Tax Preparer Penalties, Due Diligence, and IRC 6695(g)

IRS Preparer Penalties

The IRS has imposed new regulations on complaince for tax preparers with stiff consequences for violations, even if they are unintentional.

Code section 6695(g) is one of the few laws that imposes a penalty on preparers without any regard to the intent to do wrong when preparing a return.

The penalty is currently $520 for each violation of due diligence in preparing returns with Earned Income Tax Credit, Additional Child Tax Credit, and American opportunity credit, with a potential total penalty of $1,560 per return.

BEST PRACTICES

Preparers should ensure they are meeting the due dilgence requirements of knowledge and recordkeeping. Keeping copies of all documents you rely on is crucial.

Properly completing IRS Form 8867, Paid Preparer's Due Diligence Checklist. Are you checking the correct boxes?

PAID PREPARER AUDITS

If you've received an audit notice, there are steps you can take to prepare.

  • Review your files ahead of time to determine what documents you've retained. If something is missing, document why.
  • Communicate with the agent (you, or your representative)
During the audit, communication with the agent is key. Many agents will explain their reasoning to you and this allows you to learn and use that information moving forward. If you do not have an auditor who is willing to do this, you may end up with a penalty that you don't understand.

PREPARER PENALTY ASSESSMENT

Once your audit is complete, you will likely have a large assessment. Once you receive the final notice assessment you have appeal rights. These include:
  • Informal Protest
  • Formal Protest
APPEALING PREPARER PENALTIES

Your appeal cannot be filed in tax court. You have several venue choices for filing your appeal.

Attorney Chelsea Rebeck is a Preparer Penalty Expert. Contact her today at (248) 636-4232


Keywords: 6695(g)