10/31/2026
This is what you are asking your tax preparer to risk if you are asking them to be compliant in commiting tax fraud by reporting inaccurate information.
🚨 Tax Preparer Compliance Alert: Know Your Penalties 🚨
At Hometown Tax, we prioritize absolute accuracy, integrity, and strict adherence to IRS guidelines. To keep our office aligned with federal standards, here is a quick reference guide to the key civil and criminal penalties under the Internal Revenue Code (IRC) for tax return preparers.
📝 1. Conduct & Tax Return Penalties (IRC § 6694)
• Unreasonable Positions (§ 6694(a)): $1,000 or 50% of the return income (whichever is greater) for understatements due to positions lacking a realistic possibility of being sustained.
• Willful or Reckless Conduct (§ 6694(b)): $5,000 or 75% of the return income (whichever is greater) for intentional disregard of rules or willful understatements.
📇 2. Procedural & Operational Failures (IRC § 6695)
• Basic Failures ($60 per failure; annual maximum $31,500 per category):
• Failure to furnish a copy of the return to the taxpayer (§ 6695(a))
• Failure to sign the return (§ 6695(b))
• Failure to furnish a PTIN / Identifying Number (§ 6695(c))
• Failure to retain a copy or list of prepared returns (§ 6695(d))
• Failure to file correct information returns (§ 6695(e))
• Negotiating Checks (§ 6695(f)): $635 per check for endorsing or negotiating client refund checks.
• Due Diligence Failures (§ 6695(g)): $635 per failure for lack of diligence in determining eligibility for EITC, CTC, ACTC, ODC, AOTC, and Head of Household status.
🔒 3. Privacy & Disclosure Violations (IRC § 6713)
• Unauthorized Disclosure: $250 per use/disclosure (annual maximum $10,000).
• Identity Theft Scenarios: $1,000 per disclosure if tied to identity theft crimes (annual maximum $50,000).
⚖️ 4. Criminal Penalties
• Unauthorized Disclosure (§ 7216): Misdemeanor. Up to $1,000 fine and/or 1 year in prison for knowingly or recklessly sharing return data.
• Aiding False Returns (§ 7206(2)): Felony. Up to $100,000 fine and/or 3 years in prison for willfully assisting in fraudulent returns.
• Willful Failure to File or Pay (§ 7203): Misdemeanor. Up to $25,000 fine and/or 1 year in prison.
• Fraud & False Statements (§ 7206(1)): Felony. Up to $100,000 fine and/or 3 years in prison for signing false declarations under penalty of perjury.
🛡️ Defenses & Relief
Civil penalties under § 6694(a) and § 6695 may be abated if there is Reasonable Cause and the preparer acted in good faith. Note: Reasonable cause is not a defense against willful criminal violations.
Stay diligent, stay compliant, and keep serving our clients with excellence! đź’Ľđź“‹
đź“ž Questions? Contact Hometown Tax at (918) 766-3202
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