GringoPost | Ecuador: Tax Facts, Quotes and Humor

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Tax Facts, Quotes and Humor

Tax Fact: Withholding started because of a cash crunch. In the 1940's, the government needed a steady flow of cash to support the war effort. It passed the Current Tax Payment Act of 1943 which required employers to withhold income taxes from employee’s paychecks and make ongoing payments on employees behalf. before this, from 1916 - 1943, Americans paid their income taxes quarterly or annually - Jerome Accounting

Tax Quote: "Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay". - Milton Friedman

Tax Humor: "It is a good thing we don't get as much government as we pay for". - Will Rogers

Tax Subject of the Day: What about Tax Preparer Responsibilities and Penalties
In all my prior posts I've harped on the taxpayer's responsibilities, so
today I'll put myself on the hot seat.

Have you ever wondered about your preparer and what they put on your return and what can happen to them if they screw up or actually cheat on your behalf? Let me state that preparers are first and foremost a taxpayer just like you and subject to the same reporting rules. Second, no matter what the preparer puts on your return, you will ultimately be held responsible for any additional tax, penalties and interest an audit may find as the Service requires your signature on the return as well as the preparer's which conveys knowledge on your part. This in no way lets the preparer off the hook for their malfeasance.

Anyone who prepares tax returns for a fee is required to have a PTIN and complete the necessary "continuing education" requirements each year. In addition, all Preparers, EA's, CPA's and Attorneys are subject to the rules and regulations outlined in Circular 230 and the Office of Professional Responsibility (OPR) which enforces consistent standards of competence, integrity and codes of conduct.

In a case where OPR opens an investigation into a preparer, the tools at their disposal may start with a written censure. Depending on the severity of the infraction(s), the sanctions can move up to monetary penalties, suspension, a lifetime ban from preparing taxes to criminal proceedings with potential jail time of 3 -5 years.

Required Actions of Preparers:
(1) Disclose on returns of any "non-frivolous" tax positions whose disclosure is required to avoid penalty
(2) Return of all original records to client
(3) Sign all returns they prepare
(4) Provide clients a copy of tax returns
(5) Advise clients promptly of any errors or omissions by preparer or client in any tax matter
(6) Submit records/documentation requested by the IRS in a timely manner
(7) Exercise "due diligence" and use "best practices" of the profession

Prohibited Actions by Preparers:
(1) Take a position on a return unless there is a realistic possibility of the position being sustained on its
merits by a competent authority such as Treasury Regs, IRC or Tax Court Cases
(2) Unreasonable delay or prompt disposition of any tax matter before the IRS
(3) Charge the client an "unconscionable" fee for representation
(4) Represent clients with conflicting interests
(5) Solicit business using false statements
(6) Cash checks issued by the US Treasury to a client for whom return was prepared.

Sanctions imposed by OPR are more severe when "Willful Misconduct" is involved. Willful being defined as "an intentional violation or disregard of a known legal duty". Willfulness requires that the preparer acted with the knowledge that their conduct was unlawful. Most cases brought by OPR against preparers are in the realm of the lesser charge of misconduct for negligence, mistaken or inadvertent acts. Preparers are also barred from "playing" the audit roulette game or turning a "blind eye" to direct knowledge that would have a bearing on your tax liability or refund.

Any person having information of a violation of any provision of Circular 230 may make an oral or written report of the alleged violation to OPR or any officer or employee of the Internal Revenue Service. If the report is made to the IRS, they will submit the written report to OPR in your behalf.

An example of a preparer penalty is: IRC Section 6695(a) - Failure to Furnish Copy of Tax Return to Client. The penalty is $50 for each failure to comply with IRC Section 6107. The maximum penalty imposed on any tax preparer under this section shall not exceed $26,000 in a calendar year. All told there are 13 code sections that carry monetary fines ranging from $50 to a maximum of $100,000 for IRC Section 7206 - Fraud and False Statements.

According to the Criminal Investigation's Fiscal Year 2019 Report's Abusive Tax Preparer Program, Prosecutions Recommended - 203, Sentenced - 154, Incarceration Rate 78%

With that I'll close this lengthy article. Next time I'll discuss "Hobby Loss Rules and the TCJA of 2017"

John Papile: 098 168 7993. Call after: 9 AM.

City: Cuenca