6707A possible applicaion to return preparers

As we all know, section 6694 deals with the responsibility of tax return preparer in preparing tax returns (e.g., 1040, 706, 1120, etc.) Section 6694 provides a penalty to return preparers for unreasonable positions (“content”) that is not adequately supported under tax law.

As a point of logic, if a return preparer has technical responsibility for the preparation of tax returns, why would the return preparer be responsible for some “content” (e.g. a technical position) and not other “content” such as “reportable transactions” and “listed transactions” as defined in section 6707A.

Section 6011 is the statute authorizing IRS reporting and information requirements. For this reason both “reportable transactions” and “listed transactions” reference section 6011.

Given the fact that “listed transactions” deal with defined tax avoidance transactions reported in a tax return, it would be strange in the extreme to take the position that the same return preparer, responsible for technical content, is not also responsible for the listed transaction in the same tax return.

Lastly, section 6707A(a) is expressly applicable to any “person who fails to include on any return or statement” the reportable or listed transactions. Section 7701(a)(1) defines the term “person” without reference to a “return preparer.” However, 7701(a)(1) includes an individual, a corporation, etc. and return preparers are individuals, corporations and similar entities. Note also that the language of 6707A elects to use the term “person” instead of the term “taxpayer.”

There is other opinion that return preparers are not included in the term “person” in section 6707A. Notwithstanding, there is no downside for return preparers to be alert to all IRS “reportable” and “listed” transactions. The $100,000 and $200,000 penalties should be enough for return preparers to play it safe and either report or stay away from these transactions.