Disclosure can avoid many accuracy and preparer penalties

Article Abstract:

The civil penalty provisions for tax preparers have been substantially changed by the Revenue Reconciliation Act of 1989's Improved Penalty Administration and Compliance Tax Act. The IRS issued two sets of Proposed Regulations on Feb 28, 1991, that deal with penalties for returns and accuracy. A 20% penalty is imposed by Section 6662 on the portion of tax underpayments attributed to disregard of rules or negligence, substantial income tax understatements, substantial valuation misstatements, substantial pension liability over-statements, and substantial understatements of estate or gift tax valuations. Negligence under the Proposed Regulations includes failure to make reasonable attempts to comply with the law, exercise ordinary and reasonable care when preparing returns, keep proper records and books, and properly substantiate items.

Analysis, Tax consultants, Revenue

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Successful preparation and negotiation may reduce the time and breadth of an IRS audit

Article Abstract:

Types of audits used by the IRS are described, and the obligations and techniques of IRS examiners are discussed. Recommendations for taxpayers' representatives are provided. Correspondence audits usually involve minor adjustments and are conducted by mail. Office audits involve issues which may require professional judgment, and are conducted by interview at the IRS district office. Field audits are examinations of the taxpayer's records which are conducted by a revenue agent at the taxpayer's premises. The taxpayer's success at the audit level will depend largely on the quality of documentation. The taxpayer's representative should attempt to establish a good rapport with the examiner, and the taxpayer and the examiner should attempt to reach a settlement as expeditiously as possible.

Methods, Management, Tax auditing, Tax audits

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Penalties and estimated tax payments for individuals and entities are now tougher

Article Abstract:

The provisions for penalties and estimated tax payments under the Tax Reform Act of 1986 are discussed. Individuals, trusts, and estates must make quarterly estimated tax payments of at least 25 percent of the required annual payment, or they may be subject to an underpayment penalty tax. Corporations must make quarterly payments equal to 25 percent of 90 percent of the tax shown on the current year, or 25 percent of 100 percent of the tax shown on the preceding year's return. There are also penalties on early withdrawals from qualified retirement plans, and stricter penalties for fraudulent or negligent underpayment of taxes.

Prevention

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