Question

            Which of the following persons is subject to tax return preparer penalties for the return(s) mentioned?

a.         Meredith is the director of Federal taxes for a C corporation, and prepares her mother’s return for $50.

b.         Sammy is a volunteer who prepares returns at the retirement home under the IRS Tax Counseling for the Elderly program.

c.         Abbie prepares her mother’s tax returns for free. A CPA, Abbie would charge a client $750 for completing a similar return.

d.         Lizzie, a tax return preparer company’s administrative assistant, makes copies of returns and assembles the returns.

e.         John, the head of a corporation’s accounting department, prepares the corporation's return.

That's all the information i got in the question.

Answer 1

As per IRC  a “preparer” means “any person who prepares for compensation, or who employs person or persons to prepare for compensation, any return of tax imposed or any claim of refund.” Thus, a preparer does not include a person who prepares a tax return without receiving compensation.

Looking to the above definition and the option (a) to (e) of question, only Meredith (option (a)) prepares return and charges compensation.

Meredith is the director of Federal taxes for a C corporation, and prepares her mother’s return for $50. He is the persons subject to tax return preparer penalties for the return prepared by him of his mother after charging money.

Following options are not correct because:

b.         Sammy is a volunteer who prepares returns at the retirement home under the IRS Tax Counseling for the Elderly program.- Sammy is not charging compensation for preparing returns

c.         Abbie prepares her mother’s tax returns for free. A CPA, Abbie would charge a client $750 for completing a similar return.- Abbie is not charging compensation for preparing return of her mother

d.         Lizzie, a tax return preparer company’s administrative assistant, makes copies of returns and assembles the returns.- Lizzie is not preparing return. Lizzie is just making copies of returns and assembles the returns

e.         John, the head of a corporation’s accounting department, prepares the corporation's return.- John is preparing return for a corporation, of which he is an employee. John has to prepare the return because corporation is not a living person, so it is to be prepared by some one else. John in the capacity of head of the department is preparing return. It can not be termed as John is being hired by corporation to only prepare return by paying salary as a compensation