Tax Law > Tax Preparer Penalties
Tax return preparers are subject to numerous penalties for conduct which the IRS determines to be against the Internal Revenue Code. These penalties range from civil penalties to criminal sanctions including imprisonment. It is essential to obtain legal representation early when facing penalties from the IRS.
Internal Revenue Code § 6694(a) provides that any income tax return preparer who knew (or reasonably should have known) of a misrepresentation on a return will be subject to a penalty of $250 per occurrence. If the understatement is due to a reckless or intentional disregard of rules or regulations the penalty is $1,000 per occurrence. 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. Therefore it is critical that if an IRS agent even suggests the possibility of a penalty being imposed that the income tax return preparer immediately obtain advice from a tax attorney to determine how to proceed.
Additionally, the IRS may seek to enjoin an income tax return preparer from acting as an income tax return preparer under IRC § 7407(a). An injunction may be issued if a court determines that the preparer has (1) engaged in conduct subject to a preparer penalty under §6694 or §6695, (2) engaged in conduct subject to a criminal penalty under the Internal Revenue Code, (3) misrepresented his eligibility to practice before the IRS, (4) misrepresented his experience or education as a preparer, (5) guaranteed the payment of any tax refund or the allowance of any tax credit, or (6) engaged in any other fraudulent or deceptive conduct that substantially interferes with the proper administration of the tax law; and that injunctive relief is appropriate to prevent the recurrence of such conduct.
Lastly, the IRS may seek imprisonment in instances of particularly egregious conduct on the part of the tax return preparer. Recently, a Miami based tax preparer was sentenced to 21 months in prison, followed by three years of supervised release and ordered to perform 250 hours of community service in each of those years of supervised release. In addition, the preparer was ordered to pay $179,369 in restitution to the Internal Revenue Service (IRS). In that case, the preparer was assisting tax filers in claiming credits and deductions that the preparer knew the filers were not entitled to.
If the IRS is considering a penalty against you as a professional you should seek immediate assistance from a tax attorney at the earliest possible time.
Internal Revenue Code § 6694(a) provides that any income tax return preparer who knew (or reasonably should have known) of a misrepresentation on a return will be subject to a penalty of $250 per occurrence. If the understatement is due to a reckless or intentional disregard of rules or regulations the penalty is $1,000 per occurrence. 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. Therefore it is critical that if an IRS agent even suggests the possibility of a penalty being imposed that the income tax return preparer immediately obtain advice from a tax attorney to determine how to proceed.
Additionally, the IRS may seek to enjoin an income tax return preparer from acting as an income tax return preparer under IRC § 7407(a). An injunction may be issued if a court determines that the preparer has (1) engaged in conduct subject to a preparer penalty under §6694 or §6695, (2) engaged in conduct subject to a criminal penalty under the Internal Revenue Code, (3) misrepresented his eligibility to practice before the IRS, (4) misrepresented his experience or education as a preparer, (5) guaranteed the payment of any tax refund or the allowance of any tax credit, or (6) engaged in any other fraudulent or deceptive conduct that substantially interferes with the proper administration of the tax law; and that injunctive relief is appropriate to prevent the recurrence of such conduct.
Lastly, the IRS may seek imprisonment in instances of particularly egregious conduct on the part of the tax return preparer. Recently, a Miami based tax preparer was sentenced to 21 months in prison, followed by three years of supervised release and ordered to perform 250 hours of community service in each of those years of supervised release. In addition, the preparer was ordered to pay $179,369 in restitution to the Internal Revenue Service (IRS). In that case, the preparer was assisting tax filers in claiming credits and deductions that the preparer knew the filers were not entitled to.
If the IRS is considering a penalty against you as a professional you should seek immediate assistance from a tax attorney at the earliest possible time.