Ask The California Employment Tax And Payroll Tax Attorney – Tax Return Preparers Who Fail To Sign The Return Are In For Stiff Penalties

By Robert S. Schriebman

2022

Introduction

An important internal IRS Memo recently came across my desk. The Memo concerns an opinion issued by the IRS Chief Counsel. The Memo recommends that stiff penalties be assessed against non-signing tax return preparers who advise their clients that it is OK to ignore long-standing IRS positions concerning the appropriateness of taking certain deductions or filing questionable claims for refunds. The Memo recommends that penalties imposed under IRC § 6694(b) be assessed against these non-signing preparers.

The Chief Counsel held that the position which the non-signing tax return preparer advised a client to take on a return was contrary to well-settled law applicable to the facts and circumstances. The specific issue involved is not important for this discussion. If you want to know all about it see Field Attorney Advice 20223301F.

What is relevant for this article concerns the nature and the extent of the penalty set forth in IRC § 6694(b). The penalty comes under the heading, “Understatement Due to Willful or Reckless Conduct.” The statute states in substance that any tax return preparer who prepares an improper tax return or claim for refund shall pay a penalty equal to the greater of $5,000, or 50% of the elicit income or refund.

Conclusion

If you have been keeping up with the latest developments in Congress and the passage of The Inflation Reduction Act, you know that the IRS has been given an appropriation of $80 billion for hiring new personnel and increasing its efficiency. This internal Memo is only the beginning of signs that we are going to see a less “kinder and gentler” IRS. The IRS is ramping up to go after unethical practitioners and the above Memo is only the beginning.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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