Question

A tax preparer prepares annual returns for his clients, taking several illegal liberties in adopting reckless and intentional positions during his preparation. He prepares a hundred (100) returns, of which fifty (50) are later the basis for the IRS assessing the preparer a penalty. His charges were $1,500 per return for thirty (30) returns. The remaining twenty (20) returns he charged $10,000. Considering section 6694(b), what should his penalty for all fifty (50) of these for his role in intentionally disregarding rules and regulations?

a. $50,000
b. $122,500
c. $250,000
d. $300,000

Answer 1

The tax preparer's penalty for intentionally disregarding rules and regulations would be $250,000.

Step-by-step explanation:

According to section 6694(b), the tax preparer's penalty for intentionally disregarding rules and regulations would be $250,000. This penalty is applied for all fifty (50) returns that were the basis for the IRS assessing the preparer. The penalty is determined based on the charges the tax preparer received for preparing the returns.

The tax preparer's penalty, under section 6694(b) for intentionally disregarding rules and regulations, can be calculated based on the fees charged. The penalty for each return is the greater of $5,000 or 50% of the income earned on the return he prepared.

However, we need to consider the maximum penalty for each prepared return. The preparer has charged $1,500 for 30 returns, resulting in penalties of $1,500 x 30 x 50% = $22,500 for these returns. For the remaining 20 returns, each charged at $10,000, the penalty would be $10,000 x 20 x 50% = $100,000.

Adding these together, the total penalty would be $22,500 + $100,000 = $122,500.