Ethical Responsibilities and Preparer Penalties

Categories: Ethics, IRS CE
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About Course

This self-study ethics program examines the preparer penalty framework under IRC §6694 and the related aiding-and-abetting liability under IRC §6701. The course addresses the distinction between the §6694(a) penalty for an unreasonable position and the more severe §6694(b) penalty for willful or reckless conduct, the reasonable basis, substantial authority, and more-likely-than-not standards that govern when a position may properly be taken, the role of adequate disclosure in lowering the applicable standard, the line between an aggressive but supportable position and a frivolous one, and the practitioner’s ethical obligation to decline or withdraw from a representation built on an untenable position.

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What Will You Learn?

  • Distinguish the IRC §6694(a) unreasonable-position penalty from the IRC §6694(b) willful-or-reckless-conduct penalty
  • Apply the reasonable basis, substantial authority, and more-likely-than-not standards to a tax return position
  • Explain how adequate disclosure under Form 8275 affects the applicable penalty standard for a given position
  • Identify a frivolous position and distinguish it from an aggressive but legally supportable position
  • Apply the willful attempt to understate liability and reckless or intentional disregard standards of IRC §6694(b)
  • Identify circumstances giving rise to aiding-and-abetting liability under IRC §6701
  • Apply the ethical obligation to decline or withdraw from a representation involving an untenable position
  • Distinguish the preparer penalty regime from the due diligence penalty regime addressed in the prior course

Course Content

Module 1 – The Preparer Penalty Framework: IRC §6694(a) and §6694(b)
This module introduces the two-tier preparer penalty framework under IRC §6694(a) and §6694(b), distinguishing an understatement due to an unreasonable position from one involving willful or reckless conduct.

  • The Preparer Penalty Framework: IRC §6694(a) and §6694(b)

Module 2 – Reasonable Basis, Substantial Authority, and Disclosure
This module examines the reasonable basis, substantial authority, and more-likely-than-not standards a return position must satisfy, along with the role of Form 8275 disclosure in avoiding penalty exposure.

Module 3 – Frivolous Positions, Willful Understatement, and Reckless Conduct
This module addresses frivolous positions, willful attempts to understate liability, and reckless or intentional disregard of rules or regulations under §6694(b), including the effect of client pressure on this analysis.

Module 4 – Aiding-and-Abetting Liability and the Ethical Obligation to Decline or Withdraw
This module covers aiding-and-abetting liability under IRC §6701 and the practitioner's ethical obligation to decline or withdraw from a representation involving an unsupportable position.

Final Assessment – Ethical Responsibilities and Preparer Penalties
This final assessment consists of 10 multiple-choice questions covering all four modules of this course. A passing score of 70% or better is required.

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