Unreported Income: Tax Preparer (CPA) Civil & Criminal Penalties (Summary)

Taxpayers who have unreported income, may subject their tax preparer (CPA) to up to 9 years imprisonment, with the following penalties:

Tax Preparer Penalties
1. Penalty for causing an understatement of tax on a return (IRC § 6694), either: greater of ($1,000/or 50% of Income Derived), or if willful: ($5,000/50% of Income Derived)
2. Penalty for aiding and abetting an understatement of tax (IRC § 6701) either: $1,000 per violation (individual taxpayer), $10,000 per violation (corporate taxpayer)
3. Tax Preparer/Criminal Penalties
a. Felony Tax Evasion (IRC § 7201) (i.e., assist Taxpayer in evading tax)
Fines: $100,000 (per person)/ $300,000 (per corporation). Up to 5 years imprisonment (or both) plus: costs of prosecution
Misdemeanor Additional Tax Evasion (IRC § 7203)
Failure to file Taxpayer’s tax returns, keep records, supply information
Fines: $25,000 per person/ $100,000 per corporation. Up to 1 year imprisonment (or both) plus: costs of prosecution (This penalty is in addition to other penalties)

b. Willfully aiding the preparation of a false tax return (IRC § 7206)

Felony: Fines: $100,000 per person, $500,000 per corporation. Up to 3 years imprisonment (or both) and costs of prosecution.

Misdemeanor: (Additional) IRC §7210: Failure to comply with Summons for testimony or produce books and records. Fine: $1,000. Up to 1 year imprisonment.