Tax Return Preparer Penalties

Tax professionals, including CPAs and other tax return preparers, are subject to a wide range of civil and criminal penalties if the IRS determines that they have engaged in inappropriate conduct related to the preparation of tax returns. These penalties can be severe. They include fines, suspension, and imprisonment.

Beginning in 2008, Congress increased the penalties against tax return preparers who file a return containing a position for which there is not a reasonable basis. Prior to 2008, a tax practitioner could be fined $250 per return for filing a return containing a position that did not have a realistic possibility of being sustained. Under the new law, the penalty is the greater of $1,000 or half the income derived from preparing the return. Further, the standard has been increased from "realistic possibility" to "more likely than not". For a willful or reckless understatement of tax liability, the new law increases the penalty from $1,000 to the greater of $5,000 or half the preparer's income derived from preparing the return.

A tax return preparer who prepares hundreds or thousands of tax returns each season can quickly be facing fines of tens or hundreds of thousands of dollars.

In some cases, the IRS will seek a court order permanently enjoining a tax return preparer from any involvement in preparing income tax returns. If successful, such an injunction is devastating. It effectively puts the tax return preparer out of business. Even if unsuccessful, the IRS typically contacts the tax practitioner's current and former clients and publicizes the case, both of which have a tremendous negative impact on a practitioner's business and reputation.

In cases the IRS considers especially egregious, criminal charges will be brought. These charges include false claims, conspiracy, and tax fraud and, depending on the amount of the lost revenue to the government, can carry lengthy prison terms.

If the IRS is considering criminal or civil penalties against you, it is very important that you seek the assistance of an experienced tax attorney as soon as possible.

Contact the Stockbridge law office of David R. MacKusick at 678-369-0761 (Toll-Free: 1-866-408-9426) to schedule a free initial consultation with an experienced tax and criminal defense attorney.