Tax Return Preparer Penalties: Mastering the New IRS Regulations

Strategies for Complying with Significant Changes in Preparer Disclosure Standards

Accounting and Legal Advisors Must Adjust to Final Guidance

Recording of a 100-minute CPE/CLE webinar with Q&A

Conducted on Tuesday, February 3, 2009

Course Materials

This seminar will give a thorough review of the latest changes to the IRS return preparer penalty standards and the associated IRS guidance. The panel will suggest approaches for accounting firms and tax counsel to stay in full compliance.


On Dec. 15, 2008, the IRS issued long-awaited final regulations and guidance that implemented changes to tax return preparer penalty policies required by federal laws approved in 2007 and 2008. The news is both good (relaxed penalties standards) and bad (higher penalties for more kinds of returns).

Under Sec. 6694(a), a preparer of a federal return or refund claim must offer "substantial authority" for a position, or properly disclose that position with a "reasonable basis," or it will be held unreasonable. Understatement and reckless conduct penalties can hit 50% of wrongly derived income.

Preparers must reasonably believe positions involving tax shelters or reportable transactions would more likely than not hold up on audit. The general standard applies to returns and refund claims prepared after May 25, 2007; the rule for tax shelters holds for post-Oct. 3, 2008 tax year-ends.

Listen as our panel of expert federal tax advisors reviews all key provisions of the final regulations and of IRS Notice 2009-5 and Revenue Procedure 2009-11, and bottom-lines their impact for return preparers.



  1. Historical Background On Preparer Penalties
    1. Pre-2007 Sect. 6694
    2. Last significant changes to Sect. 6694(a) in 2007
      1. Return preparers must have known, or reasonably should have known, about unreasonable position
    3. IRS Notice 2007-54
      1. Transitional relief from Sect. 6694(a) changes
    4. IRS Notices 2008-11 and 2008-13
      1. Clarify earlier transition relief
      2. Provide interim penalty compliance rules
    5. Concurrent changes to Circular 230 rules
  2. Latest Developments In Preparer Penalties
    1. Passage of Tax Extenders and Alternative Minimum Tax Relief Act of 2008-12-23
      1. Revise Sect. 6694(a) to impose new “substantial authority” standard for unreasonable tax positions
      2. Or, position must be properly disclosed and have reasonable basis
      3. Special rules for tax shelters or reportable transactions
      4. Standard is more likely than not be sustained based on merits
    2. IRS Notice 2009-5
      1. Immediate guidance for signing and non-signing return preparers
      2. Define “substantial authority”
      3. Give interim penalty compliance rules for tax shelters
    3. Revenue Procedure 2009-11
      1. Identify relevant categories of returns and claims, for purposes of new penalties
      2. Identify returns and refund claims that must be signed by preparer, in order to avoid Sect. 6695(b) penalties
    4. TD 9436
      1. Final regs implementing new preparer penalties under sections 6694 and 6695, and related provisions and sections
  3. Practical implementation issues for taxpayers going forward


The panel will leave you well-briefed to work effectively with federal tax clients in these areas:

  • Complying fully with the new "substantial authority" standard and the "more likely than not" standard for tax shelters and reportable transactions.
  • Avoiding, or at least minimizing, understatement or willful/reckless conduct penalties.
  • Understanding which inside and outside parties associated with a corporate taxpayer could be considered a signing or non-signing return preparer.
  • Dealing with the reality of higher penalties that apply to federal employment, excise, estate and gift tax returns and refunds, as well as to income tax returns.


Brian Bernhardt
Brian Bernhardt

He practices in federal tax controversies and tax litigation and formerly worked in the IRS Chief Counsel's Office. He...  |  Read More

Gregory Martinelli
Gregory Martinelli
Senior Manager, Tax Controversy and Risk Management Services
Ernst & Young

He acts as an internal firm resource on federal return preparer and taxpayer penalties and reportable transactions,...  |  Read More

Todd Simmens
Todd Simmens
Partner and National Director, Tax Controversy and Procedure

He focuses on assisting clients with tax disputes, IRS procedure and penalties, and reportable transaction rules. He...  |  Read More