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.Betty is liable for payment of the tax due plus interest and a negligence penalty.
III.Sam is liable for payment of Betty's tax due plus interest and negligence penalty.
IV.Sam is liable for payment of Betty's negligence penalty.Betty is liable for the payment of the tax due plus interest.

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.Betty is liable for payment of the tax due plus interest and a negligence penalty.
III.Sam is liable for payment of Betty's tax due plus interest and negligence penalty.
IV.Sam is liable for payment of Betty's negligence penalty.Betty is liable for the payment of the tax due plus interest.
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Quizplus · Accepted Answer

Betty is ultimately responsible for the accuracy of her tax return, regardless of whether she relied on a tax professional. Therefore, she is liable for payment of the tax due plus interest and a negligence penalty. Sam may also be liable for payment of the penalty, but not the tax itself.

Betty Hires Sam to Prepare Her Federal Income Tax Return