Loading…
Enrolled Agent ReadyStudyingPart 1
Switch exam
Special Enrollment Examination
Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: BusinessesPart 3SEE Part 3: Representation, Practices and ProceduresPractices and Procedures
The Internal Revenue Code penalties and record rules that apply to paid preparers (sections 6694, 6695, 6107, 6060, 7216 and the due diligence rules for refundable credits and head of household) and the taxpayer penalties a preparer must explain: accuracy-related, fraud and frivolous return penalties. Amounts for returns filed in 2026 come from Rev. Proc. 2024-40.
Practices and Procedures5 min read7 sections
Preparer penalties are where Circular 230 meets the Code: the same conduct can bring an OPR sanction and a dollar penalty. The SEE asks which section applies, the amount for a given failure, and the record-keeping periods. Note that penalty amounts are indexed by the year the return is filed, so 2025 returns filed in 2026 use the 2026 figures in Rev. Proc. 2024-40.
The signing preparer is the individual with primary responsibility for the overall substantive accuracy of the return (Treas. Reg. 301.7701-15(b)(1)).
| Penalty | Trigger | Amount |
|---|---|---|
| 6694(a) | Position the preparer knew or should have known was unreasonable | Greater of $1,000 or 50% of income from the return |
| 6694(b) | Willful attempt to understate, or reckless or intentional disregard of rules | Greater of $5,000 or 75% of income from the return |
Example: a $12,000 fee on a willfully understated return gives 75% x $12,000 = $9,000, which beats $5,000.
These are assessable penalties outside the deficiency procedures. To sue in district court, pay at least 15% and file a refund claim within 30 days after notice and demand; then sue within 30 days of denial.
Every note. Every question. One pass.
5 more sections of this note are part of Premium.
From about US$12.42/mo on the Until-you-pass pass (12 months)