- List the failures each subsection of 6695 penalizes
- Apply the inflation-adjusted amounts for returns filed in 2026 to a fact pattern
- Explain the 6107 duties to furnish a copy and retain a copy or list for 3 years
- Identify which 6695 penalties have a reasonable cause exception
The seven subsections
Section 6695 collects procedural penalties that apply per failure, whether or not tax was understated.
| Subsection | Failure |
|---|---|
| 6695(a) | Failure to furnish a copy of the return or claim to the taxpayer as required by 6107(a) |
| 6695(b) | Failure to sign the return or claim as required by regulations |
| 6695(c) | Failure to furnish an identifying number (the PTIN) as required by 6109(a)(4) |
| 6695(d) | Failure to retain a copy or list as required by 6107(b) |
| 6695(e) | Failure to file correct information returns required by section 6060 |
| 6695(f) | Endorsing or negotiating a refund check issued to a taxpayer other than the preparer |
| 6695(g) | Failure to meet the due diligence requirements for head of household status and the credits under sections 24, 25A(a)(1) and 32 |
Section 24 is the child tax credit (including the additional child tax credit and the credit for other dependents), 25A(a)(1) is the American opportunity tax credit, and 32 is the earned income credit. The next-but-one lesson covers the 6695(g) due diligence rules in detail.
Amounts and inflation adjustment
The statute states base amounts ($50 per failure with a $25,000 cap for (a) to (e), and $500 for (f) and (g)), and 6695(h) adjusts them for inflation for returns filed in calendar years after 2014. Use the figures in the IRS inflation adjustment revenue procedure for the year the return is filed, not the statutory base.
| Penalty | Filed in 2026 (Rev. Proc. 2024-40) | Filed in 2027 (Rev. Proc. 2025-32) |
|---|---|---|
| 6695(a) to (e) | $65 per failure, maximum $32,500 | $65 per failure, maximum $33,000 |
| 6695(f) | $650 per check | $665 per check |
| 6695(g) | $650 per failure | $665 per failure |
The cap runs per calendar year for (a) to (c) and per return period for (d) and (e). The (f) and (g) penalties have no cap.
Reasonable cause
Subsections (a) through (e) each provide that the penalty does not apply if the failure is due to reasonable cause and not willful neglect. Subsection (f) has an exception for a bank depositing the full check amount into the taxpayer's account. Subsection (g) has no reasonable cause clause in the statute. Treas. Reg. 1.6695-2(d) gives a narrow exception: the preparer's normal office procedures are reasonably designed and routinely followed, and the failure on that return was isolated and inadvertent.
The 6107 duties behind (a) and (d)
Section 6107(a) requires a preparer to furnish a completed copy of the return or claim to the taxpayer no later than the time it is presented for the taxpayer's signature. Section 6107(b) requires the preparer, for the period ending 3 years after the close of the return period, to keep either a completed copy of each return or claim, or a list of the taxpayers' names and taxpayer identification numbers, and to make the copy or list available to the IRS on request.
Signing and the PTIN
The 6695(b) and (c) penalties pair with Circular 230. A signing preparer who leaves the preparer signature off, or omits the PTIN, can face both a 6695 penalty and a Circular 230 inquiry. Tax software fills in the PTIN from the preparer profile, so the common failure is a return filed under the wrong profile.
Check negotiation
Section 6695(f) penalizes a preparer who endorses or negotiates, directly or through an agent, a refund check issued to a taxpayer. The only statutory carve-out is a bank depositing the full amount of the check into the taxpayer's own account at that bank. A preparer who collects fees from a refund never endorses the client's check.
Firm-level controls in the tax season workflow guide cover client copies and retention.
A season of missed steps: Lakeside Returns, 2026 filing season
During the 2026 filing season a seasonal preparer at Lakeside Returns prepared 120 returns. A later IRS visit finds:
- 30 returns where the client never received a copy before signing (6695(a)).
- 12 returns filed under the office profile with no PTIN for the preparer (6695(c)).
- 4 returns claiming the earned income credit with no Form 8867 knowledge documentation (6695(g)).
Step 1, 6695(a): 30 failures at $65 = $1,950, well under the $32,500 cap.
Step 2, 6695(c): 12 failures at $65 = $780.
Step 3, 6695(g): each return claimed only the EIC, so 4 failures at $650 = $2,600.
Step 4, reasonable cause: the preparer argues the copies were emailed after signing. Section 6107(a) requires the copy no later than when the return is presented for signature, so a later email does not cure (a). There is no statutory reasonable cause clause for (g).
Total: $1,950 + $780 + $2,600 = $5,330 for returns filed in 2026, before any 6694 exposure.
Conclusion: the due diligence penalty is the largest per failure. Firms should treat Form 8867 documentation as a hard stop before filing.
Self-check
Answer each question before you open the answer.
What is the 6695(c) penalty for failing to furnish a PTIN on a return filed in 2026, and the cap?
Show answer
$65 per failure with a maximum of $32,500 per calendar year, per Rev. Proc. 2024-40. The statutory $50 and $25,000 are indexed under 6695(h), so the revenue procedure for the filing year controls.
How long must a preparer keep a copy of a return or a list of clients under 6107(b)?
Show answer
For the period ending 3 years after the close of the return period, under 6107(b). The preparer keeps either a completed copy of each return or a list of taxpayer names and identification numbers, and makes it available to the IRS on request.
Which benefits are covered by the 6695(g) due diligence penalty?
Show answer
Head of household filing status and the credits under section 24 (child tax credit, additional child tax credit, credit for other dependents), section 25A(a)(1) (American opportunity tax credit) and section 32 (earned income credit). Section 6695(g) lists exactly these, which is why Form 8867 covers the same four benefits.
Use it on the file
- GuideTax Season Workflow for CPA Firms: From Client Intake to E-File and Records
- GuidePaid Preparer Due Diligence Under Section 6695(g): The Four Requirements, Form 8867 and the Per-Failure Penalty
- LessonPaid preparer due diligence and Form 8867: EIC, CTC, AOTC and head of household
Sources
- 26 U.S.C. 6695, Other assessable penalties with respect to the preparation of tax returns for other persons (govinfo)
- IRS, Rev. Proc. 2024-40 (inflation-adjusted amounts, including section 6695 penalties for returns filed in 2026)
- IRS, Rev. Proc. 2025-32 (inflation-adjusted amounts, including section 6695 penalties for returns filed in 2027)
- 26 U.S.C. 6107, Tax return preparer must furnish copy of return to taxpayer and must retain a copy or list (govinfo)
Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error