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Posted by Steve Foley on January 6, 2007, 12:21 am
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I am looking into starting at a retail tax preparation
outfit. I'm currently taking their class and would like to
know who assumes the liability for the tax return, the
employer or employee.
I would be working as an employee. When I sold real estate,
the broker required me to have errors and omissions
insurance, however in that case I was a independent
contractor, not an employee.
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Posted by Bill Brown on January 7, 2007, 11:30 pm
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Steve Foley wrote:
> I am looking into starting at a retail tax preparation
> outfit. I'm currently taking their class and would like to
> know who assumes the liability for the tax return, the
> employer or employee.
>
> I would be working as an employee. When I sold real estate,
> the broker required me to have errors and omissions
> insurance, however in that case I was a independent
> contractor, not an employee.
If you prepare the return, you're liable.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Paul Thomas, CPA on January 7, 2007, 11:30 pm
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> I am looking into starting at a retail tax preparation
> outfit. I'm currently taking their class and would like to
> know who assumes the liability for the tax return, the
> employer or employee.
>
> I would be working as an employee.
Unless they inform you (in writing) that you carry some
responsibility, then it's all on them.
Now, some companies may tell you that you have to fix any
problems on your dime, meaning that you're off the clock
when you prepare an amended return and/or respond to error
notices that are your fault.
Understand that you can't bill the client for the time spent
fixing an error you made, why then should you get paid for
doing so.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Shyster1040 on January 8, 2007, 10:17 pm
Please log in for more thread options Any person who is a "preparer" with respect to a particular
return is, in general, liable for the return preparer
penalties unless that person can prove a defense thereto.
See, e.g., Treas. Reg. Sec. 1.6694-2(penalty for position
due to unrealistic position).
Under Treas. Reg. Sec. 301.7701-15(a), an "income tax return
preparer" is "any person who prepares for compensation, or
who employs (or engages) one or more persons to prepare for
compensation, other than for the person, all or a
substantial portion of any return of tax under subtitle A of
the Internal Revenue Code...."
However, for purposes of the Section 6694 penalties, Treas.
Reg. Sec. 1.6694-1(b) provides that "no more than one
individual associated with a firm ... is treated as a
preparer with respect to the same return ...." Further, the
person treated as the "preparer" is, in general, the return
preparer who signed the return as such. Where two or more
persons employed by or a part of the same firm are
"preparers" with regard to a particular return, but none
signed the return, then, in general, the person with
supervisory authority over the others is the "preparer" for
penalty purposes.
Treas. Reg. Sec. 1.6694-1(b)(1) finishes by stating "to the
extent provided in 1.6694-2(a)(2) and 1.6694-3(a)(2), an
individual and the firm with which such individual is
associated may both be subject to penalties under section
6694 with respect to the same return."
Under 1.6694-2(a)(2) and -3(a)(2), if a preparer is subject
to the preparer penalties, then that preparer's employer is
also subject to penalties if (a) one or more members of the
principal management of the employer participated in or knew
of the proscribed conduct, (b) the employer failed to
provide reasonable and appropriate procedures to review the
position in question, or (c) such review procedures were
disregarded.
So, in your case, if you sign the return as preparer, then
you will be liable for any penalties. If you don't sign the
return as preparer, then your supervisor will most likely be
the "preparer" liable for any penalties. However, the
outfit that employs you will also be liable for any
penalties unless one of the exceptions applies (i.e., didn't
know, didn't participate, had reasonable procedures, and
made sure those procedures were followed).
Any one of those exceptions is, of course, open to attack by
the employee if the employer seeks to avoid its liability.
Which does, of course, put you in the potential position of
having to show that you were such a moron that no reasonable
employer would have trusted you to prepare tax returns (or,
more realistically, that they simply didn't have reasonably
adequate procedures, or didn't follow them - which is the
$64,000 reason for why you always make sure your supervisor
reviews your work and signs off on it in writing; if the
return is any more complicated than a W-2 return with
standard deduction and nothing else funky, you do not want
to just take a verbal "looks good to me, go ahead and sign
it and send it to the client.").
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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