What do the new penalties mean for tax preparers?
The Small Business and Work Opportunity Act of 2007 has significantly changed the tax return preparer penalties. It raised the threshold as well as the penalty for tax preparers signing a tax return without adequate disclosure. The act increased the penalty amount. The new penalty applies to all tax returns, not just income tax returns. Previously, for each income tax return, the IRC imposed a penalty if there was no realistic possibility of the tax position being sustained on its merits unless there was adequate disclosure. The realistic possibility standard was 33% chance of being sustained. The penalty was $250 per income tax return. The penalty was raised to $1,000 (IRC 6694(b)) if willfulness and recklessness was involved. New Law: The Small Business and Work Opportunity Act of 2007 imposes a tax return preparer penalty on all types of tax returns (estate, gift, income, employment and excise tax). The More-Likely-Than-Not (MLTN) standard has been raised from 33% to more than 50% p
