Scan0097.rtf

MODULE 37 TAXES: GIFT AND ESTATE a court, Additionally, a return preparer wiU be subject to penalty if any part of an understatement of liability with respect to a return or refund claim is due to the preparer's willful attempt to understate tax liability, or to any reckless or intentional disregard of rules and regulations, 43. (d) The requirement is to determine Water's responsibility regarding Vee' s unfiled 2003 income tax return, A CP A should promptly inform the client upon becoming aware of the client's failure to file a required return for a prior year, However, the CPA is not obligated to inform the IRS and the CPA may not do so without the client's permission, except where required by law, If the CP A is requested to prepare the current year's return (2008) and the client has nol t. "CD tion to file tJie Rt:t'mz7! Eorr dAc C3Tficr year (2()()3),

the CPA should consider whether to withdraw from preparing the current year's return and whether to continue a professional relationship with the client. Also, note that the normal statue of limitations for the assessment of a tax deficiency is three years after the due date of the return or three years after the return is filed, whichever is later. Thus, the statute of limitations is still open with regard to 2003 since there is no time limit for the assessment of tax if no tax return was filed,

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of tax return information without the taxpayer's consent. Generally, a tax return preparer who knowingly or recklessly discloses any information furnished to him in connection with the preparation of a return, or uses any such information other than to prepare, or to assist in preparing a return, is guilty of a misdemeanor, and upon conviction may be subject to fine and/or imprisonment. A limited exception permits the disclosure or use of tax return information for purposes of being evaluated by quality or peer reviews. 49. (d) A penalty of up to $1,000 may be assessed against a tax return preparer who knowingly or recklessly discloses or uses any tax return information other than to prepare, or assist in preparing a return. Additionally, a penalty equal to the greater of $5,000, or 50% of the income to be derived by the return preparer from the return or refund claim will be assessed against a return preparer who willfully attempts to understate any client's tax liability on a return or claim for refund, 50. (a) Under Internal Revenue Code Section 6695(f) any person who is an income tax return preparer who endorses or otherwise negotiates any check which is issued to a taxpayer shall pay a penalty of $500.

44. (c) The requirement is to determine which action a tax return preparer must take to avoid tax preparer penalties for a return's understated tax liability due to a taxpayer's intentional disregard of regulations, A return preparer may, in good faith, rely without verification upon information furnished by the client or by third parties, and is not required to audit, examine, or review books, records, or documents in order to independently verify the taxpayer's information, However, the preparer should not ignore the implications of information furnished and should make reasonable inquiries if the furnished information appears incorrect, incomplete, or inconsistent.

51. (b) A CP A who prepares a federal income tax return for a fee must keep a completed copy of the return for a minimum of three years. Answer (a) is incorrect because prior to preparing a tax return the CP A would not be required to file certain notices and powers of attorney with the IRS. Answer (c) is incorrect because a CPA' would only be required to ask the client if documentation of these expenses exists. The CPA would not have to actually receive and examine this documentation. Answer (d) is incorrect because the CPA's federal identification number would be required on any federal income tax return prepared for a fee.

45. (d) According to the Statements on Standards for Tax Services, in preparing a tax return a CP A may in good faith rely upon information furnished by the client or third parties without further verification. .

client that there are errors in a previously filed tax return so that the client may file an amended tax return. Answer (a) is incorrect because the client chooses hislher own CP A. Answer (c) is incorrect because CPAs are not required to disclose fraud by the client but are usually engaged to give an opinion on the fairness of the financial statements.' Answer (d) is incorrect because although the CPA has a duty to perform an audit in accordance with GAAS and consistent with GAAP, the CPA is not under a duty to discover fraud in the audit unless the fraud would have been uncovered in the process of an ordinary audit or unless the CP A agreed to greater responsibility to uncover fraud.

46. (d) The requirement is to determine the correct statement regarding the imposition of a preparer penalty for understated corporate tax liability. A return preparer may in good faith rely without verification upon information furnished, and is not required to audit, examine, or review books, records, or documents in order to independently verify a taxpayer's information. However, the preparer should not ignore the implications of information furnished and should make reasonable inquiries if information appears incorrect, incomplete, or inconsistent. 47. (a) A tax return preparer is subject to a penalty for knowingly or recklessly disclosing corporate tax return information, if the disclosure is made to enable a third party to solicit business from the taxpayer. Taxpayer return information can be disclosed by the preparer without penalty if the disclosure is made to enable the tax processor to electronically compute the taxpayer's liability, for purposes of the tax return preparer's peer review, or if the disclosure is made under an administrative order by a state agency that registers tax return preparers. 48. Cc) The requirement is to determine the correct statement regarding a tax return preparer's disclosure or use

52. (b) A CPA.generally does owe a duty to inform a

53. (b) If the IRS issues a thirty-day letter to an individual taxpayer who wishes to dispute the assessment, the taxpayer may ignore the thirty-day letter and wait to receive a ninety-day letter. Answer (a) is incorrect because a taxpayer must receive a ninety-day letter before a petition can be filed in Tax Court. Answer (c) is incorrect because a taxpayer has a thirty-day period during which to file a written protest. Answer (d) is incorrect because a taxpayer is not required to pay the taxes and commence an action in federal district court. Generally, upon the receipt of a thirty-day letter, a taxpayer who wishes to dispute the fin'dings has thirty days to (1) request a conference with an appeals officer or file a written protest letter, or (2) may elect to do nothing during the thirty-day period and await a ninety-day letter. The tax-