Unreasonable Position
A tax return preparer who prepares a return or refund claim for which any part of a tax liability understatement is due to an “unreasonable position” (defined below) must pay a penalty for each return or claim equal to the greater of:
-
$1,000 or
-
50% of the income derived (or to be derived) by the tax return preparer for preparing the return or claim (Code Sec. 6694(a)(1)), A position is “unreasonable” if:
-
The tax return preparer knew (or reasonably should have known) of the position
-
There was not a reasonable belief that the position would more likely than not be sustained on its merits, and
-
The position was not disclosed as provided in Code Sec. 6662(d)(2)(B)(ii), or if the position was disclosed, there was no reasonable basis for the position. (Code Sec. 6694(a)(2))