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ACC483_COOKE_WEEK2 - Explain Under the Small Business and...

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To whom does Circular 230 apply? This applies to tax practitioners who may include attorneys and accountants who provide written advice in emails, letters, legal opinions or memoranda’s. What are the suggested best practices for tax advisors? (1) Communicating clearly with the client regarding the terms of the engagement and the form and scope of the advice or assistance to be rendered; (2) Establishing the relevant facts, including evaluating the reasonableness of any assumptions or representations; (3) Relating applicable law, including potentially applicable judicial doctrines, to the relevant facts; (4) Arriving at a conclusion supported by the law and the facts; (5) Advising the client regarding the import of the conclusions reached; and (6) Acting fairly and with integrity in practice before the IRS. (IRS, 2005) May the IRS penalize practitioners under Circular 230? If so, in what ways?
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Unformatted text preview: Explain. Under the Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 (SBWOTA), enacted on May 25, 2007, a new level of return preparer penalties under Sec. 6694(a) was established for tax returns prepared after that date. The new penalties cover both signing and nonsigning preparers (under Sec. 7701(a) (36)) of all tax returns (including claims for refunds and amended returns) such as gift and estate tax returns, employment and excise tax returns, and generation-skipping transfer tax returns. Sec. 6694(a), as amended, increases the penalty from $250 to the greater of $1,000 or 50% of the income that the preparer would derive (or to be derived) from the claim or tax return for which the penalty was imposed (Bruce E. May, 2008). 1040 order Label Filing status Exemptions Income AGI Tax and credits Payments Refund Signature Other Taxes...
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