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The Internal Revenue Service has sent letters to about 21,000 tax preparers in California and across the country as part of its increasing focus on tax preparer penalties. Tax law attorneys and certified public accountants are not only bound by ethical standards of conduct to prepare accurate returns but may also face severe civil and criminal penalties if they prepare inaccurate returns. Being investigated by the IRS for a tax preparation error is serious and requires immediate attention from an experienced Orange County tax attorney.

“Tax return preparers are expected to be knowledgeable in tax law and prepare accurate returns while exercising due diligence,” the IRS said in its letter. “In general, preparers may rely in good faith upon client-provided information but they may not ignore the implications of information known or reasonably suspected to be untrue, incomplete, inconsistent or inaccurate.”

The IRS warns that taxpayers may be held liable for additional taxes if returns are found to be incorrect. Penalties and interest may also be imposed against taxpayers. Tax return preparers can also face stiff consequences for preparing returns in which a reckless or intentional disregard for regulations results in an understatement of a tax liability. Under IRC Section 6694(b), these preparers may be fined at least $5,000 per return. A $1,000 fine can also be imposed under IRC Section 6694(a) for any return that contains an understatement in tax liabilities based on an “unreasonable position.”

Despite the potentially daunting nature of these fines, the most serious thing at stake for tax preparers is their professional reputation and licensure. An experienced tax law attorney can help deal with the IRS and fight to prevent any honest mistakes from damaging a tax preparer’s standing in the tax preparer community.

Source:, “IRS Letters and Visits to Return Preparers – FAQs Filing Season 2012.”