September 01, 2008

WARNING: Tax Preparer Penalties May Now Apply to You (2008, 22:05)

WARNING: Tax Preparer Penalties May Now Apply to You

Probate & Property Magazine: November/December 2008, Vol. 22, No. 5

By Tina R. Green

Tina R. Green is a partner in the Texarkana, Texas, firm of Patton Roberts PLLC

Section 6694 of the Internal Revenue Code was implemented with the passage of the Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520. It authorized the imposition of penalties on those who prepare income tax returns for compensation regardless of their educational background or profession—lawyers or accountants—under certain circumstances. In the event the amount of income tax on a tax return or claim for refund (collectively referred to herein as “a return”) was understated, the preparer may be subject to penalty under Code § 6694 if the preparer failed to comply with the applicable standards of conduct. Former Code § 7701(a)(36) defined a person to be an “income tax return preparer” if he or she prepares (or employs one or more persons to prepare) all or a substantial portion of a return under Subtitle A (income taxes) for compensation.

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