If you are a CPA and/or tax accountant, then you have certain obligations to meet with the IRS when it comes to preparing tax returns for your clients. The most common penalties are broken down below. Call our office to discuss your options whether you have already been contacted or not; we can devise a plan.
IRS Penalties for Tax Accountants and CPAs
IRC § 6694 – Understatement of Taxpayer’s Liability by Tax Return Preparer
IRC § 6694(a) – Understatement due to unreasonable positions.
The penalty is the greater of $1,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund.
IRC § 6694(b) – Understatement due to willful or reckless conduct.
The penalty is the greater of $5,000 or 75% of the income derived by the tax return preparer with respect to the return or claim for refund.
IRC § 6695 – Other Assessable Penalties with Respect to the Preparation of Tax Returns for Other Persons
IRC § 6695(a) – Failure to furnish copy to taxpayer.
Penalty: $50 for each failure, not to exceed $26,000 in a calendar year.
IRC § 6695(b) – Failure to sign return.
Penalty: $50 for each failure, not to exceed $26,000 in a calendar year.
IRC § 6695(c) – Failure to furnish identifying number.
Penalty: $50 for each failure, not to exceed $26,000 in a calendar year.
IRC § 6695(d) – Failure to retain copy or list.
Penalty: $50 for each failure, not to exceed $26,000 in a return period.
IRC § 6695(e) – Failure to file correct information returns.
Penalty: $50 for each failure, not to exceed $26,000 in a return period.
IRC § 6695(f) – Negotiation of check.
Penalty: $520 for endorsing or negotiating any tax refund check.
IRC § 6695(g) – Failure to be diligent in determining eligibility for credits (Child Tax Credit, American Opportunity Tax Credit, Earned Income Credit).
Penalty: $520 for each failure.
IRC § 6700 – Promoting Abusive Tax Shelters
Penalty for promoters of abusive tax shelters is generally $1,000 per organization or sale of an abusive plan (or, if less, 100% of the income derived from the activity).
IRC § 6701 – Penalties for Aiding and Abetting Understatement of Tax Liability
Penalty is $1,000 ($10,000 if related to a corporation’s return). This applies once per taxpayer per tax period or event.
IRC § 6713 – Disclosure or Use of Information by Preparers of Returns
Penalty: $250 per unauthorized disclosure or use, with a maximum of $10,000 per calendar year.
IRC § 7206 – Fraud and False Statements
Felony offense
Penalty: Up to $100,000 fine ($500,000 for corporations), up to 3 years imprisonment, or both.
Includes costs of prosecution.
IRC § 7207 – Fraudulent Returns, Statements, or Other Documents
Misdemeanor offense
Penalty: Up to $10,000 fine ($50,000 for corporations), up to 1 year imprisonment, or both.
IRC § 7216 – Disclosure or Use of Information by Preparers of Returns
Misdemeanor offense for knowingly or recklessly disclosing return information.
Penalty: Up to $1,000 fine, up to 1 year imprisonment, or both.
Includes costs of prosecution.
IRC § 7407 – Action to Enjoin Tax Return Preparers
A federal district court may enjoin a tax return preparer from engaging in proscribed conduct or, in extreme cases, from continuing to operate as a tax return preparer altogether.
IRC § 7408 – Action to Enjoin Specified Conduct Related to Tax Shelters and Reportable Transactions
A federal district court may enjoin a person from engaging in prohibited conduct, including violations of Circular 230.
Consult a Tax Accountant Penalty Defense Attorney
Understanding these penalties is crucial. If you have been accused of any of these violations or are concerned about compliance, contact a Tax Accountant Penalty Defense Attorney today to protect your practice and reputation.