20 upheld under audit inform client of penalties

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(<20% upheld under audit) Inform client of penalties likely to apply & any errors/omissions client made. Submit records lawfully requested. Exercise due diligence & best practices in preparing, reviewing, & filing tax returns accurately. Restricted from charging the client a contingent fee, or “an unconscionable fee” for representation before the IRS & representing clients w/ conflicting interests. AICPA: Statements on Standards for Tax Service: No. 1: Tax Return Positions CPA may take a position against to IRS, must have a good faith belief that the position has a realistic probability ( > 33% ) sustained upon audit, Client should be fully informed of the risks & penalties involved. No 2: Questions on Returns make a reasonable efort to obtain appropriate answer from client to all questions on the return. No. 3: Procedural Aspects of Preparing Returns in good faith, rely w/out verification on info furnished by the client. No. 4: Estimates may use estimates received from taxpayer if it’s impractical to obtain exact data. No. 5: Recognition of Administrative Proceeding or Court Decision As facts may vary from yr to yr, not bound by an admin or judicial proceeding involving a prior yr. No. 6: Knowledge of Error : should advise client promptly upon learning of error in previously filed & provide a recommendation. Error should not be disclosed to IRS w/out the client’s consent No. 7: Advice to Clients: Use judgement to provide advice to a client profess competence & appropriately serves the client’s needs. Preparer Penalties: Unreasonable position penalty imposed if tax position is: Not disclosed on the return and there is not substantial authority ( >40% chance the position would be sustained under court review). Disclosed on the return not reasonable basis ( >20% )- Penalty is > of $1,000 or 50% of the income attribto preparing the return. Penalty for willful & reckless conduct – applies if understatement of tax liability is due to: Preparer’s willful attempt to understate liability, Reckless/intentional disregard of IRS rules. Penalty is > of $5,000 or 75% of the income attrib to preparing. $1,000 a return or doc on persons who aid in the preparation of returns they know will result in the understatement of the tax $250 for each 3rd-party disclosure or improper use of tax return data- $50 penalty for failure to sign as paid preparer $50 penalty for failure to furnish a copy to the taxpayer $500 penalty for endorsing or otherwise negotiating a check for refund of tax $500 penalty for each instance of failure to be diligent in determining the taxpayer’s eligibility for the earned income credit, child tax credit, & American opportunity credit. Privileged communication: Privilege applies only to tax advice. Can’t for taxpayer info that is intended to be disclosed on return-Can’t for matters involving criminal charges or questions brought by SEC. Tax Planning: Efective planning requires consideration for tax & non-tax. Efective tax planning max the taxpayer’s after-tax wealth & achieving the taxpayer’s non-tax goals. 3 parties to every transaction: taxpayer, other party, & the govt. 3 basic planning strategies: timing, income

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