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30.6 Preparer Penalties (Filing Specific)

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1 Part 1, Chapter 1: Tax Return Basics & Filing Requirements

1.1 Form 1040 Overview & Structure 1.2 Form 1040-SR for Seniors 1.3 Who Must File (Income Thresholds) 1.4 Filing Deadlines & Extensions (Form 4868) 1.5 Penalties: Failure to File vs. Failure to Pay 1.6 Sources of Tax Information (W-2s, 1099s, K-1s) 1.7 Preparer Due Diligence Requirements 1.8 Amended Returns (Form 1040-X)

2 Part 1, Chapter 2: Filing Status & Dependents

2.1 Single & Married Filing Jointly 2.2 Married Filing Separately 2.3 Head of Household Requirements 2.4 Qualifying Surviving Spouse 2.5 Qualifying Child Test (5 Tests) 2.6 Qualifying Relative Test (4 Tests) 2.7 SSN, ITIN & Residency Status

3 Part 1, Chapter 3: Wages & Employee Compensation

3.1 W-2 Income & Withholding 3.2 Employee vs. Independent Contractor 3.3 1099-NEC, 1099-MISC & 1099-K Reporting 3.4 Fringe Benefits (Taxable vs. Non-Taxable) 3.5 Stock Options (ISO vs. NQSO) 3.6 Special Categories (Clergy, Military, Foreign)

4 Part 1, Chapter 4: Interest, Dividends & Other Income

4.1 Taxable vs. Tax-Exempt Interest 4.2 US Savings Bonds & OID 4.3 Ordinary vs. Qualified Dividends 4.4 Schedule B Requirements 4.5 Rental & Royalty Income Basics 4.6 Alimony, Gambling & Other Income 4.7 Cancelled Debt & Form 1099-C 4.8 Net Operating Loss (NOL)

5 Part 1, Chapter 5: Capital Gains & Property Transactions

5.1 Capital vs. Non-Capital Assets 5.2 Cost Basis Calculation 5.3 Inherited & Gifted Property Basis 5.4 Short-Term vs. Long-Term Gains 5.5 Capital Gains Tax Rates (0%, 15%, 20%) 5.6 Netting & the $3,000 Loss Limit 5.7 Wash Sales & Related Party Rules 5.8 Sale of Primary Residence (Section 121) 5.9 Installment Sales (Form 6252) 5.10 Like-Kind Exchanges (Section 1031)

6 Part 1, Chapter 6: Adjustments to Income

6.1 Educator Expenses & HSA Contributions 6.2 Self-Employment Tax Deduction 6.3 IRA Contributions (Traditional) 6.4 Student Loan Interest Deduction 6.5 Alimony Paid (Pre-2019 Divorces) 6.6 Other Adjustments & New OBBBA Deductions (Tips, Overtime, Auto Loan, Senior Bonus)

7 Part 1, Chapter 7: Deductions (Standard & Itemized)

7.1 Standard Deduction by Filing Status 7.2 Medical & Dental Expenses (7.5% Floor) 7.3 State & Local Taxes (SALT $40K Cap) 7.4 Mortgage Interest Deduction 7.5 Charitable Contributions 7.6 Casualty & Theft Losses 7.7 QBI Deduction (Section 199A)

8 Part 1, Chapter 8: Tax Calculation & Credits

8.1 Tax Tables & Rate Schedules 8.2 Alternative Minimum Tax (AMT) 8.3 Self-Employment Tax Calculation 8.4 Child Tax Credit & Additional CTC 8.5 Earned Income Tax Credit (EITC) 8.6 Education Credits (AOC & LLC) 8.7 Child & Dependent Care Credit 8.8 Other Credits (Saver's, Premium Tax)

9 Part 1, Chapter 9: Retirement Accounts & Social Security

9.1 Traditional vs. Roth IRA 9.2 401(k), 403(b) & TSP Basics 9.3 SEP-IRA & SIMPLE IRA 9.4 Required Minimum Distributions (RMDs) 9.5 Early Withdrawal Penalties & Exceptions 9.6 Social Security Taxation

10 Part 1, Chapter 10: Specialized Individual Returns

10.1 Estate Tax (Form 706) 10.2 Gift Tax (Form 709) 10.3 Foreign Income (Form 2555) 10.4 FBAR & FATCA Reporting 10.5 Farm Income (Schedule F) 10.6 Disaster Area Rules

11 Part 2, Chapter 11: Business Entity Types

11.1 Overview of Entity Types 11.2 State Law vs. Tax Classification 11.3 Entity Selection: Reasonable Comp & QBI 11.4 Form 8832 & Rev. Proc. 2009-41 11.5 LLC Deep Dive: Spouses & EINs 11.6 Changing Status: The 60-Month Rule

12 Part 2, Chapter 12: Starting a Business

12.1 Hobby vs. Business (Profit Motive) 12.2 Employer Identification Number (EIN) 12.3 Tax Year Selection 12.4 Recordkeeping Requirements 12.5 Statute of Limitations 12.6 Related Party Transactions 12.7 Start-Up Costs, Entity Choice & OBBBA Business Changes (2025)

13 Part 2, Chapter 13: Worker Classification & Payroll

13.1 Employee vs. Independent Contractor 13.2 Common Law Test (Behavioral, Financial, Relationship) 13.3 Statutory Employees & Non-Employees 13.4 Form 941 & Payroll Deposits 13.5 Trust Fund Recovery Penalty 13.6 FUTA & Unemployment Taxes

14 Part 2, Chapter 14: Accounting Methods & Income

14.1 Cash vs. Accrual Method 14.2 Hybrid Methods & Changes 14.3 Inventory & COGS 14.4 Gross Receipts & Income Recognition 14.5 Constructive Receipt 14.6 Form 1099 Reporting Requirements 14.7 §163(j) Business Interest Expense Limitation 14.8 §174 Research & Experimental Expenditures

15 Part 2, Chapter 15: Depreciation & Asset Treatment

15.1 MACRS Basics & Recovery Periods 15.2 Mid-Month, Mid-Quarter, Half-Year Conventions 15.3 Section 179 Expense Deduction 15.4 Bonus Depreciation 15.5 Listed Property Rules 15.6 Amortization of Intangibles 15.7 Depletion 15.8 Disposition of Business Assets

16 Part 2, Chapter 16: Business Deductions

16.1 Ordinary & Necessary Test 16.2 Business Travel Expenses 16.3 Business Meals (50% Limitation) 16.4 Business Use of Vehicle 16.5 Home Office Deduction 16.6 Business Interest Limitation (163(j)) 16.7 Business Bad Debts

17 Part 2, Chapter 17: Business Credits & Fringe Benefits

17.1 General Business Credit Overview 17.2 R&D Credit & Disabled Access Credit 17.3 Small Employer Health Insurance Credit 17.4 Fringe Benefit Rules 17.5 Cafeteria Plans (Section 125) 17.6 Achievement Awards & Other Benefits

18 Part 2, Chapter 18: Sole Proprietorships

18.1 Schedule C Overview 18.2 Calculating Net Profit/Loss 18.3 Self-Employment Tax (Schedule SE) 18.4 Estimated Tax Payments 18.5 Hobby Loss Rules

19 Part 2, Chapter 19: Partnerships

19.1 Partnership Formation 19.2 Partner's Basis Calculation 19.3 Form 1065 Overview 19.4 Schedule K-1 (Partner's Share) 19.5 Guaranteed Payments 19.6 Partnership Distributions 19.7 At-Risk & Passive Activity Rules 19.8 Partnership Termination & Liquidation

20 Part 2, Chapter 20: C Corporations

20.1 Form 1120 Overview 20.2 Corporate Tax Rate (21%) & CAMT 20.3 Accumulated Earnings Tax 20.4 Dividends Received Deduction 20.5 Earnings & Profits (E&P) 20.6 Corporate Distributions, Dividends & Stock Redemptions 20.7 §351 Transfers, §1032, §1202 QSBS & Other Corporate Provisions 20.8 Corporate Liquidation

21 Part 2, Chapter 21: S Corporations

21.1 S Election Requirements (Form 2553) 21.2 Form 1120-S Overview 21.3 Shareholder Basis Calculation 21.4 Reasonable Compensation 21.5 S Corporation Distributions 21.6 Built-In Gains Tax & Termination

22 Part 2, Chapter 22: Specialized Business Returns

22.1 Trusts & Estates (Form 1041) 22.2 Simple vs. Complex Trusts 22.3 Distributable Net Income (DNI) 22.4 Tax-Exempt Organizations (Form 990) 22.5 Retirement Plans (Form 5500) 22.6 Qualified Retirement Plans Overview 22.7 Farm Taxation 22.8 Rental Real Estate Activities

23 Part 3, Chapter 23: Practice Before the IRS

23.1 What is Practice Before the IRS? 23.2 Who Can Practice (Full Rights) 23.3 Limited Practice Rights (AFSP, Unenrolled) 23.4 Special Relationships (Family, Employees) 23.5 PTIN Requirements 23.6 Circular 230 Overview 23.7 Office of Professional Responsibility (OPR)

24 Part 3, Chapter 24: Becoming & Maintaining EA Status

24.1 Two Paths to EA (Exam vs. IRS Experience) 24.2 Application Process (Form 23) 24.3 Background & Compliance Checks 24.4 Renewal Requirements (Form 8554) 24.5 Continuing Education Requirements 24.6 Inactive Status & Termination

25 Part 3, Chapter 25: Practitioner Duties (Circular 230)

25.1 Due Diligence Requirements 25.2 Knowledge of Client's Omission 25.3 Conflict of Interest Rules 25.4 Fee Requirements (Contingent, Unconscionable) 25.5 Advertising & Solicitation Rules 25.6 Tax Return Position Standards 25.7 Written Advice Standards 25.8 Sanctions & Penalties for Violations

26 Part 3, Chapter 26: Power of Attorney & Authorization

26.1 Form 2848 (Power of Attorney) 26.2 CAF (Centralized Authorization File) 26.3 Form 8821 (Tax Information Authorization) 26.4 Third-Party Designee 26.5 Signing Returns for Taxpayers 26.6 Client Confidentiality & Privilege 26.7 Representing Clients in Audits (Examination) 26.8 Appealing IRS Decisions 26.9 Collection Representation

27 Part 3, Chapter 27: Legal Authority & Research

27.1 Hierarchy of Tax Authority 27.2 Internal Revenue Code 27.3 Treasury Regulations 27.4 Revenue Rulings & Procedures 27.5 Court Cases & Precedent 27.6 Statutes of Limitations

28 Part 3, Chapter 28: Specific Representation Issues

28.1 Trust Fund Recovery Penalty (TFRP) 28.2 Innocent Spouse Relief (Form 8857) 28.3 Injured Spouse Allocation (Form 8379) 28.4 Penalty Abatement (FTA & Reasonable Cause) 28.5 Taxpayer Advocate Service (TAS) 28.6 Freedom of Information Act (FOIA)

29 Part 3, Chapter 29: Final Review & Exam Strategy

29.1 Exam Structure & Logistics (2026-2027) 29.2 The "Clock" of Representation (Master Deadlines) 29.3 Ethics vs. Law (Sanctions & Penalties) 29.4 Final Mock Review & Exam Strategy

30 Part 3, Chapter 30: Filing Process & E-File

30.1 E-File Requirements (The "More Than 10 Returns" Rule) 30.2 ERO Responsibilities 30.3 EFIN & Application Process 30.4 Form 8879 (Signature Authorization) 30.5 Record Retention & Data Security (WISP) 30.6 Preparer Penalties (Filing Specific)

30.6 Preparer Penalties (Filing Specific)

Key Takeaways Explain This Topic AI

Failure to Sign Return (§6695(b)): $65 per failure (2025). Max $33,000 per calendar year.

Failure to Furnish Copy (§6695(a)): $65 per failure (2025). Max $33,000.

Failure to Retain Copy/List (§6695(d)): $65 per failure (2025). Max $33,000.

Negotiating Refund Check (§6695(f)): $650 per check (2025). No maximum, no reasonable cause exception.

Form 8867 EITC/CTC/AOTC/HoH Due Diligence (§6695(g)): $650 per failure per credit (2025).

Last updated: October 2026

  • Preparer Penalties (Filing) — Tax Year 2025
  • Why This Matters for the Exam

IRC §6695 penalties are testable because they involve specific dollar amounts that change annually with inflation. For the July 2026 - February 2027 exam window, you need to know the Tax Year 2025 penalty amounts.

The exam may also test when these penalties apply and whether there are maximums.

The Legal Foundation: IRC §6695

IRC §6695 imposes penalties on tax return preparers for specific administrative failures. These are civil penalties (not criminal) and are assessed per failure.

Key Distinction: These are preparer penalties (assessed against the preparer), not taxpayer penalties (assessed against the taxpayer).

  • The Main IRC §6695 Penalties (2025 amounts)
  • Penalty #1: Failure to Furnish Copy to Taxpayer (§6695(a))

Rule: The preparer must provide the taxpayer with a complete copy of the return before it is filed (or within a reasonable time after filing).

  • Penalty (2025): $65 per failure
  • Maximum (2025): $33,000 per calendar year

Example: A preparer fails to furnish copies to 10 clients in 2025. The penalty is 10 × $65 = $650 .

Penalty #2: Failure to Sign Return (§6695(b))

Rule: The preparer must sign the return (with their PTIN) before it is filed. For e-filed returns, this means the preparer's electronic signature is applied.

  • Penalty (2025): $65 per failure
  • Maximum (2025): $33,000 per calendar year
  • Penalty #3: Failure to Furnish Identifying Number (PTIN) (§6695(c))

Rule: The preparer must include their PTIN on every return they prepare for compensation.

  • Penalty (2025): $65 per failure | Maximum: $33,000
  • Penalty #4: Failure to Retain Copy or List (§6695(d))

Rule: The preparer must retain either a copy of the return, or a list of taxpayers (name, TIN, tax year) for whom returns were prepared, for 3 years from the later of the return due date or filing date.

  • Penalty (2025): $65 per failure
  • Maximum (2025): $33,000 per calendar year
  • Penalty #5: Negotiation of Refund Check (§6695(f))

Rule: A preparer cannot endorse or negotiate a refund check issued to a taxpayer. The check must go directly to the taxpayer (or be deposited into the taxpayer's account).

Penalty (2025): $650 per check | No Maximum

Zero Tolerance: Unlike the other §6695 penalties, there is no maximum and no reasonable cause exception for negotiating a refund check.

Penalty #6: Due Diligence Failure on EITC/CTC/AOTC/HoH (§6695(g))

Rule: Preparers must complete and retain Form 8867 (Paid Preparer's Due Diligence Checklist) for any return claiming the EITC, child tax credit, additional child tax credit, American Opportunity Tax Credit, or head-of-household filing status.

Penalty (2025): $650 per failure per credit , per return.

Example: A return claims both EITC and CTC. If the preparer fails Form 8867 due diligence for both, the penalty is 2 × $650 = $1,300 for that single return.

Preparer Penalties Summary Table (2025)

Violation IRC § Penalty (2025) Maximum (2025) Reasonable Cause?

  • Failure to Furnish Copy §6695(a) $65 $33,000/yr Yes
  • Failure to Sign §6695(b) $65 $33,000/yr Yes
  • Failure to Furnish PTIN §6695(c) $65 $33,000/yr Yes
  • Failure to Retain Copy/List §6695(d) $65 $33,000/yr Yes
  • Negotiating Refund Check §6695(f) $650 No max No
  • Due Diligence (Form 8867) §6695(g) $650 per credit No max Limited
  • Related Information-Return Thresholds (2025, post-OBBBA)
  • Form 2025 Threshold
  • 1099-K (third-party network) $20,000 + 200 transactions (OBBBA reset to the pre-ARPA threshold)
  • 1099-NEC / 1099-MISC $600 (unchanged for 2025; rises to $2,000 indexed in 2026 under OBBBA)
  • Mandatory e-file (information returns) 10 or more in aggregate (T.D. 9972)
  • Inflation Adjustments

The IRS adjusts §6695 penalty amounts annually for inflation. For Tax Year 2025 (tested in the July 2026 - February 2027 exam window):

$65 penalties (furnish, sign, PTIN, retain) are 2025-indexed from an original $50 base.

$650 penalties (check negotiation, due diligence) are 2025-indexed from an original $500 base.

On the Exam

Question types to practice on IRC §6695 penalties:

Amount Questions: "What is the 2025 penalty for a preparer who endorses or negotiates a client's refund check?"

  • Application Questions: "Is a preparer required to furnish a copy of the return to the taxpayer?"
  • Maximum Questions: "What is the 2025 maximum penalty for failure to sign returns?"

Key takeaway: $65 for sign/furnish/retain/PTIN (max $33,000). $650 for check negotiation and Form 8867 due diligence (no max).