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Return Preparer Penalties

Tax professionals including CPAs, tax attorneys, enrolled agents, and tax return preparers are subject to a myriad of penalties for conduct which the IRS deems to be problematic, abusive, or undermining of the public’s confidence in the administration of the nation’s tax laws. Other professionals such as actuaries and appraisers can also be subject to penalties. These penalties can be civil or criminal, and the consequences of these penalties can be severe.

In addition to monetary penalties, tax professionals who conduct their professional or personal affairs in an unprofessional manner or that results in violations of the tax laws by the preparer or his clients are subject to discipline by the IRS Office of Professional Responsibility (“OPR”) as well as state licensing authorities. Discipline can take the form of anything from a private reprimand to censure, suspension or the permanent loss of license to practice. Further, the preparer's employer, firm or entity also is subject to the penalty if it knew, or reasonably should have known, of the conduct giving rise to the penalty.

Other civil penalties that can be imposed against income tax returns preparers include:

  • Failure by an income tax preparer to sign a required return;
  • Failure by an income tax return preparer to furnish a required taxpayer identification number;
  • Failure by an income tax return preparer to furnish a copy of the tax return to the taxpayer;
  • Failure by an income tax return preparer to retain a completed copy of the return or a record of the taxpayer's name, identification number, taxable year, and type of return prepared;
  • Failure by an income tax return preparer to comply with the due diligence requirements with respect to determining a taxpayer's eligibility for, or amount of, the earned income credit;
  • Aiding and aiding and abetting the understatement of a tax liability; and
  • Disclosing or using any tax return information other than to prepare or assist in preparing the taxpayer's return.

In particularly egregious cases, the IRS can also seek criminal penalties against return preparers.

It is not only return preparers who are subject to return preparer penalties. Appraisers can also be subject to return preparer penalties. The Internal Revenue Code specifically imposes a penalty on a person who prepares an appraisal that results in a substantial or gross valuation misstatement if the appraiser knew or reasonably should have known that the appraisal would be used in connection with a return or refund claim. This penalty can be as much as 125% of the fee received for the appraisal.

At Thorn Law Group, we are experienced at representing tax professionals. If the IRS, OPR or other licensing authority is considering a penalty against you as a professional, contact the Thorn Law Group’s Managing Partner Kevin E. Thorn right away to discuss your options. Mr. Thorn can be reached at (240) 235-5096.

IRS Summary of Return Preparer Penalties
IRS Criminal Investigation Abusive Return Preparer Program
Circular 230


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