returns due on or before January 15, 2008; and to 2007 employment
and excise tax returns due on or before January 31, 2008. However, no
transitional relief is available under section 6694(b) as transitional
relief is not appropriate for return preparers who exhibit willful or
reckless conduct, regardless of the type of return prepared.
Tax advisors should provide clients with the
highest quality representation concerning federal tax issues by
adhering to best practices in providing advise 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 officer 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.
