The IRS and Tax Preparer Defense

Tax preparers may be subject to civil and, in particularly egregious cases, criminal penalties for various issues relating to tax returns they prepared. Internal Revenue Code Section 6694 imposes monetary penalties as high as $5,000 on tax preparers who prepare returns taking positions that may not be fully supported by current law. Additionally, Internal Revenue Code Section 6695 imposes penalties against tax preparers who fail to sign a return, fail to furnish a taxpayer identification number, fail to furnish a copy of the tax return to the taxpayer, fail to retain a completed copy of the tax return, or fail to conduct due diligence regarding the taxpayers eligibility for certain credits including the earned income credit. If the tax preparer has violated Circular No. 230, additional monetary penalties may apply up to the value of the fee earned for completing the tax return.

Tax return preparers may also suffer severe professional consequences. The tax preparer may be referred to the IRS's Office of Professional Responsibility. In that case, the tax preparer may be subject to suspension, disbarment, or censure and may be prohibited from acting as an income tax preparer in the future.

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