Reliance on client's information

Generally, for purposes of the penalties imposed under Code Sec. 6694(a) and Code Sec. 6694(b), a tax preparer may rely on the information provided by the taxpayer and a preparer need not audit, examine or review books and records, business operations or documents in order to verify the taxpayer's information. However, a preparer may not ignore the implications of the information provided or actually known. The preparer is required to make reasonable inquiries if furnished information seems incomplete or incorrect. The preparer is also required to make relevant inquiries where certain prerequisites are imposed before a certain treatment is claimed (e.g., whether specific documents are retained before a deduction is claimed) (Reg. §1.6694-1(e)).