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IRS disciplines tax preparer for alleged tax fraud

The IRS is tightening its regulation of professional tax preparers. The new requirements overseen by the agency start with an electronic registration system in which each preparer must apply for or new a Preparer Tax Identification Number or PTIN. But they also include other components, such as competency testing and continuing professional education.

Indeed, within the IRS bureaucracy there is now an Office of Professional Responsibility (OPR). And this office is prepared to take action against professional tax return preparers who do not meet the agency's standards.

This week, OPR announced that it had disciplined a professional preparer who was accused of filing fraudulent returns. OPR handled the case along with the Justice Department's tax division. The IRS said that authority for the discipline came from its Regulations Governing Practice Before the IRS. These regulations are often referred to in the tax community as Circular 230.

In this case, the discipline took the form of the tax preparer's consent to be sanctioned under Circular 230, rather than engage in a separate disciplinary process. Originally, the IRS had sought to permanently bar him preparing anymore federal tax returns. The tax division of the Justice Department accused him of routinely preparing and filing fraudulent returns seeking inflated tax refunds.

Under the terms of the disciplinary agreement, the preparer is prohibited from any practice before the IRS for at least five years. The prohibition from practice includes the preparation of tax returns. The tax preparer's provisional PTIN was also revoked under the disciplinary agreement.

In a statement, the director of the professional responsibility office at the IRS said that this disciplinary agreement was a direct result of the agency's heightened regulation of federal tax return preparers.

Source: "IRS Office of Professional Responsibility Disbars Return Preparer Accused of Filing False Returns," IRS.gov, 12-31-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our California tax fraud page.

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