Betty hires Sam to prepare her federal income tax return.In preparing the return,Sam erroneously decided to exclude consulting fees because he estimated that Betty's expenses should have exceeded the income she received.If the IRS detects Betty's underpayment of tax,what is the likely result?
I.Betty is not subject to the negligence penalty since she relied on a professional tax preparer and reported her income in good faith.
II.Sam is liable for payment of Betty's tax due plus interest and negligence penalty.

Question

Betty hires Sam to prepare her federal income tax return.In preparing the return,Sam erroneously decided to exclude consulting fees because he estimated that Betty's expenses should have exceeded the income she received.If the IRS detects Betty's underpayment of tax,what is the likely result?
I.Betty is not subject to the negligence penalty since she relied on a professional tax preparer and reported her income in good faith.
II.Sam is liable for payment of Betty's tax due plus interest and negligence penalty.
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Quizplus · Accepted Answer

Betty is still responsible for her tax return and can be subject to penalties even if she relied on a professional. Sam may face penalties for preparing an incorrect return, but he is not liable for Betty's tax due.

Betty Hires Sam to Prepare Her Federal Income Tax Return