IRS Penalties and OPR
(Office of Professional
Responsibility)
Presented by
Sidney Goldin, CPA, MS
Taxation
I. Penalties—A big deal for
IRS
A. Substantial Revenue Raisers
1. 37.9 million penalties assessed in
2012
2. Total value of $27 billion dollars
1. Deterri...
C. Penalty Policy Statement
1. End game should be future
compliance, not punitive
punishment
2. Duty of consistency—simila...
C. Penalty Policy Statement
(cont’d.)
5. Impartial and honest decision
should be made, objective
enforcement
6. Promote vo...
D. Good Sound Bites, But
Seldom Followed
1. Non-filing penalties—most common
for preparers—missed extensions,
inadvertent ...
E. Most Common types of
Penalties
1. Failure to File
a. 5% per month or part of month
return not filed—limit 25%
b. Reason...
E. Most Common types of
Penalties (cont’d.)
2. Failure to pay
• ½ of 1% per month or part of
month—limit 25%
3. No tax due...
E. Most Common types of
Penalties (cont’d.)
4. Accuracy related penalty
a. Based on underpayment
b. Usually enforced at au...
E. Most Common types of
Penalties (cont’d.)
5. Fraud Civil Penalty
a. 75% of deficiency or
underpayment
b. Burden of proof...
E. Most Common types of
Penalties (cont’d.)
6. Trust Fund Recovery Penalty
a. 100% of trust fund portion of
corporation li...
E. Most Common types of
Penalties (cont’d.)
6. Trust Fund Recovery Penalty
(cont’d.)
c. Can have very broad meaning
i) Res...
E. Most Common types of
Penalties (cont’d.)
6. Trust Fund Recovery Penalty
(cont’d.)
c. Can have very broad meaning
(cont’...
E. Most Common types of
Penalties (cont’d.)
7. Failure to Deposit Employment
Taxes
a. Made within 5 days—2%
b. 5-15 days—5...
E. Most Common types of
Penalties (cont’d.)
7. Failure to Deposit Employment
Taxes (cont’d.)
d. Criminal (jail time) penal...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties
a. Unreasonable positions
i) For undisclosed positions—
...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties (cont’d.)
b. No penalty if reasonable
cause or good fait...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties (cont’d.)
d. Handled as separate cases,
not allowed to d...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties (cont’d.)
g. Penalty for unreasonable
position—greater o...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties (cont’d.)
i. IRC 6713—disclosure of tax
return informati...
E. Most Common types of
Penalties (cont’d.)
8. Preparer Penalties (cont’d.)
j. IRC 7216—knowing or reckless
use or disclos...
II. IRS Office of Professional
Responsibility (OPR)
A. IRS “police”
B. Operates under Circular
230
C. Can receive referrals from
revenue agents, revenue
officers, independent...
D. Governs practitioners,
authorized to practice
before IRS
E. Conducts disciplinary
proceedings against
CPAs, attorneys
a...
G. Common cases are non-
filing and/or non-payment
of taxes by practitioners, or
other violations of IRS rules
and regulat...
H. Proceedings begin with
complaints by referring
parties (cont’d.)
2. Letter containing
complaint is sent to
practitioner...
H. Proceedings begin with
complaints by referring
parties (cont’d.)
3. Practitioner or
representative must
respond in time...
H. Proceedings begin with
complaints by referring
parties (cont’d.)
5. If agreed, case can be
settled at that point
6. If ...
H. Proceedings begin with
complaints by referring
parties (cont’d.)
6. If no agreement, then
case goes to ALJ (cont’d.)
a....
H. Proceedings begin with
complaints by referring
parties (cont’d.)
7. Can take case to U.S.
District Court if ALJ decisio...
If you have any questions,
please feel free to contact
Sidney Goldin
214.635.2509
SGoldin@GPPcpa.com
or
Rick Lahr
214.635....
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Irs penalties and opr (office of professional responsibility)

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A presentation to lawyers and accountants on IRS penalties and the office of professional responsibility, presented by Sidney Goldin, CPA. It lays out some of the IRS traps that you need to be aware of.

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Irs penalties and opr (office of professional responsibility)

  1. 1. IRS Penalties and OPR (Office of Professional Responsibility) Presented by Sidney Goldin, CPA, MS Taxation
  2. 2. I. Penalties—A big deal for IRS
  3. 3. A. Substantial Revenue Raisers 1. 37.9 million penalties assessed in 2012 2. Total value of $27 billion dollars 1. Deterring non-compliance 2. Establishing fairness by punishing non-compliant taxpayers B. Deterrent Effect
  4. 4. C. Penalty Policy Statement 1. End game should be future compliance, not punitive punishment 2. Duty of consistency—similar cases should be treated alike 3. Opportunity to have adequate penalty defense 4. 4. Careful thought and consideration by IRS to make fair and correct decision
  5. 5. C. Penalty Policy Statement (cont’d.) 5. Impartial and honest decision should be made, objective enforcement 6. Promote voluntary compliance not for purpose of raising revenue 7. Resolve each case in a prompt manner
  6. 6. D. Good Sound Bites, But Seldom Followed 1. Non-filing penalties—most common for preparers—missed extensions, inadvertent error 2. Examiners propose assessment of accuracy related (20%) penalties automatically without forethought on reports 3. Small error rates from CPA firms, not reasonable cause for IRS
  7. 7. E. Most Common types of Penalties 1. Failure to File a. 5% per month or part of month return not filed—limit 25% b. Reasonable estimate for extension required per IRS regulation (1.6081) c. High estimate is recommended, even if little or no payment made
  8. 8. E. Most Common types of Penalties (cont’d.) 2. Failure to pay • ½ of 1% per month or part of month—limit 25% 3. No tax due, no penalties • In later examination, if deficiency found, penalty imposed from original due date
  9. 9. E. Most Common types of Penalties (cont’d.) 4. Accuracy related penalty a. Based on underpayment b. Usually enforced at audit level c. Only applied where return was filed; doesn’t apply on substitute returns.
  10. 10. E. Most Common types of Penalties (cont’d.) 5. Fraud Civil Penalty a. 75% of deficiency or underpayment b. Burden of proof is on IRS to prove intent
  11. 11. E. Most Common types of Penalties (cont’d.) 6. Trust Fund Recovery Penalty a. 100% of trust fund portion of corporation liability b. Imposed on “responsible” persons
  12. 12. E. Most Common types of Penalties (cont’d.) 6. Trust Fund Recovery Penalty (cont’d.) c. Can have very broad meaning i) Responsible persons can include bankers or other lenders who provide or pay funds directly to employers specifically earmarked for wages with knowledge that the employer will not deposit payroll
  13. 13. E. Most Common types of Penalties (cont’d.) 6. Trust Fund Recovery Penalty (cont’d.) c. Can have very broad meaning (cont’d.) ii) However recent abatement of penalty was obtained by office who paid employees when other creditors weren’t paid
  14. 14. E. Most Common types of Penalties (cont’d.) 7. Failure to Deposit Employment Taxes a. Made within 5 days—2% b. 5-15 days—5% c. More than15 days—10%
  15. 15. E. Most Common types of Penalties (cont’d.) 7. Failure to Deposit Employment Taxes (cont’d.) d. Criminal (jail time) penalties also possible—have been imposed in egregious cases e. Imposed on corporation— not to be confused with TFRP
  16. 16. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties a. Unreasonable positions i) For undisclosed positions— no substantial authority— e.g., code, regs. case law, rev. rulings, tech. advice memorandums ii) For disclosed positions— no reasonable basis or frivolous arguments
  17. 17. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties (cont’d.) b. No penalty if reasonable cause or good faith exists c. Examiners can “write up” preparers for penalties if adjustments exists— “non” signing or “signing” preparers. Required to consider in all cases.
  18. 18. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties (cont’d.) d. Handled as separate cases, not allowed to discuss with taxpayers e. Preparer can file appeal if penalty proposed f. Either examiner of appeals can refer directly to OPR in egregious cases
  19. 19. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties (cont’d.) g. Penalty for unreasonable position—greater of $1,000 or 50% of income from return h. Willful or reckless conduct— greater of $5,000 or 50% of income from return
  20. 20. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties (cont’d.) i. IRC 6713—disclosure of tax return information or improper use of tax information—$250 per each violation up to $10,000 per year
  21. 21. E. Most Common types of Penalties (cont’d.) 8. Preparer Penalties (cont’d.) j. IRC 7216—knowing or reckless use or disclosure of tax return information—maximum fine $1,000 and up to one year imprisonment—use care when responding to banks or mortgage company requests for client information
  22. 22. II. IRS Office of Professional Responsibility (OPR)
  23. 23. A. IRS “police” B. Operates under Circular 230 C. Can receive referrals from revenue agents, revenue officers, independent internal investigations, or other sources
  24. 24. D. Governs practitioners, authorized to practice before IRS E. Conducts disciplinary proceedings against CPAs, attorneys and enrolled agents F. Can suspend or disbar practitioners after due process occurs
  25. 25. G. Common cases are non- filing and/or non-payment of taxes by practitioners, or other violations of IRS rules and regulations H. Proceedings begin with complaints by referring parties mentioned above 1. File is opened and assigned to enforcement attorney
  26. 26. H. Proceedings begin with complaints by referring parties (cont’d.) 2. Letter containing complaint is sent to practitioner—must state basis for complaint, alleged violations of rules, regulations, etc. of Circular 230
  27. 27. H. Proceedings begin with complaints by referring parties (cont’d.) 3. Practitioner or representative must respond in timely manner 4. Conference with enforcement attorney is held; attorney can propose sanctions.
  28. 28. H. Proceedings begin with complaints by referring parties (cont’d.) 5. If agreed, case can be settled at that point 6. If no agreement, then case goes to Administrative Law Judge and is heard there
  29. 29. H. Proceedings begin with complaints by referring parties (cont’d.) 6. If no agreement, then case goes to ALJ (cont’d.) a. Rules of evidence and discovery are allowed if approved by ALJ b. Conducted similar to court of law
  30. 30. H. Proceedings begin with complaints by referring parties (cont’d.) 7. Can take case to U.S. District Court if ALJ decision is appealed—good luck with that
  31. 31. If you have any questions, please feel free to contact Sidney Goldin 214.635.2509 SGoldin@GPPcpa.com or Rick Lahr 214.635.2520 RLahr@GPPcpa.com

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