ETHICS AND PREPARER ETHICS AND PREPARER RESPONSIBILITYRESPONSIBILITY

PREPARERSPREPARERS

generally defined as individuals or entities generally defined as individuals or entities who prepare returns for compensation who prepare returns for compensation

they are required to sign the return as the they are required to sign the return as the preparer. preparer.

required to provide identification numbers required to provide identification numbers on returns they prepare. on returns they prepare.

They are required to keep records of They are required to keep records of returns prepared returns prepared

Signature Requirements Signature Requirements

a tax return preparer must sign the tax a tax return preparer must sign the tax return or refund claim in the appropriate return or refund claim in the appropriate space provided on the return or claim after space provided on the return or claim after it is completed and before it is presented it is completed and before it is presented to the taxpayer for signature. to the taxpayer for signature.

A preparer who does not do so is subject A preparer who does not do so is subject to a penalty of $50 for each failure. to a penalty of $50 for each failure.

The maximum penalty is $25,000 per The maximum penalty is $25,000 per person per calendar year. person per calendar year.

FAILURE TO ENTER FAILURE TO ENTER IDENTIFYING NUMBERIDENTIFYING NUMBER

There is a penalty of $50 for each failure There is a penalty of $50 for each failure of a preparer to place an identifying of a preparer to place an identifying number on a return or refund claim that he number on a return or refund claim that he prepares. prepares.

No penalty is imposed if the failure to No penalty is imposed if the failure to furnish the identification number is due to furnish the identification number is due to reasonable cause and not due to willful reasonable cause and not due to willful neglect. neglect.

Providing Copy of Return to Providing Copy of Return to Taxpayer Taxpayer

preparer must furnish a completed copy of preparer must furnish a completed copy of the return or claim to taxpayer no later the return or claim to taxpayer no later than the time the return or claim is than the time the return or claim is presented to the taxpayer for signature.presented to the taxpayer for signature.

Failure to do so results in a penalty of $50 Failure to do so results in a penalty of $50 for each failure unless reasonable cause for each failure unless reasonable cause exists.exists.

The maximum penalty cannot exceed The maximum penalty cannot exceed $25,000 $25,000

Record-Keeping Requirements Record-Keeping Requirements

a preparer must retain a copy of a return a preparer must retain a copy of a return prepared or keep a list of the name and taxpayer prepared or keep a list of the name and taxpayer identification number of the taxpayer.identification number of the taxpayer.

For the period ending three years after the close For the period ending three years after the close of the return period, a preparer must retain a of the return period, a preparer must retain a completed copy of a return or refund claim or completed copy of a return or refund claim or keep a list of the name, taxpayer identification keep a list of the name, taxpayer identification number, and taxable year of the taxpayer, as number, and taxable year of the taxpayer, as well as the type of return or claim for refund. well as the type of return or claim for refund.

PREPARER PENALTIESPREPARER PENALTIES

Aiding and abetting-Aiding and abetting- Any person who aids or Any person who aids or assists in, or gives advice concerning, the assists in, or gives advice concerning, the preparation or presentation of any portion of a preparation or presentation of any portion of a return, affidavit, claim, or other document, with return, affidavit, claim, or other document, with the knowledge that the portion, if submitted, will the knowledge that the portion, if submitted, will create an understatement of the tax liability of create an understatement of the tax liability of another person must pay a penalty another person must pay a penalty The penalty is $1,000 per violation with regard to a The penalty is $1,000 per violation with regard to a

return or document concerning a taxpayer other than return or document concerning a taxpayer other than a corporation.a corporation.

PREPARER PENALTIESPREPARER PENALTIES

Aiding and abetting- Aiding and abetting- The penalty is The penalty is $10,000 with regard to a return or other $10,000 with regard to a return or other document concerning the tax liability of a document concerning the tax liability of a corporation. The penalty applies only once corporation. The penalty applies only once for assistance given to a taxpayer for a for assistance given to a taxpayer for a specific tax period regardless of the specific tax period regardless of the number of documents prepared that cause number of documents prepared that cause an understatement for that tax period an understatement for that tax period

UNDERSTATEMENT PENALTIESUNDERSTATEMENT PENALTIES

If a preparer prepares a return and an If a preparer prepares a return and an understatement is due and takes and the understatement is due and takes and the preparer knew or reasonably should have preparer knew or reasonably should have known of the unreasonable position. A known of the unreasonable position. A penalty is imposed equal to the greater of penalty is imposed equal to the greater of $1,000 or 50 percent of the income $1,000 or 50 percent of the income derived (or to be derived) by the tax return derived (or to be derived) by the tax return preparer from the preparation of the return preparer from the preparation of the return or claim with respect to which the penalty or claim with respect to which the penalty is imposed. is imposed.

UNREASONALBE POSITIONS UNREASONALBE POSITIONS ARE:ARE:

undisclosed positions that are not based on undisclosed positions that are not based on substantial authority substantial authority

positions that are disclosed but lack a positions that are disclosed but lack a reasonable basis reasonable basis

tax shelters and reportable transactions if it is tax shelters and reportable transactions if it is not reasonable to believe the position would not reasonable to believe the position would more likely than not be sustained on its merits more likely than not be sustained on its merits

The penalty does not apply if the preparer shows The penalty does not apply if the preparer shows reasonable cause for the understatement and reasonable cause for the understatement and that he acted in good faith. that he acted in good faith.

WILLFUL UNDERSTATEMENTWILLFUL UNDERSTATEMENT

If the understatement is due to the If the understatement is due to the preparer's reckless or intentional disregard preparer's reckless or intentional disregard of rules or regulations. The penalty for of rules or regulations. The penalty for willful or reckless conduct is equal to the willful or reckless conduct is equal to the greater of $5,000 or 50 percent of the greater of $5,000 or 50 percent of the income derived (or to be derived) by the income derived (or to be derived) by the tax return preparer from the preparation of tax return preparer from the preparation of the return or claim with respect to which the return or claim with respect to which the penalty is imposed the penalty is imposed

NEGOTIATIING TAXPAYERS NEGOTIATIING TAXPAYERS REFUND CHECKREFUND CHECK

A practitioner who prepares tax returns A practitioner who prepares tax returns may not endorse or otherwise negotiate may not endorse or otherwise negotiate any check issued to a client by the any check issued to a client by the government in respect of a Federal tax government in respect of a Federal tax liability liability

A return preparer who does so, directly or A return preparer who does so, directly or through an agent, must pay a penalty of through an agent, must pay a penalty of $500 for each check so negotiated $500 for each check so negotiated

There is no reasonable cause exceptionThere is no reasonable cause exception

IMPROPER DISCLOSUREOF IMPROPER DISCLOSUREOF RETURN INFORMATIONRETURN INFORMATION

There is a penalty of $250 for each There is a penalty of $250 for each improper disclosure of return information improper disclosure of return information by a person whose business is preparing, by a person whose business is preparing, or providing services for the preparation or providing services for the preparation of, income tax returns or any person who of, income tax returns or any person who for compensation prepares an income tax for compensation prepares an income tax return for another person. return for another person.

CRIMINAL PENALTIESCRIMINAL PENALTIES

It is a misdemeanor for a preparer to It is a misdemeanor for a preparer to disclose any information furnished to him disclose any information furnished to him for the preparation of any income tax for the preparation of any income tax return or to use the information for any return or to use the information for any purpose other than to prepare, or assist in purpose other than to prepare, or assist in preparing, an income tax return. The preparing, an income tax return. The penalty is a fine of up to $1,000 or penalty is a fine of up to $1,000 or imprisonment for up to one year or both, imprisonment for up to one year or both, together with the costs of prosecution. together with the costs of prosecution.

CRIMINAL PENALTIESCRIMINAL PENALTIES

Any person who willfully attempts in any Any person who willfully attempts in any manner to evade or defeat any tax or manner to evade or defeat any tax or payment of any tax imposed by the Code payment of any tax imposed by the Code is guilty of a felony. A person convicted of is guilty of a felony. A person convicted of tax evasion may be fined up to $100,000 tax evasion may be fined up to $100,000 ($500,000 for a corporation) or imprisoned ($500,000 for a corporation) or imprisoned not more than five years or both, together not more than five years or both, together with the costs of prosecution with the costs of prosecution

CRIMINAL PENALTIESCRIMINAL PENALTIES

Any person required by the Code or Any person required by the Code or regulations to file a return, keep any regulations to file a return, keep any records or supply any information who records or supply any information who willfully fails to file the return, keep the willfully fails to file the return, keep the records or supply the information is guilty records or supply the information is guilty of a misdemeanor. A person convicted of of a misdemeanor. A person convicted of this offense may be fined up to $25,000 this offense may be fined up to $25,000 ($100,000 for a corporation) or imprisoned ($100,000 for a corporation) or imprisoned not more than one year or both, together not more than one year or both, together with the costs of prosecution with the costs of prosecution

CRIMINAL PENALTIESCRIMINAL PENALTIES

Any person who willfully aids or assists in, or Any person who willfully aids or assists in, or procures, counsels, or advises the preparation procures, counsels, or advises the preparation or presentation of a return, affidavit, claim, or or presentation of a return, affidavit, claim, or other document under the tax laws that is other document under the tax laws that is fraudulent or false as to any material matter is fraudulent or false as to any material matter is guilty of a felony.guilty of a felony.

A person convicted of this offense may be fined A person convicted of this offense may be fined up to $100,000 ($500,000 for a corporation) or up to $100,000 ($500,000 for a corporation) or imprisoned not more than three years or both, imprisoned not more than three years or both, together with the costs of prosecution together with the costs of prosecution

CRIMINAL PENALTIESCRIMINAL PENALTIES

Any person who fails to comply with a Any person who fails to comply with a summons issued under the Code that calls summons issued under the Code that calls for testimony or for the production of for testimony or for the production of books or documents and neglects to books or documents and neglects to appear or to produce the books or appear or to produce the books or documents has committed a crime. A documents has committed a crime. A person convicted of this offense may be person convicted of this offense may be fined not more than $1,000 or imprisoned fined not more than $1,000 or imprisoned not more than one year or both, together not more than one year or both, together with costs of prosecution. with costs of prosecution.

PRACTICE BEFORE THE IRSPRACTICE BEFORE THE IRS

Attorneys, CPAs, enrolled agents and Attorneys, CPAs, enrolled agents and enrolled actuaries may practice before the enrolled actuaries may practice before the IRS IRS

Some individuals can practice before the Some individuals can practice before the IRS without enrollment IRS without enrollment An individual may represent a member of his An individual may represent a member of his

immediate family immediate family A regular full-time employee of an individual A regular full-time employee of an individual

employer may represent the employer employer may represent the employer

PRACTICE BEFORE THE IRSPRACTICE BEFORE THE IRS

A general partner or a regular full-time A general partner or a regular full-time employee of a partnership may represent the employee of a partnership may represent the partnership partnership

bona fide officer or a regular full-time bona fide officer or a regular full-time employee of a corporation employee of a corporation

A regular full-time employee of a trust, A regular full-time employee of a trust, receivership, guardianship, or estate receivership, guardianship, or estate

RESPONSIBILITIESOF PERSONS RESPONSIBILITIESOF PERSONS PRACTICING PRACTICING

They must submit information as They must submit information as requested, unless it is privileged requested, unless it is privileged

They must advise the client of errors They must advise the client of errors They must comply with due diligence They must comply with due diligence

requirements requirements They must not violate restrictions on fees They must not violate restrictions on fees They must comply with rules on returning They must comply with rules on returning

clients' records clients' records

RESPONSIBILITIESOF PERSONS RESPONSIBILITIESOF PERSONS PRACTICINGPRACTICING

They must not engage in practice that They must not engage in practice that results in a conflict of interest results in a conflict of interest

They must comply with restrictions on They must comply with restrictions on advertising advertising

They must comply with rules concerning They must comply with rules concerning the positions taken on returns and advice the positions taken on returns and advice given given

They must comply with rules on tax shelter They must comply with rules on tax shelter opinions opinions

REQUESTS FROM IRSREQUESTS FROM IRS

A practitioner must, on a proper and lawful A practitioner must, on a proper and lawful request by a duly authorized IRS officer or request by a duly authorized IRS officer or employee, promptly submit records or employee, promptly submit records or information in any matter before the IRS information in any matter before the IRS unless the practitioner believes in good unless the practitioner believes in good faith and on reasonable grounds that the faith and on reasonable grounds that the records or information are privileged records or information are privileged

REQUESTS FROM IRSREQUESTS FROM IRS

A practitioner may not interfere, or attempt A practitioner may not interfere, or attempt to interfere, with any proper and lawful to interfere, with any proper and lawful effort by the IRS or the Office of effort by the IRS or the Office of Professional Responsibility to obtain any Professional Responsibility to obtain any record or information unless the record or information unless the practitioner believes in good faith and on practitioner believes in good faith and on reasonable grounds that the record or reasonable grounds that the record or information is privileged information is privileged