30.6 Preparer Penalties (Filing Specific)

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)

Related Information-Return Thresholds (2025, post-OBBBA)

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

Expect 2-3 questions on IRC §6695 penalties, typically:

1. Amount Questions: "What is the 2025 penalty for a preparer who endorses or negotiates a client's refund check?"
2. Application Questions: "Is a preparer required to furnish a copy of the return to the taxpayer?"
3. 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).