A tax preparer working for H & R Block has advised a company to take a position on its tax return. The tax preparer believes that there is a 75% possibility that the position will be sustained if audited by the IRS. If the position is not sustained, an accuracy-related penalty and a late-payment penalty would apply. What is the tax preparer’s responsibility regarding disclosure of the penalty to the company?
A. The tax preparer is responsible for disclosing both penalties to the company.
B. The tax preparer is responsible for disclosing only the accuracy-related penalty to the company.
C. The tax preparer is responsible for disclosing only the probability of the late-payment penalty to the company.
D. The tax preparer has no responsibility for disclosing any potential penalties to the company, because the position will is more likely than not to be sustained on audit.
Answer:A
A tax preparer working for H & R Block has advised a company to take a position on its tax return. The tax preparer believes that there is a 75% possibility that the position will be sustained if audited by the IRS. If the position is not sustained, an accuracy-related penalty and a late-payment penalty would apply. What is the tax preparer’s responsibility regarding disclosure of the penalty to the company?
A. The tax preparer is responsible for disclosing both penalties to the company. B. The tax preparer is responsible for disclosing only the accuracy-related penalty to the company. C. The tax preparer is responsible for disclosing only the probability of the late-payment penalty to the company. D. The tax preparer has no responsibility for disclosing any potential penalties to the company, because the position will is more likely than not to be sustained on audit.