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| negotiate the check, or endorse a refund check for deposit in full to a taxpayer’s account pursuant to a written authorization of the taxpayer. |
| A preparer bank may also subsequently endorse or negotiate a refund check as part of the check-clearing process through the financial system after initial endorsement. Under Treas. Reg. 1.6695-1(f), a tax preparer, however, may affix the taxpayer's name to a check for the purpose of depositing the check into the account in the name of the taxpayer or in joint names of the taxpayer and one or more persons (excluding the tax return preparer) if authorized by the taxpayer or the taxpayer's recognized representative. The IRS may sanction any income tax return preparer that violates this provision. In addition, the IRS reserves the right to assert all appropriate preparer and non-preparer penalties against a Provider as warranted. |
| Providers are not tax return preparers for the purpose of assessing most preparer penalties as long as their services are limited to "typing, reproduction or other mechanical assistance in the preparation of a return or claim of refund". If an ERO, Intermediate Service Provider, Transmitter or the product of a Software Developer alters the return in a way that does not come under the "mechanical assistance" exception, the IRS may hold the Provider liable for income tax return preparer penalties. |
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The return preparer penalties under IRC 6695 are
assessed against preparers who: * Fail to provide the taxpayer with a copy of the return, $50 per failure, up to a maximum of $25,000 for each calendar year; per IRC 6695(a), * Fail to sign the return, $50 per failure, up to a maximum of $25,000 for each calendar year, per IRC 6695(b), * Fail to provide an identifying number, $50 per failure, up to a maximum of $25,000 for each calendar year; per IRC 6695(c), * Fail to retain a copy of the return or a list of returns prepared, $50 per failure, up to a maximum of $25,000 for each return period, per IRC 6695(d), * Fail to file a tax return preparer information return or set forth an item in the return as required under IRC 6060, $50 for each failure, up to a maximum of $25,000 for each return period, per IRC 6695(e), * Negotiate a refund check or misappropriate a refund via electronic means, $500 per failure per IRC 6695(f), or * Fail to be diligent in determining eligibility for the Earned Income Tax Credit, $500 per failure per IRC 6695(g). These penalties are generally processed under the pre-assessment penalty procedures. |
| The prohibition on return preparers negotiating a refund check is limited to cash a refund check and remit all of the cash to the taxpayer, accept a refund check for deposit in full to a taxpayer's account provided the bank does not initially endorse or negotiate the check and to endorse a refund check for |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 05/28/15 |
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