Preparers must beware of aiding and abetting penalty

Article Abstract:

Congress has enacted a number of penalty statutes to discourage commercial tax preparers from submitting false or fraudulent returns or other documents. The most renowned of these statutes is Sec. 6694, which penalizes income-tax preparers for understating tax liability on returns or claiming of refunds. A lesser known, but equally formidable statute is Sec. 6701, known as the aiding and abetting penalty. Tax practitioners should also be familiar with this civil penalty because of its broad reach. It fines guilty tax preparers $1,000 for every individual and $10,000 for every corporation that they aided and abetted during the tax period. The 'Berger' case has established that Sec. 6701 applies beyond such obviously unacceptable behavior as document backdating.

Public Finance Activities, Tax Evasion & Penalties, Tax consultants, Tax penalties, Accomplices

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How to establish a client was not responsible for paying taxes or did not willfully fail to do so

Article Abstract:

Lawyers or independent accountants must protect themselves from the potential 100 percent liability stemming from the failure of their client to pay withholding taxes. Due to Section 6672, a fine equal to the total sum of tax evaded, is assessed on any taxpayer who knowingly does not collect or account for and pay the proper tax. The 100 percent liability is not included with the employer's liability for taxes. These and other aspects of penalty assessments with regard to income tax evasion are discussed in detail.

Prevention

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Some taxpayers may still avoid recognizing income when their debts are discharged

Article Abstract:

The Tax Reform Act of 1986 narrowed the possibilities for avoiding income when debt is discharged. Situations such as bankruptcy, insolvency, and corporate debt discharges, in which debtors can delay or avoid recognition of income, are discussed and illustrated.

Analysis, Bankruptcy

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