Accuracy and preparer penalties are strict under new regs

Article Abstract:

Limits outlined in the final Regulations issued by the IRS on accuracy-related and return preparer penalties provide both the taxpayer and the preparer adequate guidance on such penalties. TD 8381 deals with accuracy-related penalties and is applicable to the taxpayer; TD 8382 deals with the return preparer penalty for unrealistic positions that cause understatements and is applicable to the person who prepared the taxpayer's return for compensation. Although the issued Regulations are generally stricter, they are streamlined and clarify many limits for both the taxpayer and the preparer. TD 8382 specifically presents a new preparer liability standard in the form of realistic possibility of success.

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A gift from a tax debtor may have a tax price tag

Article Abstract:

Section 6901 of the Internal Revenue Code requires transferee liability to be based 'at law or in equity' and furnishes the IRS with a process that permits the agency to collect the transferee's tax. Transferee liability applies to estate beneficiaries, shareholders, donees to charities, or any person liable for the estate tax of the transferor in cases where assets received are lower than fair market prices. The IRS's right to collect from the transferor covers a wide scope, as is evident in the inclusion of minor actions such as the overpayment of corporate assets to a stockholder.

Courts, Cases, Transfer taxes, Revenue, United States. Tax Court

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Furnishing advice may subject practitioners to preparer penalties

Article Abstract:

Practitioners should carefully determine if the tax advice they provide clients could be considered as amounting to return preparation. This is necessary in the light of the substantial preparer penalties that can be imposed on them by the IRS even if they were not responsible for directly preparing the return itself. These preparer penalties are imposed in cases when returns include unrealistic positions or understatement of taxes that have been wilfully made. Practitioners may refer to Section 7701(a)(36) to ascertain if they could be considered tax preparers as defined by the IRS.

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