UNDERSTATEMENT OF TAXPAYER LIABILITY BY RETURN PREPARERS.

SEC. 8246. UNDERSTATEMENT OF TAXPAYER LIABILITY BY RETURN PREPARERS.(a) Application of Return Preparer Penalties to All Tax Returns.—(1) Definition of tax return preparer.—Paragraph (36) of section 7701(a) (relating to income tax preparer) is amended—121 STAT. 201(A) by striking “income” each place it appears in the heading and the text, and(B) in subparagraph (A), by striking “subtitle A” each place it appears and inserting “this title”.(2) Conforming amendments.—(A)(i) Section 6060 is amended by striking “income tax return preparers” in the heading and inserting “tax return preparers”.(ii) Section 6060(a) is amended—(I) by striking “an income tax return preparer” each place it appears and inserting “a tax return preparer”,(II) by striking “each income tax return preparer” and inserting “each tax return preparer”, and(III) by striking “another income tax return preparer” and inserting “another tax return preparer”.(iii) The item relating to section 6060 in the table of sections for subpart F of part III of subchapter A of chapter 61 is amended by striking “income tax return preparers” and inserting “tax return preparers”.(iv) Subpart F of part III of subchapter A of chapter 61 is amended by striking “Income Tax Return Preparers” in the heading and inserting “Tax Return Preparers”.(v) The item relating to subpart F in the table of subparts for part III of subchapter A of chapter 61 is amended by striking “income tax return preparers” and inserting “tax return preparers”.(B) Section 6103(k)(5) is amended—(i) by striking “income tax return preparer” each place it appears and inserting “tax return preparer”, and(ii) by striking “income tax return preparers” each place it appears and inserting “tax return preparers”.(C)(i) Section 6107 is amended—(I) by striking “income tax return preparer” in the heading and inserting “tax return preparer”,(II) by striking “an income tax return preparer” each place it appears in subsections (a) and (b) and inserting “a tax return preparer”,(III) by striking “Income Tax Return Preparer” in the heading for subsection (b) and inserting “Tax Return Preparer”, and(IV) in subsection (c), by striking “income tax return preparers” and inserting “tax return preparers”.(ii) The item relating to section 6107 in the table of sections for subchapter B of chapter 61 is amended by striking “Income tax return preparer” and inserting “Tax return preparer”.(D) Section 6109(a)(4) is amended—(i) by striking “an income tax return preparer” and inserting “a tax return preparer”, and(ii) by striking “income return preparer” in the heading and inserting “tax return preparer”.(E) Section 6503(k)(4) is amended by striking “Income tax return preparers” and inserting “Tax return preparers”.(F)(i) Section 6694 is amended—121 STAT. 202(I) by striking “income tax return preparer” in the heading and inserting “tax return preparer”,(II) by striking “an income tax return preparer” each place it appears and inserting “a tax return preparer”,(III) in subsection (c)(2), by striking “the income tax return preparer” and inserting “the tax return preparer”,(IV) in subsection (e), by striking “subtitle A” and inserting “this title”, and(V) in subsection (f), by striking “income tax return preparer” and inserting “tax return preparer”.(ii) The item relating to section 6694 in the table of sections for part I of subchapter B of chapter 68 is amended by striking “income tax return preparer” and inserting “tax return preparer”.(G)(i) Section 6695 is amended—(I) by striking “income” in the heading, and(II) by striking “an income tax return preparer” each place it appears and inserting “a tax return preparer”.(ii) Section 6695(f) is amended—(I) by striking “subtitle A” and inserting “this title”, and(II) by striking “the income tax return preparer” and inserting “the tax return preparer”.(iii) The item relating to section 6695 in the table of sections for part I of subchapter B of chapter 68 is amended by striking “income”.(H) Section 6696(e) is amended by striking “subtitle A” each place it appears and inserting “this title”.(I)(i) Section 7407 is amended—(I) by striking “income tax return preparers” in the heading and inserting “tax return preparers”,(II) by striking “an income tax return preparer” each place it appears and inserting “a tax return preparer”,(III) by striking “income tax preparer” both places it appears in subsection (a) and inserting “tax return preparer”, and(IV) by striking “income tax return” in subsection (a) and inserting “tax return”.(ii) The item relating to section 7407 in the table of sections for subchapter A of chapter 76 is amended by striking “income tax return preparers” and inserting “tax return preparers”.(J)(i) Section 7427 is amended—(I) by striking “income tax return preparers” in the heading and inserting “tax return preparers”, and(II) by striking “an income tax return preparer” and inserting “a tax return preparer”.(ii) The item relating to section 7427 in the table of sections for subchapter B of chapter 76 is amended to read as follows: “Sec. 7427. Tax return preparers.”. 121 STAT. 203(b) Modification of Penalty for Understatement of Taxpayer’s Liability by Tax Return Preparer.—Subsections (a) and (b) of section 6694 are amended to read as follows:“(a) Understatement Due to Unreasonable Positions.—“(1) In general.—Any tax return preparer who prepares any return or claim for refund with respect to which any part of an understatement of liability is due to a position described in paragraph (2) shall pay a penalty with respect to each such return or claim in an amount equal to the greater of—“(A) $1,000, or“(B) 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.“(2) Unreasonable position.—A position is described in this paragraph if—“(A) the tax return preparer knew (or reasonably should have known) of the position,“(B) there was not a reasonable belief that the position would more likely than not be sustained on its merits, and“(C)(i) the position was not disclosed as provided in section 6662(d)(2)(B)(ii), or“(ii) there was no reasonable basis for the position.“(3) Reasonable cause exception.—No penalty shall be imposed under this subsection if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.“(b) Understatement Due to Willful or Reckless Conduct.—“(1) In general.—Any tax return preparer who prepares any return or claim for refund with respect to which any part of an understatement of liability is due to a conduct described in paragraph (2) shall pay a penalty with respect to each such return or claim in an amount equal to the greater of—“(A) $5,000, or“(B) 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.“(2) Willful or reckless conduct.—Conduct described in this paragraph is conduct by the tax return preparer which is—“(A) a willful attempt in any manner to understate the liability for tax on the return or claim, or“(B) a reckless or intentional disregard of rules or regulations.“(3) Reduction in penalty.—The amount of any penalty payable by any person by reason of this subsection for any return or claim for refund shall be reduced by the amount of the penalty paid by such person by reason of subsection (a).”.(c) Effective Date.—The amendments made by this section shall apply to returns prepared after the date of the enactment of this Act.121 STAT. 204