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Special Enrollment Examination

Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: Businesses Part 3SEE Part 3: Representation, Practices and Procedures

Part 3 Return Preparer Rules and Penalties question: mortgage broker a list

Part 3Return Preparer Rules and Penalties

Without the client's written consent, a preparer gives a mortgage broker a list of clients' incomes to market loans. The preparer has violated:

A No rule, as the broker is a financial professional
B Only section 6107, the copy-retention rule
C Section 7216, which can bring criminal penalties
D Only section 6060, the employee-record rule

Show the answer and explanation

Answer: C. Section 7216, which can bring criminal penalties

Section 7216 makes it a crime (a misdemeanor punishable by a fine of up to $1,000 and up to 1 year in prison) for a preparer to knowingly or recklessly disclose or use tax return information except as permitted by regulation; section 6713 imposes a civil penalty of $250 per disclosure. Using return information for marketing requires the taxpayer's prior written consent in the prescribed form. Source: IRC 7216, 6713; Treas. Reg. 301.7216-3. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Assuming disclosure to another professional is permitted.

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A taxpayer gave her CPA all relevant information, the CPA was competent, and she relied in good faith on his advice about a deduction later disallowed. The 20% accuracy-related penalty The section 6694(a) penalty for a preparer's understatement due to an unreasonable position is the greater of $1,000 or Under Circular 230, practice before the IRS includes all of the following EXCEPT

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.