Preparer penalties

Each preparer penalty is its own provision, with its own trigger, its own standard and in some cases its own stated defence. They are not one rule with one amount.

A scoped rule is not a rule about everyone

Several of these rules are written with a scope: they reach certain persons, certain conduct, or certain returns. The scope is part of the rule, so we state who a provision reaches rather than turning it into a rule about everyone.

Several of these amounts are adjusted each year, so we describe how each one is computed and leave the figure to the year in question rather than printing a number that quietly goes stale.

What the authority says

Any return or claim for refund prepared by a tax return preparer shall bear an identifying number of the preparer, as the Secretary prescribes, for securing proper identification of the preparer.
The identifying number is a device for identifying the preparer to the Secretary.
A practitioner may not wilfully, recklessly or through gross incompetence sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that lacks a reasonable basis, is an unreasonable position as described in § 6694(a)(2), or is a wilful attempt to understate liability or a reckless or intentional disregard of rules or regulations as described in § 6694(b)(2).
A practitioner may not advise a client to take a frivolous position on a document submitted to the Internal Revenue Service.
A practitioner must inform a client of any penalties reasonably likely to apply to a position taken on a return the practitioner prepared or advised on, and of the opportunity to avoid such penalties by disclosure.
A practitioner generally may rely in good faith without verification on information furnished by the client, but may not ignore the implications of information actually known and must make reasonable inquiries if the information appears incorrect, inconsistent or incomplete.
A penalty applies to a tax return preparer who fails to furnish a completed copy of the return or claim for refund to the taxpayer.
A penalty applies to a tax return preparer who fails to sign a return or claim for refund that the preparer is required to sign.
A penalty applies to a tax return preparer who fails to furnish the preparer's identifying number as required.
A penalty applies to a tax return preparer who fails to retain a copy of the return or a list of returns prepared, as required.
Under § 6695(g), a penalty applies for each failure to comply with due-diligence requirements prescribed by the Secretary with respect to determining eligibility for, or the amount of, the earned income credit, the child tax credit and related credits, the American Opportunity Tax Credit, and head-of-household filing status.
A tax return preparer who determines eligibility for, or the amount of, an applicable credit or head-of-household filing status must meet the due-diligence requirements of this section for each such determination.
The preparer must complete Form 8867, Paid Preparer's Due Diligence Checklist, based on information the preparer obtained from the taxpayer or otherwise reasonably obtained, and must submit it in the manner required.
The preparer must complete the applicable worksheets or otherwise record the computation of the credit amount.
The preparer must not know, or have reason to know, that any information used in determining eligibility or the amount is incorrect, and must make reasonable inquiries where information appears incorrect, inconsistent or incomplete, contemporaneously documenting those inquiries and the responses.
The preparer must retain the checklist, worksheets, a record of how and when the information was obtained, and the documents relied on, for three years as specified in the regulation.
Under § 6694(a), a penalty applies where any part of an understatement of liability on a return or claim is due to a position for which there was not substantial authority, the preparer knew or reasonably should have known of the position, and the position was not disclosed or had no reasonable basis.
For a tax shelter or a reportable transaction to which § 6662A applies, the standard under § 6694(a) is whether it was reasonable to believe the position would more likely than not be sustained on its merits.
No penalty applies under § 6694(a) if it is shown that there is reasonable cause for the understatement and the preparer acted in good faith.
Under § 6694(b), a separate and larger penalty applies where the understatement is due to a wilful attempt to understate liability or to a reckless or intentional disregard of rules or regulations.
The § 6694(a) and § 6694(b) penalties are computed by reference to a fixed amount or a percentage of the income derived by the preparer with respect to the return, whichever is greater, and the amounts are adjusted for inflation.
A civil penalty applies to a person engaged in the business of preparing, or providing services in connection with the preparation of, returns who discloses or uses information furnished in connection with the preparation of a return other than to prepare or assist in preparing the return.
The civil penalty applies for each disclosure or use, subject to a stated annual maximum, and applies whether or not the disclosure or use was knowing or reckless.
The exceptions that apply for purposes of § 7216 apply for purposes of this section as well.

Every source on this page shows the body that issued it and the date we read it. The text behind this centre was last read on 2026-08-24.

Where this comes from

26 U.S.C. § 6109 — Identifying numbersUnited States Code (GPO, govinfo). Read for: Any return or claim for refund prepared by a tax return preparer shall bear an identifying number of the preparer, as the Secretary prescribes, for securing proper identification of the preparer. Read on 2026-08-16.
31 C.F.R. § 10.34 — Standards with respect to tax returns and documents, affidavits and other papersElectronic Code of Federal Regulations. Read for: A practitioner may not wilfully, recklessly or through gross incompetence sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that lacks a reasonable basis, is an unreasonable position as described in § 6694(a)(2), or is a wilful attempt to understate liability or a reckless or intentional disregard of rules or regulations as described in § 6694(b)(2). Read on 2026-08-16.
26 U.S.C. § 6695 — Other assessable penalties with respect to the preparation of tax returns for other personsUnited States Code (GPO, govinfo). Read for: A penalty applies to a tax return preparer who fails to furnish a completed copy of the return or claim for refund to the taxpayer. Read on 2026-08-16.
26 C.F.R. § 1.6695-2 — Tax return preparer due diligence requirements for certain tax returns and claimsElectronic Code of Federal Regulations. Read for: A tax return preparer who determines eligibility for, or the amount of, an applicable credit or head-of-household filing status must meet the due-diligence requirements of this section for each such determination. Read on 2026-08-16.
26 U.S.C. § 6694 — Understatement of taxpayer's liability by tax return preparerUnited States Code (GPO, govinfo). Read for: Under § 6694(a), a penalty applies where any part of an understatement of liability on a return or claim is due to a position for which there was not substantial authority, the preparer knew or reasonably should have known of the position, and the position was not disclosed or had no reasonable basis. Read on 2026-08-16.
26 U.S.C. § 6713 — Disclosure or use of information by preparers of returnsUnited States Code (GPO, govinfo). Read for: A civil penalty applies to a person engaged in the business of preparing, or providing services in connection with the preparation of, returns who discloses or uses information furnished in connection with the preparation of a return other than to prepare or assist in preparing the return. Read on 2026-08-16.

What we are not saying here

Nothing on this page should be read as saying Confers no licence, credential, qualification or competence finding.; Confers no authority to practice or represent before the IRS.; Says nothing about electronic filing or about any e-file identifier.; A practitioner rule. Its overlap with § 6694 is deliberate but the two are separate authorities with separate consequences.; Dollar amounts under this section are adjusted for inflation and must always be stated with the year they apply to.; The due-diligence requirement reaches only the credits and filing status the statute and the regulations name. It is not a rule about every return.; The obligation attaches to the covered credits and to head-of-household status. A return with none of those has no requirement under this section.; Says nothing about representation, identifiers or programme participation.; Every dollar figure under this section is inflation-adjusted and must be stated with the calendar year it applies to.; This is a preparer penalty, distinct from taxpayer penalties and from Circular 230 discipline.; Civil penalty amounts are adjusted for inflation and must be stated with the year they apply to.; Distinct from the criminal offence in § 7216, with a different mental-state requirement..

Where to go next

Whether the preparer definition reaches what I didConduct and compensation, in the order the text asks about them.
What a preparer identifying number isWhen the Code requires it, and what holding one does not settle.
How electronic filing participation worksA firm-level programme with a firm-level identifier.
Who may deal with the IRS for a taxpayerEligibility and authorization are two separate requirements.
What enrolled agent, CPA and attorney each meanSide by side, in the regulation's order, with no ranking.
Whether the practice rules reach mePart 10 is written with a scope, and the scope is part of the rule.
How IRS discipline works, and how to check itThe three sanctions, the process behind them, and what a published record does and does not say.
What due diligence requiresThe professional standard and the statutory requirement are not one rule.
When client information may be disclosed or usedDefined terms, consent, and the exceptions the rules state.
Where bookkeeping ends and preparation beginsWhat the federal definitions look at, which is not the job title.
How this centre works and where it stopsThe limits we hold ourselves to, including the state boundary.
The authority behind all of itEvery source, what it was read for, and the date it was read.

This is general education for people who work in tax, not legal or tax advice, and not a determination about anyone's status or obligations. Rules change and facts matter. For a decision about your own situation or your own practice, take advice from a licensed professional.