(a) For the purposes of this section, the term:
(1) “Tax return preparer” means a person who prepares for compensation, or who employs one or more persons to prepare for compensation, a return of tax imposed by this title or a claim for refund of tax imposed by this title. The preparation of a substantial portion of a return or claim for refund shall be deemed to be the preparation of the entire return or claim for refund. The term “tax return preparer” shall not mean a person who only:
(A) Furnishes typing, reproducing, or other mechanical assistance;
(B) Prepares a return or claim for refund of the employer (or an officer, partner, member, or employee of the employer) by whom the person is regularly and continuously employed; or
(C) Prepares, as a fiduciary, a return or claim for refund for a person.
(2) “Understatement of liability” means an understatement of the net amount due with respect to a tax imposed by this title or an overstatement of the net amount creditable or refundable with respect to the tax.
(b) A tax return preparer shall sign the return or claim for refund as a tax return preparer. A tax return preparer who fails to sign a return or claim for refund shall pay a penalty of $50 for each unsigned return or claim for refund unless it is shown that the failure is due to reasonable cause.
(c) A tax return preparer shall pay a penalty of $250 for each return or claim for refund prepared by the tax preparer which understates a taxpayer’s liability if:
(1) A part of an understatement of liability with respect to a return or claim for refund was due to the tax treatment of an item for which there was not a realistic possibility of success on its merits;
(2) The tax return preparer knew or reasonably should have known of the tax treatment of the item; and
(3)(A) The relevant facts affecting the tax treatment of the item were not adequately disclosed in the return or claim for refund or in a statement attached to the return or claim for refund (or in a copy of the federal return which was filed with the return or claim for refund, if applicable); or
(B) The position was frivolous.
(d)(1) A tax return preparer shall pay a penalty of $1,000 for each return or claim for refund prepared by the tax return preparer that understates a taxpayer’s liability if a part of an understatement of liability with respect to a return or claim for refund was due to:
(A) A willful attempt in any manner to understate the liability for tax with respect to the return or claim for refund; or
(B) A reckless or intentional disregard of rules or regulations.
(2) The amount of the penalty payable by a person by reason of paragraph (1) of this subsection shall be reduced by the amount of the penalty paid by the person by reason of subsection (c) of this section.
(e)(1) Except as provided in paragraph (2) of this subsection, a person is subject to a penalty of $1,000 if the person:
(A) Aids or assists in, procures, or advises with respect to, the preparation or presentation of a portion of a return, affidavit, claim for refund, or other document (for purposes of this paragraph, the term “procures” includes ordering or otherwise causing a subordinate to perform an act and knowing of, and not attempting to prevent, participation in the act by any other person (whether or not the person is a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control);
(B) Knows or has reason to believe that the portion will be used in connection with a material matter arising under a tax imposed by this title; and
(C) Knows that the portion would result in an understatement of the liability for tax of another person.
(2) If the return, affidavit, claim for refund, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by this subsection shall be $10,000.
(3) If a person is subject to a penalty under this subsection with respect to a document relating to a taxpayer for a taxable period (or where there is no taxable period, a taxable event), the person shall not be subject to a penalty under this subsection with respect to another document relating to the taxpayer for the taxable period (or event).
(4) This subsection shall apply whether or not the understatement is made with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim for refund, or other document.
(5) For purposes of paragraph (1) of this subsection, a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of the document by reason of the assistance.
(6) The penalty imposed by this section shall be in addition to any penalty assessed under subsection (b) of this section.
(7) A penalty on a person shall not be assessed under subsection (c) of this section with respect to a return for which a penalty is imposed on the person under this subsection.
(f)(1) Assessment of any penalty under this section shall be governed by § 47-4312.
(2) Any assessment of a penalty that has become final pursuant to § 47-4312 shall be due and payable within 30 days after service of a final assessment by the Mayor or service of a final order by the Office of Administrative Hearings, as applicable.
This section is referenced in § 47-4221.
Effect of Amendments
D.C. Law 15-217, rewrote subsec. (f); and repealed subsec. (g).
For temporary (90 day) amendment of section, see § 3(j) of Office of Administrative Hearings Establishment Emergency Amendment Act of 2004 (D.C. Act 15-513, August 2, 2004, 51 DCR 8976).
For temporary (90 day) amendment of section, see § 3(j) of Office of Administrative Hearings Establishment Congressional Review Emergency Amendment Act of 2004 (D.C. Act 15-553, October 26, 2004, 51 DCR 10359).