Freddie has been assessed a preparer penalty for willful and reckless conduct. When he completed Peggy's Federal income tax return, he purposely omitted $100,000 of cash receipts that should have been reported as gross income. Freddie charged Peggy $4,000 to prepare the return. What is Freddie's preparer penalty?

Question

Quizplus · Accepted Answer

The preparer penalty for willful or reckless conduct is the greater of $5,000 or 50% of the income derived (or to be derived) by the tax preparer from the preparation of the return. Since $5,000 is greater than 50% of the $4,000 fee Freddie charged, the penalty is $5,000.

Freddie Has Been Assessed a Preparer Penalty for Willful and Reckless