Finding your way on the intricate paths of tax preparation requires expertise and a keen awareness of the potential pitfalls that come with the territory. As a tax professional, understanding and adhering to the Internal Revenue Service (IRS) standards is crucial. Failing to do so can lead to significant penalties, tarnishing your reputations and even impacting your livelihood.
What Are Tax Return Preparer Penalties?
The IRS imposes various penalties on tax return preparers who fail to comply with tax laws, rules, and regulations. These penalties are designed to uphold the integrity of the tax system and ensure that preparers maintain high standards of conduct. Some common infractions and their associated penalties include:
- Failure to Furnish Identifying Number: Preparers are required to include their Preparer Tax Identification Number (PTIN) on tax returns or claims for refunds they prepare.
- Failure to Sign Return: Each tax return or refund claim prepared must bear the preparer’s signature.
- Failure to Retain Copy or List: Preparers must retain a copy of each return or a list of the taxpayers they have served.
- Failure to File Correct Information Returns: If a preparer fails to file correct information returns, they face a penalty.
- Negotiation of Check: Preparers are prohibited from endorsing or negotiating any check issued to a taxpayer. Violating this rule incurs a penalty of $635 for returns filed in 2025.
For most of these penalties, the IRS issues a fine to the tax preparer ranging from $60 per failure to $31,500 (as of 2025).
More Severe Consequences of Non-Compliance
Non-compliance with IRS regulations can lead to more severe consequences than monetary penalties. Preparers may face suspension or disbarment from practice before the IRS, legal action, and damage to their professional reputation. The IRS’s Office of Professional Responsibility (OPR) oversees tax professionals’ conduct and enforces practice standards.
Best Practices for Tax Preparers
At Highland Tax Group, we aim to stick to these best practices, so we avoid any penalties or non-compliance with the IRS:
- Staying updated on tax laws and IRS regulations
- Keeping detailed records of all tax returns and all associated documentation
- Verifying all information clients provide us to ensure its accuracy
- Following the guidelines of Circular 230, concerning practice before the IRS
- Consulting with colleagues or legal advisors when we need guidance
Highland Tax Group blog is a great resource for staying current on tax regulations. If you need assistance with any tax or IRS issues, call the Highland Tax Group or contact them online to discuss your needs.