Preparer Penalties: Preparer Penalties (§6694/§6695)
Preparer Penalties: Preparer Penalties (§6694/§6695) is a critical concept in EA Exam Part 3, Practices & Procedures. This topic covers essential tax principles that frequently appear on the exam. Understanding preparer penalties (§6694/§6695) is crucial for passing Part 3.
Quick answer
Preparer penalties under Sections 6694 and 6695 are tested for the conduct that triggers them and the standards that avoid them. §6694 penalizes understatements due to unreasonable positions; §6695 covers procedural failures like not signing or not providing a copy.
Preparer Penalties (§6694/§6695) is tested on EA Exam Part 3 (Practices & Procedures). Primary IRS reference: IRC §6694.
About this EA exam topic
Preparer penalties under Sections 6694 and 6695 are tested for the conduct that triggers them and the standards that avoid them. §6694 penalizes understatements due to unreasonable positions; §6695 covers procedural failures like not signing or not providing a copy.
The EA exam tests the reasonable-basis, substantial-authority, and more-likely-than-not standards and the §6695 checklist items.
What you'll be tested on
- §6694 unreasonable-position and willful/reckless penalties
- Standards that avoid §6694 (reasonable basis, substantial authority)
- §6695 procedural penalties (signature, copy, PTIN, due diligence)
- Reasonable-cause defenses
How to prepare
- Map each position-confidence standard to the penalty it avoids.
- Memorize the §6695 checklist.
- Connect EITC due-diligence failures to penalties.
Practice questions for Preparer Penalties (§6694/§6695)
What this topic covers
Preparer Penalties (§6694/§6695) appears in Part 3: Representation, Practices & Procedures within the Practices & Procedures domain. VantageEA practice questions focus on how preparer penalties rules are applied in realistic EA exam fact patterns.
What candidates practice
Candidates practice identifying tested facts, choosing the best multiple-choice answer, and reviewing explanations tied to IRC §6694, IRC §6695, IRC §7216. This topic supports timed 100-question PSI-style mock tests and shorter topic review sessions.
Related practice-question themes include preparer-penalties, section-6694, section-6695, unreasonable-position.
Topic overview
Frequently asked questions
What triggers a §6694 penalty?
A return understatement from an unreasonable position the preparer knew or should have known about, absent adequate authority or disclosure.
Which part?
Part 3 (Representation).
Reference?
IRC §§6694-6695.
Continue studying
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