The Internal Revenue Service has issued new guidance on implementing the recently amended tax return preparer penalty, which punishes tax preparers for taking "unreasonable positions" on tax liabilities.
Notice 2009-5 provides guidance on the preparer penalty modifications included in the financial bailout bill. The American Institute of CPAs has lobbied heavily to equalize the standards for tax preparers and their clients through several bills this year, until the revised standards were finally signed into law as part of the Emergency Economic Stabilization Act.
Section 6694(a) of the Tax Code imposes a penalty on a tax return preparer who prepares a return or claim for refund reflecting an understatement of liability due to an "unreasonable position" if the tax return preparer knew (or reasonably should have known) of the position. No penalty is imposed, however, if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.
The IRS has also issued Rev. Proc. 2009-11, which identifies the relevant categories of tax returns and claims for refund for purposes of the tax return preparer penalty under Section 6694. The revenue procedure also identifies the returns and claims for refund that need to be signed by a tax preparer under the regulations published by the Treasury Department and the IRS in order to avoid a penalty.
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