The IRS can penalize a tax preparer personally for mistakes on returns they prepare. New tax professionals need to understand how these penalties work. In this episode, Jason Carr walks through the three most important preparer penalty provisions: due diligence failures under Section 6695(g), unreasonable positions under Section 6694(a), and willful or reckless conduct under Section 6694(b). Jason explains the current penalty amounts, what triggers each penalty, and the practical habits that keep a preparer on solid ground. Jason covers: Why due diligence matters for EITC, CTC, AOTC, and head of household claimsThe current $650-per-failure penalty for due diligence violationsHow a single return can generate up to $2,600 in due diligence penaltiesThe $1,000-or-50-percent penalty for unreasonable positionsThe $5,000-or-75-percent penalty for willful or reckless conductFour practical habits that protect new preparersWhy documentation is a preparer’s best defenseKey Takeaways Due diligence is required for four items: EITC, CTC/ACTC/ODC, AOTC, and head of household filing status.The due diligence penalty is $650 per failure: A single return with all four items could trigger $2,600 in penalties if due diligence requirements are not met.Unreasonable positions can cost $1,000 or more: The Section 6694(a) penalty is the greater of $1,000 or 50% of income from the return.Willful or reckless conduct is the most serious: The Section 6694(b) penalty is the greater of $5,000 or 75% of income from the return.Good habits protect you: Complete Form 8867, ask follow-up questions, keep records, and know when to decline work.Documentation is your defense: Form 8867, intake notes, worksheets, and client communications should be retained for at least three years.Resources Mentioned MuseSpring: https://musespring.comTax Business Blueprint Program: https://musespring.comThe Law Office of Jason Carr, PLLC: https://carrtaxlaw.comDisclaimer Content on this channel is provided by MuseSpring LLC for educational and informational purposes only. It does not constitute legal or tax advice or establish an attorney-client relationship. MuseSpring LLC is not a law firm. Jason D. Carr appears in MuseSpring content in his capacity as an educator and founder of MuseSpring LLC, not in his capacity as an attorney with The Law Office of Jason Carr, PLLC. For advice specific to your situation, consult a qualified tax professional or licensed attorney. Comment Policy Please do not post confidential, sensitive, or personally identifiable tax information in the comments. We do not provide individualized legal or tax advice in the comments or social media replies.
