What is Tax return preparer penalties?
In short
Tax return preparers can be penalized under Section 6694 for understatements on returns they prepare: for an unreasonable position, the greater of $1,000 or 50% of the fee; for willful or reckless conduct, the greater of $5,000 or 75% of the fee.
Key takeaways
- A position is reasonable if there is substantial authority for it, or a reasonable basis and it is adequately disclosed.
- Other penalties cover failing to sign a return, give the taxpayer a copy or include an identification number.
- Circular 230 sanctions can apply in addition.
Where it's tested
REG: Circular 230 & Practitioner Ethics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A CPA discovers that a client's previously filed return contains a material error. Under Circular 230, what must the CPA do?