Risk Assessment Flashcards

Under IRC Section 274(d), which elements must be substantiated for travel expenses?

Answer: Amount, time, place, and business purpose

Section 274(d) requires adequate records showing amount, time, place, and business purpose for travel and similar expenses.

Why is the Cohan rule a weak fallback for a client's undocumented vehicle and travel deductions?

Answer: Section 274(d) strict substantiation overrides Cohan estimates for those expenses

Courts may estimate some expenses under Cohan, but not expenses subject to 274(d) strict substantiation.

What makes employer reimbursements nontaxable under an accountable plan?

Answer: Business connection, adequate substantiation, and return of excess amounts within a reasonable time

An accountable plan requires a business connection, substantiation, and the return of excess advances.

What is the failure-to-file penalty under IRC Section 6651(a)(1) before any interaction with other penalties?

Answer: 5% per month, up to 25%

The failure-to-file penalty is 5% of the unpaid tax per month or part month, capped at 25%.

What is the monthly failure-to-pay penalty rate under IRC Section 6651(a)(2)?

Answer: 0.5% per month

The failure-to-pay penalty is 0.5% of the unpaid tax per month, up to 25%.

The Trust Fund Recovery Penalty under IRC Section 6672 can make a responsible person personally liable for what amount?

Answer: 100% of unpaid trust fund taxes

Responsible persons who willfully fail to remit withheld taxes can be personally liable for 100% of the trust fund amount.

Under IRC Section 6694, what standard must an undisclosed return position generally meet to avoid a preparer penalty?

Answer: Substantial authority

Undisclosed positions generally need substantial authority, while disclosed positions need only a reasonable basis.