Cindy is a CPA who provides return preparation guidance, but rarely does she actually prepare returns. Bill teaches kindergarten and knows how to handle most items on his return, receiving only a W-2 and a K-1 from an S corporation controlled by his sister. The K-1 shows an ordinary loss of $85,600. Bill sends Cindy the K-1 as well as other information and asks her how he should handle the K-1 data. Bill seems very happy with the K-1, and makes an off-handed comment to Cindy that he doesnt know how he lost $85,600 since hes never put a dime into the business. Cindy asks nothing further. She then sends him a short letter explaining which forms need to be filed and where the items on the K-1 should be reported, but she incorrectly advises him about a small amounts of separately stated credits and says nothing about the potential limitation on his losses. Bill follows her instructions and files the returns.

Is Cindy a tax return preparer?

What should Cindy have done with respect to the K-1?