Avoiding penalties when there is a disclosure dispute

Article Abstract:

The IRS holds the 'signing preparer' of the tax return accountable for ensuring that the returns are without positions that are undisclosed and are excessively aggressive. Under Section 6694(a), tax return preparers will be subject to a $250 penalty if the tax understatement on a return or a tax refund claim is made partly due to an unrealistic position, if the tax preparer has been aware of the indefensibility of the position, and if the position was frivolous or undisclosed. A $1,000 penalty will be imposed if it has been deemed that there was a conscious effort to understate the amount of taxes the taxpayer would have to pay or there was a blatant disregard of IRC rules and regulations. Return preparers, however, will not be subject to any penalty if they had been found to have acted in good faith and if there were justifiable reasons for the tax understatement. The burdens of proof are placed largely on preparers.

Tax return preparation services, Disclosure (Taxation)

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How aggressive should the tax practitioner be in preparing a client's return?

Article Abstract:

The most professional way to handle client tax returns is to make sure major decisions are understood and accepted by clients, and to document advice given to clients. Different attitudes, which range from a conservative to an aggressive approach, can be used when preparing returns. Violations of standards set forth in IRS Circular 230 are likely to revolve around actions taken or omitted during the preparation process, and could result in a practitioner's disbarment or suspension from IRS practice.

Management, United States. Internal Revenue Service, Tax returns

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