692
return preparer who
70. (a) A tax return preparer is
subject to a penalty for
knowingly or recklessly disclosing
corporate tax return in-
formation, if the disclosure is made
to enable a third party to
solicit business from the taxpayer.
Taxpayer return infor-
mation can be disclosed by the
preparer without penalty if
the disclosure is made to enable the
tax processor to elec-
tronically 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.
71. (c) The requirement is to
determine the correct ,
statement regarding a tax return
preparer's disclosure or use
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 informa-
tion other than to prepare, or to
assist in preparing a return,
) is incorrect because although the CPA has a duty to
is guilty of a misdemeanor, and rm
upon conviction may be with GAAP, the CPA is not under a duty to discover fraud
subject to fine and/or audit unless the fraud would have been uncovered in
imprisonment. A limited
exception
permits the disclosure or use of
tax return information for
purposes of being evaluated by
quality or peer reviews.
72. (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 pen-
alty 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
MODULE 40 TAXES: GIFT AND ESTATE
willfully attempts to understate any client's tax liability on the process of an ordinary
a audit or unless the CP A agreed
return or claim for refund. to
greater responsibility to
73. (a) Under Internal Revenue Code Section 6695(f) uncover fraud.
any person who is an income tax return preparer who en-
dorses or otherwise negotiates any check which is issued vid-
to a ment, the tax-
taxpayer shall pay a penalty of $500. letter and wait to receive a
incorrect because a taxpayer
74. (b) A CPA who prepares a federal income tax return
letter before a petition can be filed
for a fee must keep a completed copy of the return for a a taxpayer has
ect because
minimum of three years. Answer (a) is incorrect because le a written protest.
prior to preparing a tax return the CP A would not payer be re-is not required to
quired to file certain notices and powers of attorney
ction inwith
federal district
the
IRS. Answer (c) is incorrect because a CPA would only
be Generally, .upon the
required to ask the client if documentation of these receipt of a thirty-day letter, a
expenses tax-
exists. The CPA would not have to actually receive and payer who wishes to dispute the
examine this documentation. Answer (d) is incorrect be- findings has thirty days to
cause the CP A's federal identification number would be (1) request a conference with an
required on any federal income tax return prepared for a appeals officer or file a
fee. written protest letter, or (2) may
elect to do nothing during
75. (b) A CPA generally does owe a duty to inform a the thirty-day period and await
client that there are errors in a previously filed tax return a ninety-day letter. The tax-
so payer would then have ninety
that the client may file an amended tax return. Answer (a) days to file a petition with the
is Tax Court. Alternatively, a
incorrect because the client chooses hislher own CP A. taxpayer may choose to pay the
An-
swer (c) is incorrect because CPAs are not required to dis- additional taxes and file a claim
for refund. When the re-
close fraud by the client but are usually engaged to give fund claim is disallowed, the
an taxpayer could then commence
opinion on the fairness of the financial statements. An- an action in federal district
court.
an audit in accordance with GAAS and consistent 77. (c) A CPA will be liable to a
tax client for damages
resulting from the following
activities: (1) failure to file a
client's return on a timely basis,
(2) gross negligence or
fraudulent conduct resulting in
client losses, (3) erroneous
advice or failure to advise
client of certain tax elections,
and
(4) wrongful disclosure or use
of confidential information.
A CP A will not be liable to a
tax client for refusing to sign a
client's request for a filing
extension, therefore answer (c)
is
correct.
78. (b) According to the
AICPA Statements on Stan-
dards for Tax Services, a CP A
sho Therefore, answer (d) is incorrect. income tax return
uld Also, a CPA preparers who fail to sign
not should advise the client of the a
reco potential penalty conse- return, unless the failure is
mm quences of any recommended tax due to reasonable cause.
end position. Therefore, an- An-
a swer (c) is incorrect. Answer (a) is swer (d) is incorrect
po- incorrect as a CPA may because IRe §6695(f)
sitio not recommend a position that is imposes a $500
n frivolous even if the posi- penalty upon income tax
unle tion is adequately disclosed on the return preparers who
ss return. endorse or
ther otherwise negotiate a
e is 79. (a) While performing services client's tax refund checks.
a for a client, a CPA There is no
reali may become aware of an error in a code section imposing a
stic previously filed return. penalty for the
poss The CPA should advise the client understating of a
ibili of the error (as required by client's tax liability due to
ty the Statements on Standards for an error in calculation.
of it Tax Services) and the
bein measures to be taken. It is the 82. (c) A ePA should
g client's responsibility to de- consider both: (1)
sus- cide whether to correct the error. In information
the event that the client actually known to the ePA
tain does not correct an error, or agree from the tax return of
ed to take the necessary steps another
if it to change from an erroneous client; and (2) information
is method of accounting, the CP A provided by the client that
chal should consider whether to ap-
leng continue a professional relation- pears to be correct based on
ed. ship with the client. the client's returns from
Furt prior
her 80. (b) A CPA may in good faith years. In preparing or
mor rely without verifica- signing a return, a Cl' A
e, a tion upon information furnished may in good
CP by the client when prepar- faith rely without
A ing the client's tax return. verification upon
sho However, the CPA should not information furnished by
uld ignore implications of the client or by third
not information furnished and should parties. However, the ePA
prep make reasonable inquiries if should not
are information appears incorrect, ignore the implications of
or incomplete, or inconsistent. information furnished and
sign should
an 81. (c) Answer (a) is incorrect make reasonable inquires if
inco because IRe §6695(a) the information furnished
me imposes a $50 penalty upon ap-
tax income tax return preparers who pears to be incorrect,
retu fail to furnish a copy of the return incomplete, or inconsistent
rn if to the taxpayer. An- either on its
the face or on the basis of other
CP swe facts known to the Cl' A.
A r
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ws is
that inc
the orre
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rn bec
take aus
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posi IRe
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that 95(
will b)
not imp
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aine $50
d if
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leng upo
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