Freddie has been assessed a preparer penalty for willful and reckless conduct. When he completed Peggy's Federal income tax return (she is in the 33% tax bracket), Freddie 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 penalty for willful or reckless conduct by a tax preparer is the greater of $5,000 or 50% of the income derived from the preparation of the return. In this case, $5,000 is greater than 50% of the $4,000 fee Freddie charged.

Freddie Has Been Assessed a Preparer Penalty for Willful and Reckless