REG Tax Procedure · Updated November 2026
Who Gets the Penalty, the Taxpayer or the Preparer?
Identify whose conduct created the problem and how serious that conduct was before thinking about penalty amounts.
Taxpayer penalties
Can arise from underpayment, negligence, disregard of rules, substantial understatement, fraud, and failures to file or pay.
Preparer penalties
Can arise when a preparer takes improper positions or engages in prohibited conduct under applicable professional and tax rules.
Intent matters
Reasonable error, negligence, recklessness, willful conduct, and fraud are not interchangeable.
Disclosure and authority
Whether a position is disclosed and the level of authority supporting it can affect the analysis.
The takeaway
Identify the actor and level of misconduct before thinking about the penalty amount.
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FAQ
Can both taxpayer and preparer face consequences from one return?
Yes.
Is negligence the same as fraud?
No.
Should I memorize exact amounts first?
Understand the conduct categories first, then current amounts.