Question

What standard must tax practitioners meet under Section 6694 (preparer penalties) of the Internal Revenue Code with respect to undisclosed positions taken on tax returns?

Answer 1

Under Section 6694 of the Internal Revenue Code, tax practitioners must meet the accuracy-related penalty standard for undisclosed positions taken on tax returns.

Step-by-step explanation:

Tax practitioners must meet the accuracy-related penalty standard under Section 6694 of the Internal Revenue Code with respect to undisclosed positions taken on tax returns. This means that tax practitioners must exercise due diligence in the preparation of tax returns and have a reasonable belief that the positions taken on the returns are more likely than not to be upheld in court.

In other words, tax practitioners are expected to have a solid understanding of the tax laws and regulations, and they should be able to justify the positions taken on tax returns based on the available guidance and precedents. If a tax practitioner fails to meet this standard and prepares a tax return with an undisclosed position that results in an understatement of tax liability, they may face penalties.