Tax Preparer Penalties

[WhiteOleander]

This is quoted from "THE KIPLINGER TAX LETTER"

"IRS gives preparers a break on the new tighter reporting standards. Required disclosures need to be made only to clients, not to the Service, IRS says in proposed rules. The rules flesh out a 2007 law that requires preparers to disclose when a position that's taken on a tax return has a less than 50% chance of being correct. Tax pros had complained that making disclosures to the Service would mean tattling on clients. The rules also caution preparers to keep documents that substantiate any such disclosures. That way, when IRS agents come calling, the preparer can show that he or she has the records to rebut an IRS penalty.
Congress will provide more relief this year or next by requiring disclosure only in situations where there is a less than 40% chance that the position taken will be upheld by the service. That's the same standard that taxpayers must meet."

[Snaggletooth]

Other Preparers

Oleander, there is also a standard mentioned whereby practitioners "may rely on, without substantiation, information given by other advisors, preparers, or parties, as well as on previously filed tax returns." (NATP newsletter 06/19/08)

Interesting indeed...not sure if this is relief or whether it sucks advisors and other preparers into liability....

[WhiteOleander]

The way I read that is that the IRS has backed down on requiring preparers to report positions taken on a return that the IRS later decides was unfounded. The IRS was going to fine the preparer if they had not filed the form (the number escapes me) disclosing the position.

I believe that some preparers had warned the IRS that they would simply file that form with each and every return they filed so as not to be liable for any preparers penalties.

It seems now they are saying that as long as the preparer can give evidence that they informed the taxpayer, the preparer will not be penalized.