Final answer:
The correct answer is a) failure to sign a return as preparer and give their tax identification number on the return. This is a required step by the IRS for accountability and tracking purposes, and failure to comply incurs a penalty. Options b), c), and d) are practices related to record-keeping and professional standards but do not directly lead to IRS penalties if not followed.
Step-by-step explanation:
A tax return preparer may encounter several types of failures that can initiate a tax penalty from the IRS. These failures are specifically identified and penalized to ensure compliance and accuracy in tax preparation. The correct option from the given list in this scenario is:
a) failure to sign a return as preparer and give their tax identification number on the return.
Option (a) directly relates to standard protocol for tax return preparers as defined by the Internal Revenue Service (IRS). Tax preparers are mandated to sign the returns they prepare and to provide their Preparer Tax Identification Number (PTIN) on the return. This requirement helps the IRS to track the performance of tax return preparers and ensure accountability in tax filing. Failure to do so is in direct violation of IRS regulations and can result in penalties being assessed against the tax return preparer.
Error in option (b), while important for ethical and practical reasons, does not automatically trigger an IRS penalty. Tax return preparers are generally required to keep a copy of all returns prepared for a period of three years from the date of the return or two years from the date the tax was paid, whichever is later.
Regarding option (c), providing a receipt for services is a business best practice and might be regulated at the state level or by professional bodies, but it is not a federal requirement by the IRS that would trigger a tax penalty.
Lastly, option (d) is misleading as the IRS requirements state that records should be kept as mentioned in option (b), well short of the five-year period stated here.