Legal Support Services for Tax Preparers
If you are under investigation by the IRS, Department of Justice, Office of Professional Responsibility (OPR), or other licensing authority, you should consult a tax attorney. The IRS and Department of Justice are focused on enforcing Congress’ penalty scheme to punish tax professionals, such as CPAs, tax attorneys, actuaries, appraisers, enrolled agents, and paid tax return preparers, for fraudulent and unethical behavior.
Tax preparer penalties can result in civil penalties, suspension, disbarment, and criminal prosecution.
The primary penalty regime for paid preparers is IRC §6694. IRC §6694 provides the following:
- If a tax return understatement was due to an unreasonable position based on the preparer’s advice, a minimum penalty of $1,000 is assessed unless the preparer can prove good faith and that the understatement was due to a reasonable cause.
- If the understatement is due to the preparer’s willful attempt to understate a tax liability or reckless or intentional disregard of rules, a minimum penalty of $5,000 is assessed.
Other Considerations
The IRS may also seek tax preparer penalties utilizing the following tax statutes:
- Failure by a tax return preparer to provide the taxpayer with a copy of the tax return. IRC § 6695.
- Failure by a tax return preparer to sign a required return. IRC § 6695.
- Failure by a tax return preparer to provide a required taxpayer identification number. IRC §6695.
- Failure by a 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. IRC §6695.
- Failure by a tax return preparer to comply with the due diligence requirements concerning determining a taxpayer’s eligibility for, or amount of, the earned income credit. IRC §6695
- They were aiding and aiding and abetting the understatement of a tax liability. IRC §6701.
- Disclosing or using any tax return information other than to prepare or assist in preparing the taxpayer’s return. IRC §6713
CPAs, tax attorneys, and enrolled agents are not the only ones that need to be concerned about an IRS tax preparer investigation. Appraisers can also be subject to penalties. IRC §6695A imposes a penalty on a person who completes 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. The penalty assessed against the appraiser can be up to 125% of the gross fee received for the appraisal.
The IRS may also petition the court to prohibit or enjoin the income tax preparer from engaging in abusive practices under IRC §7407(a).
ITax preparers may be referred to the IRS’s Office of Professional Responsibility. In addition to monetary civil and criminal penalties, discipline can result in a private reprimand, suspension, or the permanent loss of license to practice. The preparer’s employer, firm, or entity is also exposed to tax penalties if it knew or reasonably should have known the conduct giving rise to the penalty.
Contact Us to Get Legal Help for Tax Preparers
If you are a tax professional being investigated by the IRS, Department of Justice, or other licensing authority, it is serious. In addition to civil tax penalties, a tax preparer’s livelihood and freedom are at stake. You should seek the immediate advice of a tax lawyer.
Contact the Law Offices of Todd S. Unger, Esq. LLC now to discuss your options (877) 544-4743.