Tax preparer penalties: what the IRS can do when a preparer gets it wrong.

The Internal Revenue Code sets several penalties for paid tax return preparers. The main ones cover:

• Unreasonable positions that cause an understatement of tax (26 U.S.C. § 6694(a)).
• Willful or reckless conduct, including a reckless or intentional disregard of rules or regulations (§ 6694(b)).
• Missed duties, such as not signing the return, not giving you a copy, or not including the preparer’s identifying number (§ 6695).
• Misusing your information by disclosing it or using it for something other than preparing the return (§ 6713; § 7216).

A court can also order a preparer to stop certain conduct, or to stop preparing returns (§ 7407).

These penalties are paid to the government. They don’t change what you owe on your own return. Whether you can recover your costs from the preparer is a separate question under state law, and only an attorney licensed in your state can answer it.

A preparer can be penalized when part of an understatement of tax on a return they prepared is due to an unreasonable position, and they knew or reasonably should have known of the position (26 U.S.C. § 6694(a)(1)).

Generally, a position is unreasonable unless there is or was substantial authority for it. For a position that was properly disclosed on the return, the test is generally whether there is a reasonable basis for it, and tax shelters and certain reportable transactions have their own test (§ 6694(a)(2)).

The penalty for each return is the greater of a fixed amount set in the statute or half of the income the preparer earned, or will earn, from that return. No penalty applies if the preparer shows reasonable cause for the understatement and acted in good faith (§ 6694(a)(1), (3)).

A larger penalty applies when an understatement is due to a willful attempt to understate the tax, or to a reckless or intentional disregard of rules or regulations (26 U.S.C. § 6694(b)(2)).

For each return, it’s the greater of a higher fixed amount set in the statute or three-quarters of the income the preparer earned from that return, reduced by any penalty already paid under the unreasonable-position rule for the same return (§ 6694(b)(1), (3)).

A separate penalty applies to anyone who helps prepare any part of a return or other tax document knowing it will be used in a material tax matter and would result in an understatement of another person’s tax (26 U.S.C. § 6701(a)).

Federal law also penalizes a preparer for each failure to meet certain basic duties. For several of them, such as signing the return and giving you a copy, no penalty applies if the failure was due to reasonable cause and not willful neglect (26 U.S.C. § 6695). The duties include:

• Not giving you a copy of your return.
• Not signing the return when regulations require it.
• Not including the preparer’s identifying number on the return.
• Not keeping a copy of the return, or a list of the people they prepared returns for.
• Endorsing or otherwise negotiating a client’s refund check.
• Not meeting the due diligence rules for head of household filing status and for certain credits, including the child tax credit, the American opportunity credit, and the earned income credit.

Anyone who prepares federal returns for pay must have a preparer tax identification number (PTIN), and the IRS reminds taxpayers to make sure their preparer enters it on the return filed with the IRS (IRS, PTIN requirements; IRS, preparer credentials and qualifications).

A person in the business of preparing returns, or who prepares returns for pay, can be penalized for disclosing information you gave them for your return, or using it for any purpose other than preparing the return (26 U.S.C. § 6713(a)).

Doing so knowingly or recklessly is also a federal misdemeanor (26 U.S.C. § 7216(a)). Both sections have exceptions, so whether a particular disclosure was allowed depends on the facts.

The government can ask a federal court to stop a preparer. A court may order a preparer to stop specific conduct if it finds, among other things, that the preparer engaged in conduct subject to the penalties above, misrepresented their eligibility to practice before the IRS or their experience or education, guaranteed a refund or credit, or engaged in other fraudulent or deceptive conduct, and that an order is appropriate to prevent it from happening again (26 U.S.C. § 7407(b)).

If a preparer has continually or repeatedly engaged in that conduct and a narrower order wouldn’t be enough, the court may bar them from acting as a tax return preparer (§ 7407(b)).

A penalty against your preparer is between the preparer and the IRS. You generally remain responsible for the correct tax on your own return, along with any penalties and interest the IRS assesses. For penalties under the accuracy rules, the law says none applies to a portion of an underpayment if you show reasonable cause and that you acted in good faith (26 U.S.C. § 6664(c)(1)). See who pays when a tax preparer makes a mistake and tax preparation errors for fixing the return and asking for relief.

If you believe a preparer acted improperly, the IRS accepts reports of preparer misconduct (IRS, tax return preparer misconduct). Reporting doesn’t get your money back. Whether you can recover your costs from the preparer depends on state law, what the preparer agreed to do, and the deadlines that apply, so talk with an attorney licensed in your state.

We wrote this page from the primary sources below and checked it against them on October 22, 2026.

• 26 U.S.C. § 6694: understatement due to unreasonable positions; willful or reckless conduct
• 26 U.S.C. § 6695: other assessable penalties for return preparers
• 26 U.S.C. § 6701: aiding and abetting understatement of tax liability
• 26 U.S.C. § 6713: disclosure or use of information by preparers
• 26 U.S.C. § 7216: criminal penalty for disclosure or use of return information
• 26 U.S.C. § 7407: action to enjoin tax return preparers
• 26 U.S.C. § 6664: reasonable cause exception for accuracy-related penalties
• IRS, PTIN requirements for tax return preparers: who must have a PTIN
• IRS, Understanding tax return preparer credentials and qualifications: PTIN on the return
• IRS, Tax return preparer misconduct: reporting a preparer

We are not attorneys, and this page is not legal advice. Laws change and differ from state to state. If anything here is out of date or wrong, email support@malpracticeattorneys.com with the page name, and we’ll review it and update the page.