Tax Return Preparer Penalties and Due Diligence
Preparer responsibility goes beyond typing numbers into a return; positions need support and required diligence standards must be followed.
Position standards
A preparer can face penalties when a return position lacks the required level of authority or disclosure under the applicable rule.
Willful or reckless conduct
More serious penalties can apply to intentional disregard of rules, fraudulent conduct, or reckless behavior.
Due diligence
Certain credits, filing statuses, and other tax benefits carry specific preparer due-diligence obligations.
Exam strategy
Separate ordinary negligence or unsupported positions from willful misconduct and from special due-diligence failures.
The takeaway
Tax preparers can face different penalties depending on the level of support for a position, the preparer's conduct, and whether required due diligence was performed.
Related Summit resources
FAQ
What is the key distinction?
Tax preparers can face different penalties depending on the level of support for a position, the preparer's conduct, and whether required due diligence was performed.
What should I identify first?
Preparer responsibility goes beyond typing numbers into a return; positions need support and required diligence standards must be followed.
Why is this tested?
Understand why tax preparers can face penalties for unsupported positions, misconduct, or failing required diligence procedures.