As per tax laws, any person who prepares tax returns for no income group of taxpayers such as excise returns, file returns to obtain compensation is a ‘tax return preparers’. This tax law provides for several penalties on these tax return preparers in helping and regulating this industry by the IRS. Some of the penalties are mentioned below:

• $50 in case preparer failing in signing a tax return or failed in giving PIN, $26,500 maximum annually.
• $50 each on non-compliance of maintaining copies of prepared returns or a list of client taxpayers, $26,500 maximum annually.
• $50 if fails to give a copy of tax return to the taxpayer, $26,500 maximum annually.
• $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.
• Higher of half of the derived income fraudulently or $1,000 using undisclosed or unrealistic income position.
• Higher of $5,000 or three-fourth of the income earned for every return of which is understated or prepared return intentionally, lowered by the $1,000 amount or half penalty for that negligence.
• $1,000 or $10,000 for corporations return for every tax return or proof filed or abet a client in acknowledging him of tax liability.
• For every distinct activity like interest sale, entity organization, etc., $1,000 penalty or the full amount of derived gross income from the promoter’s as an ‘abusive tax shelter’, whichever is less.

In the given situation, the tax return preparer understated the tax liability frivolously does not disclose the same.

Therefore, in this case, the tax return preparer will be charged with a penalty higher than half of the derived income fraudulently or $1,000 using an undisclosed or unrealistic income position.

b.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The imposed penalty on tax return preparer.

Answer to Problem 9P

The tax return preparer will be charged with a penalty of $\boxed{\$50}$ .

Explanation of Solution

As per tax laws, any person who prepares tax returns for no income group of taxpayers such as excise returns, file returns to obtain compensation is a ‘tax return preparers’. This tax law provides for several penalties on these tax return preparers in helping and regulating this industry by the IRS. Some of the penalties are mentioned below:

• $50 in case preparer failing in signing a tax return or failed in giving PIN, $26,500 maximum annually.
• $50 each on non-compliance of maintaining copies of prepared returns or a list of client taxpayers, $26,500 maximum annually.
• $50 if fails to give a copy of tax return to the taxpayer, $26,500 maximum annually.
• $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.
• Higher of half of the derived income fraudulently or $1,000 using undisclosed or unrealistic income position.
• Higher of $5,000 or three-fourth of the income earned for every return of which is understated or prepared return intentionally, lowered by the $1,000 amount or half penalty for that negligence.
• $1,000 or $10,000 for corporations return for every tax return or proof filed or abet a client in acknowledging him of tax liability.
• For every distinct activity like interest sale, entity organization, etc., $1,000 penalty or the full amount of derived gross income from the promoter’s as an ‘abusive tax shelter’, whichever is less.

In the given situation, the tax return preparer fails to furnish his identifying number.

Therefore, in this case, the tax return preparer will be charged with a penalty of $\boxed{\$50}$ .

c.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The imposed penalty on tax return preparer.

Answer to Problem 9P

The tax return preparer will be charged with a penalty of $1,000 or $10,000 for the corporation's return for every tax return or proof filed or abet a client in acknowledging him of tax liability.

Explanation of Solution

As per tax laws, any person who prepares tax returns for no income group of taxpayers such as excise returns, file returns to obtain compensation is a ‘tax return preparers’. This tax law provides for several penalties on these tax return preparers in helping and regulating this industry by the IRS. Some of the penalties are mentioned below:

• $50 in case preparer failing in signing a tax return or failed in giving PIN, $26,500 maximum annually.
• $50 each on non-compliance of maintaining copies of prepared returns or a list of client taxpayers, $26,500 maximum annually.
• $50 if fails to give a copy of tax return to the taxpayer, $26,500 maximum annually.
• $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.
• Higher of half of the derived income fraudulently or $1,000 using undisclosed or unrealistic income position.
• Higher of $5,000 or three-fourth of the income earned for every return of which is understated or prepared return intentionally, lowered by the $1,000 amount or half penalty for that negligence.
• $1,000 or $10,000 for corporations return for every tax return or proof filed or abet a client in acknowledging him of tax liability.
• For every distinct activity like interest sale, entity organization, etc., $1,000 penalty or the full amount of derived gross income from the promoter’s as an ‘abusive tax shelter’, whichever is less.

In the given situation, the tax return preparer understated the tax liability of a taxpayer willfully.

Therefore, in this case, the tax return preparer will be charged with a penalty of $1,000 or $10,000 for the corporation's return for every tax return or proof filed or abet a client in acknowledging him of tax liability.

d.

To determine

Introduction: The Internal Revenue Service (IRS) has a wide range of functions and responsibilities such as look after of administration of federal taxes, and to perform duties like estimating, determining, and collecting taxes in the form of revenue to the government, it also performs tax return audits and imposes penal provisions. It is the office within the revenue department. The task of the department is to provide the taxpayers with quality service by assisting them in proving knowledge content so the taxpayers understand their tax responsibility and pay taxes timely. It is important in maintaining and establishing tax laws.

The imposed penalty on tax return preparer.

Answer to Problem 9P

The tax return preparer will be charged with a penalty of $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.

Explanation of Solution

As per tax laws, any person who prepares tax returns for no income group of taxpayers such as excise returns, file returns to obtain compensation is a ‘tax return preparers’. This tax law provides for several penalties on these tax return preparers in helping and regulating this industry by the IRS. Some of the penalties are mentioned below:

• $50 in case preparer failing in signing a tax return or failed in giving PIN, $26,500 maximum annually.
• $50 each on non-compliance of maintaining copies of prepared returns or a list of client taxpayers, $26,500 maximum annually.
• $50 if fails to give a copy of tax return to the taxpayer, $26,500 maximum annually.
• $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.
• Higher of half of the derived income fraudulently or $1,000 using undisclosed or unrealistic income position.
• Higher of $5,000 or three-fourth of the income earned for every return of which is understated or prepared return intentionally, lowered by the $1,000 amount or half penalty for that negligence.
• $1,000 or $10,000 for corporations return for every tax return or proof filed or abet a client in acknowledging him of tax liability.
• For every distinct activity like interest sale, entity organization, etc., $1,000 penalty or the full amount of derived gross income from the promoter’s as an ‘abusive tax shelter’, whichever is less.

In the given situation, the tax return preparer understated the tax liability of a taxpayer willfully.

Therefore, in this case, the tax return preparer will be charged with a penalty of $530 if tries to cash the issued taxpayer's refund or if failed to claim any credit, $26,500 maximum annually.