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Is the preparer aware of any errors, omissions, or mistakes on the return under examination?
In January, IRS Commissioner Doug Shulman announced the results of a comprehensive six-month study of the tax return preparer industry, which proposed new registration, testing, and continuing education of tax return preparers.
And, if that isn't enough to deter someone from using an unlicensed tax preparer, consumers also are at risk of identity theft when they give their Social Security numbers and personal financial information to unlicensed tax practitioners, Wagner said.
"What they (the IRS) really should do is simplify the tax laws so ordinary middle-class Americans don't need to hire a tax preparer to do their taxes," Davis said.
He said the new measures will include paid tax preparer enforcement and investigation of preparer misconduct.
In the first of these revisions (1989), the tax preparer penalty provision (in particular the [section] 6694(a) penalty) was redirected, expanded in scope, and increased in magnitude.
The demand for well-trained, high-quality tax preparers remains high, as roughly 70 million taxpayers turn to a paid tax preparer for assistance filing a tax return each year.
Furthermore, the tax return preparer may not ignore the implications of information furnished to, or known by, the preparer, and must make reasonable inquiries if a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that the information furnished is incorrect, inconsistent, or incomplete.
Asking questions is worth the time it takes to make sure a tax preparer is hired with the skill level needed to prepare an individuals taxes at an affordable price.
The IRS originally began charging a user fee for issuing a PTIN in connection with its tax return preparer registration program, which required tax return preparers who were not CPAs, attorneys, or enrolled agents to pass an exam and register with the IRS.
Agostino noted, however, that many times such audits do result in "very substantial civil penalties for noncompliance." Geiger agreed, citing a recent case where a preparer was essentially defrauding the government out of "principle." According to Geiger, the preparer had stated, "I think that the government should be allowed to have only what people are willing to pay, and in that regard I'll decide what that should be." Ultimately, the preparer's tax identification number (PTIN) and electronic filing identification number (EFIN) were revoked, but she set up new ones through her daughter and continued preparing returns.
Before delving into the content of CCA 201519029, it's important to understand the basic definitions of a tax preparer and willful or reckless conduct.