Final answer:
The IRS may enforce penalties on Ryan, a paid tax preparer, who filed a return and did not report a client's income resulting in less tax paid. Paid preparers are obligated to ensure accurate and legal tax filings, and failure to do so can lead to fines, criminal charges, and professional consequences such as the loss of their PTIN.
Step-by-step explanation:
Regarding the scenario where Ryan, a paid tax preparer, filed a return and chose not to report a client's income due to a lack of documentation, the IRS can assess various penalties against Ryan if an audit reveals the failure to report income. Paid tax preparers hold a responsibility to ensure that tax returns are accurate and comply with the tax laws. If a preparer willfully omits income, they may be subject to penalties such as a fine for each such failure, potential criminal charges, and professional repercussions like loss of their preparer tax identification number (PTIN).
The internal workings of the Internal Revenue Service (IRS) are complex, and the IRS may assess preparer penalties under different provisions of the tax code, depending on the nature and severity of the infraction. Preparers are expected to exercise due diligence in preparing tax returns, and penalties reflect the importance of maintaining integrity within the tax system.
It is critical for tax preparers to understand these risks and the implications of submitting false or incomplete tax returns, not just for their clients but also for their professional practice. Therefore, proper tax reporting and adherence to IRS guidelines are paramount for both the taxpayer and the tax preparer.