H.R. 6323 — Taxpayer Protection and Preparer Proficiency Act

This section designates the Act as the “Taxpayer Protection and Preparer Proficiency Act” and specifies that amendments refer to provisions of the Internal Revenue Code of 1986 and that “Secretary” means the Secretary of the Treasury or the Secretary’s delegate.

This section revises the definition of "return" in IRC §6696(e)(1)—for purposes of penalties on tax return preparers—to include, in addition to any return of tax imposed by the Internal Revenue Code, (1) any administrative adjustment request under §6227 (i.e., a partnership-filed amended return under the centralized partnership audit regime), (2) any partnership adjustment tracking report under §6226(b)(4)(A), and (3) any other document purporting to be a return, request, or report described above. The amendment applies on the date of enactment.

This section revises IRC §6695(c) to impose a $250 penalty (capped at $75,000 annually) on tax return preparers who fail to furnish a valid identifying number (i.e., PTIN complying with IRC §6109(a)(4)(A)) on any return or claim for refund, defining noncompliance to include numbers assigned to others, nonexistent, inactive, withdrawn, suspended, revoked, or otherwise invalid, with an exception for reasonable cause; adds new §6695(h) imposing a $250 penalty on electronic return originators (i.e., persons originating electronic submissions of returns or claims for others, with specified exceptions) who fail to use a valid electronic filing identification number (EFIN) assigned by the Secretary, also excepted for reasonable cause; and updates cross-references. It broadens the definition of tax return preparer under IRC §7701(a)(36) to explicitly include preparation for compensation of any document purporting to be a return of tax or claim for refund (previously limited to returns and claims), treating preparation of a substantial portion as full preparation. The section further directs the Secretary, within 18 months of enactment, to establish a program to identify pre-processing errors in PTINs or EFINs on electronically filed returns or claims and allow withdrawal or correction to avoid penalties. Finally, it adds new IRC §7218 imposing criminal penalties on tax return preparers for willful failure to furnish a valid PTIN on any return, document purporting to be a return, or claim for refund with intent to evade tax requirements.

This section increases and revises penalties under section 6695 of the Internal Revenue Code on tax return preparers for various failures as follows: (1) in subsections (a), (b), (d), and (e), the per failure penalty to $250 (from $50) and the maximum annual penalty to $50,000 (from $25,000) in (a) and (d) or to $75,000 (from $25,000) in (b) and (e); (2) in subsection (g), to $1,000 (from $500); (3) replaces subsection (f) with a penalty, for each negotiated taxpayer refund check or misappropriated refund (or portion thereof) via electronic funds transfer, equal to the greater of $1,000 or the full amount of the check or transfer (with an exception for banks depositing the full check amount into the taxpayer's account); and (4) updates inflation adjustment base years in subsection (i)(1) to calendar year 2024 and 2023 (from 2014 and 2013), with a conforming amendment limiting adjustments to the fixed-dollar amount in new subsection (f)(2)(A).

This section requires the Secretary of the Treasury to publish final disciplinary determinations under 31 U.S.C. §330(c) (suspension, disbarment, censure, or penalties against representatives before the Department) or (d) (invalidation of appraiser work or testimony) on a public website within 30 days, including the facts, circumstances, and reasons for the determination. This section also amends IRC §6109 (1) to require any tax return or refund claim prepared by a tax return preparer to include a preparer tax identification number (PTIN) for the preparer, employer, or both (revising former subsection (a)(4)), with an exception for supervised preparers whose return is signed by a specified practitioner (i.e., CPA, attorney, or enrolled agent in good standing under 31 U.S.C. §330 with unrevoked license), and to invalidate suspended or revoked PTINs; and (2) to direct the Secretary to administer PTINs by restricting issuance or renewal to individuals who meet suitability standards (background check, tax compliance review, no state license revocation for tax preparation), complete up to 18 hours annually of continuing education on ethics, professional responsibility, and tax law (with approved programs listed publicly and no mandated provider), satisfy comparable state requirements, or qualify as specified practitioners (adding new subsection (e)). (Thus, imposes minimum competency and integrity standards on paid tax preparers, who currently number over 700,000 PTIN holders, to reduce errors and fraud on taxpayer returns.)