Penalties for Tax Return Preparers; Prohibition on Continuing to Prepare Returns; Refunds

  1. Law
  2. Georgia Code
  3. Revenue and Taxation
  4. State Administrative Organization, Administration, and Enforcement
  5. Administration
  6. Penalties for Tax Return Preparers; Prohibition on Continuing to Prepare Returns; Refunds

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  1. As used in this Code section, the term:
    1. "Tax return preparer" means any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed under Chapter 7, 7A, or 8 of this title or any claim for refund of such tax. The preparation of a substantial portion of a return or claim for refund shall be treated as if it were the preparation of such return or claim for refund. A person shall not be considered a tax return preparer merely because the person does any of the following:
      1. Furnishes typing, reproducing, or other mechanical assistance;
      2. Prepares a return or claim for refund of the employer, or an officer or employee of the employer, by whom the person is regularly and continuously employed;
      3. Prepares as a fiduciary a return or claim for refund for any person; or
      4. Prepares a claim for refund for a taxpayer in response to a notice of proposed assessment issued to the taxpayer.
    2. "Understatement of liability" means an understatement of the net amount payable for a tax imposed under Chapter 7, 7A, or 8 of this title or an overstatement of the net amount creditable or refundable from such tax. For purposes of this paragraph, the amount determined as an underpayment of estimated income tax under the relevant provisions of this chapter is not considered an understatement of liability.
    1. Any tax return preparer who prepares any return or claim for refund for which any part of an understatement of liability is due because of a position described in paragraph (2) of this subsection shall pay a penalty not to exceed $500.00 for each such return or claim for refund.
    2. A position is described in this subsection if:
      1. The tax return preparer knew or reasonably should have known of the position;
      2. There was not a reasonable basis for the position; and
      3. The position was frivolous or not adequately disclosed in the return or claim for refund or in a statement attached to the return or claim for refund.
    3. No penalty shall be imposed under this subsection if it is shown that there is reasonable cause for the understatement of liability and the tax return preparer acted in good faith.
  3. Any tax return preparer who prepares any return or claim for refund for which any part of an understatement of liability is due because of conduct described in this subsection shall pay a penalty for each such return or claim for refund in an amount equal to the greater of $5,000.00 or 50 percent of the income derived, or to be derived, by the tax return preparer for the return or claim for refund. Conduct described in this subsection is conduct by the tax return preparer which is:
    1. A willful attempt in any manner to understate the liability for tax on the return or claim for refund; and
    2. A reckless or intentional disregard of the law.
  4. If at any time there is a final administrative determination or a final judicial decision that there was no understatement of liability in the case of the taxpayer's underlying return or claim for refund for which a penalty under subsection (b) or (c) of this Code section has been assessed against the tax return preparer, such assessment shall be canceled; and if any portion of such penalty has been paid, the amount so paid shall be refunded to the tax return preparer as an overpayment of tax without regard to any period of limitations which, but for this subsection, would apply to the making of such refund.
  5. Other assessable penalties on the preparation for other persons of returns of tax imposed under Chapter 7, 7A, or 8 of this title shall be as follows:
    1. Any tax return preparer who prepares any return or claim for refund and is required by regulations prescribed by the commissioner to sign such return or claim for refund but who fails to sign such return shall pay a penalty of $50.00 for such failure, unless it is shown that such failure is due to reasonable cause and not due to willful neglect or that the practice conformed to accepted industry standards. The maximum penalty imposed under this paragraph on any tax return preparer during any calendar year shall not exceed $25,000.00;
      1. Any tax return preparer who prepares any return or claim for refund and fails to furnish the preparer's identifying number on such return or claim for refund shall pay a penalty of $50.00 for such failure, unless it is shown that such failure:
        1. Is due to reasonable cause and not due to willful neglect; or
        2. Failed to conform to accepted industry standards.
      2. The maximum penalty imposed under this paragraph on any tax return preparer during any calendar year shall not exceed $25,000.00; and
    3. Any tax return preparer who fraudulently endorses or otherwise negotiates directly or through an agent any check made for the taxes imposed under Chapter 7, 7A, or 8 of this title which is issued to a taxpayer other than the tax return preparer shall pay a penalty of $500.00 for each such check. This paragraph shall not apply to the deposit by a bank, within the meaning of Section 581 of the Internal Revenue Code of 1986, of the full amount of the check in the taxpayer's account in such bank for the benefit of the taxpayer.
    1. A civil action in the name of the State of Georgia may be commenced at the request of the commissioner to enjoin any tax return preparer, or employer having knowledge of an employee tax return preparer, who is doing business in this state and engaging in conduct described in this subsection from further engaging in preparing tax returns. This action may be brought by the department in the superior court of the county of the tax return preparer's residence or principal place of business or in which the taxpayer for whose tax return the action is brought resides. The court may exercise its jurisdiction over the action separate and apart from any other action brought by the State of Georgia against the tax return preparer or any taxpayer.
    2. In an action under this subsection, the court may issue an injunction prohibiting a person from acting as a tax return preparer if the court finds that the individual has:
      1. Engaged in any pattern of conduct subject to civil penalty under subsection (b), (c), or (e) of this Code section; or
      2. Guaranteed the payment of any tax refund or the allowance of any tax credit.
  7. Any claim for refund of any penalty paid under this Code section shall be filed in accordance with rules and regulations promulgated by the commissioner. Any penalty under subsection (b) or (e) of this Code section shall be assessed within three years after the return or claim for refund was filed, and no proceeding in court without assessment for the collection of such tax shall begin after the expiration of such period. In the case of any penalty under subsection (c) of this Code section, the penalty may be assessed, or a proceeding in court for the collection of the penalty may be begun without assessment, at any time. Except as provided in subsection (d) of this Code section, any claim for refund of an overpayment of any penalty assessed under subsection (b), (c), or (e) of this Code section shall be filed within three years from the time the penalty was paid.
  8. Except as otherwise provided by this Code section, proceedings to assess, collect, or seek a refund of any penalty imposed under this Code section shall be conducted in the same manner and subject to the same rights of appeal as assessments, collections, and claims for refund of the related taxes under Chapter 7, 7A, or 8 of this title, as the case may be.

(Code 1981, §48-2-62, enacted by Ga. L. 2009, p. 671, § 1/HB 444.)


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