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| Tax advisors should provide clients with the highest quality representation concerning federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service. Best practice includes establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law to the relevant facts, and arriving at a conclusion supported by the law and the facts. Best practices does not mean you would advice a client to take any step necessary to avoid the payment of tax. It would also not be best practice to advise a client to submit a document, affidavit or other paper to the Internal Revenue Service even if this impedes the administration of the federal tax laws. Finally, best practice would not be to advise a client to take a position on a document, affidavit or other paper submitted to the Internal Revenue Service. |
| In cases where any part of the understatement of the tax liability is due to a willful attempt by the return preparer to understate the liability, or if the understatement is due to reckless or intentional disregard of the rules or regulations by the tax preparer, the preparer is subject to a $5,000 penalty or a penalty of 50% of income derived or to be derived if this is a greater amount. |
| A penalty will not be imposed on any part of an underpayment if there was reasonable cause for your position and you acted in good faith in taking that position. However, you cannot avoid the penalty by disclosure if you failed to keep proper books and records or failed to substantiate items properly. |
| The penalty for reckless or intentional disregard of a regulation may be avoided by disclosure only if the position represents a good faith challenge to the validity of the regulation and has a reasonable basis. Generally, the accurate-related penalty of any position of a tax underpayment attributable to negligence or disregard of the rules or regulations is 20%. |
| An understatement in the excess of the amount of tax required to be shown on the tax return over the amount of tax shown on the return for the tax year, reduced by any rebates. There is a substantial understatement if the amount of the understatement for any year exceeds 10% of the tax required to be shown on the return for the tax year. This amount would be the amount that exceeds 10% of the tax required to be shown on the return for the tax year or $5,000, whichever is greater. Likewise, for a corporation it would be the greater of the amount that exceeds 10% of the tax required to be shown on the return for the year or $10,000. |
| A family member, an office of a corporation, or an employee representing an employer, are unenrolled individual that are able to represent their specific taxpayers before the IRS. This is true as long as this individual presents satisfactory identification proving the relationship to the person that they are representing. |
| The un-enrolled preparer who has been determined ineligible for limited practice before the Internal Revenue Service may request, after 2 years following the notice of final determination of ineligibility or decision of appeal, that eligibility for limited practice be reinstated. |
| Enrollment as an enrolled agent based on an applicant's former employment with the Internal Revenue Service may be of unlimited scope or limited to permit the presentation of matters only of the particular class for which the applicant's former employment has qualified the applicant. The enrollment may also be limited to permit the presentation of matters only before the particular unit or division of the Internal Revenue Service for which the applicant's former employment has qualified the applicant. |
| Individuals may always appear on their own behalf before the Internal Revenue Service without the need of enrolled agents. |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Filing Season Program rights reserved. |
| Revised: 12/14/14 |
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