Professional Tax Research Solutions from the Founder of Kleinrock. tax and accounting research
Parker Tax Pro Library
Accounting News Tax Analysts professional tax research software Like us on Facebook Follow us on Twitter View our profile on LinkedIn Find us on Pinterest
federal tax research
Professional Tax Software
tax and accounting
Tax Research Articles Tax Research Parker's Tax Research Articles Accounting Research CPA Client Letters Tax Research Software Client Testimonials Tax Research Software tax research


Accounting Software for Accountants, CPA, Bookeepers, and Enrolled Agents

CPA Tax Software

        

 

IRS Clarifies Limitations Period for Assessing Preparer Penalties for Amended Returns.

(Parker Tax Publishing April 20, 2015)

The IRS's Office of Chief Counsel clarified that the IRS has three years from the time a return with an understatement is filed to assess a penalty against the return preparer, and the preparer has three years from when the penalty is paid to contest that penalty. CCA 201514008.

Background

An IRS examination group requested clarification of the limitation period for making an assessment of the Code Sec. 6694 return preparer penalty for preparing a return or claim for refund with an understatement of tax liability, and for the limitation period for when a preparer can request a refund for an overpayment of that penalty. The group noted that they often confronted situations where a return preparer had filed amended income tax returns that included an understatement of tax liability attributable to an unreasonable filing position.

For purposes of its memorandum, the IRS used a representative fact pattern wherein a tax return preparer prepared an amended return (Form 1040X) for 2011 and claimed a refund that was based on a meritless position. The 1040X was timely filed on April 15, 2015 (3 years following the filing of the original return).

Analysis

Code Sec. 6694(a) imposes a penalty on a tax return preparer for any return or claim for refund resulting in an understatement of liability due to an unreasonable position, about which the preparer knew or reasonably should have known. The penalty is the greater of $1,000 or 50 percent of the income derived by the preparer from the return or claim.

Reg. Sec. 1.6694-1(a)(1) divides the standards against which the return preparer's conduct is measured into two categories:

(1) for positions other than those relating to tax shelters and reportable transactions, the penalty applies when the understatement is due to an undisclosed position for which the return preparer did not have substantial authority on which to rely, or is due to a disclosed position for which there is no reasonable basis; and

(2) for positions with respect to tax shelters or reportable transactions, the preparer penalty applies if the return or claim includes an understatement of liability for which it is not reasonable to believe that the position has merit.

The IRS advised that the limitation periods under Code Sec. 6696(d) were controlling. As such, the penalty in Code Sec. 6694(a) must be assessed within three years after the refund claim was filed, and return preparers liable for the penalty have three years after the time the penalty was paid to file a claim for a refund of an overpayment of the penalty, if they believe the penalty was incorrectly assessed.

The IRS concluded that because the claim for refund in its representative fact pattern was based on a meritless position, the return preparer was subject to penalty under Code Sec. 6694(a). Because the amended 2011 return claiming a refund was filed April 15, 2015, the IRS advised its examination group that it would have until April 15, 2018 to assess the preparer penalty.

Assuming the penalty is paid, the IRS stated that the preparer would have 3 years from the date of payment to file a claim for refund for an overpayment of a penalty (Code Sec. 6696(b)). The IRS noted that the preparer's entitlement to a refund assumes that he can show the penalty was incorrectly determined or that he had reasonable cause and acted in good faith.

For a discussion of civil penalties against practitioners for understatements, see Parker ¶276,300. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com


Professional tax research

We hope you find our professional tax research articles comprehensive and informative. Parker Tax Pro Library gives you unlimited online access all of our past Biweekly Tax Bulletins, 22 volumes of expert analysis, 250 Client Letters, Bob Jennings Practice Aids, time saving election statements and our comprehensive, fully updated primary source library.

Parker Tax Research

Try Our Easy, Powerful Search Engine

A Professional Tax Research Solution that gives you instant access to 22 volumes of expert analysis and 185,000 authoritative source documents. But having access won’t help if you can’t quickly and easily find the materials that answer your questions. That’s where Parker’s search engine – and it’s uncanny knack for finding the right documents – comes into play

Things that take half a dozen steps in other products take two steps in ours. Search results come up instantly and browsing them is a cinch. So is linking from Parker’s analysis to practice aids and cited primary source documents. Parker’s powerful, user-friendly search engine ensures that you quickly find what you need every time you visit Our Tax Research Library.

Parker Tax Research Library

Dear Tax Professional,

My name is James Levey, and a few years back I founded a company named Kleinrock Publishing. I started Kleinrock out of frustration with the prohibitively high prices and difficult search engines of BNA, CCH, and RIA tax research products ... kind of reminiscent of the situation practitioners face today.

Now that Kleinrock has disappeared into CCH, prices are soaring again and ease-of-use has fallen by the wayside. The needs of smaller firms and sole practitioners are simply not being met.

To address the problem, I’ve partnered with a group of highly talented tax writers to create Parker Tax Publishing ... a company dedicated to the idea that comprehensive, authoritative tax information service can be both easy-to-use and highly affordable.

Our product, the Parker Tax Pro Library, is breathtaking in its scope. Check out the contents listing to the left to get a sense of all the valuable material you'll have access to when you subscribe.

Or better yet, take a minute to sign yourself up for a free trial, so you can experience first-hand just how easy it is to get results with the Pro Library!

Sincerely,

James Levey

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com

    ®2012-2018 Parker Tax Publishing. Use of content subject to Website Terms and Conditions.

IRS Codes and Regs
Tax Court Cases IRS guidance