Preparer Due Dilligence Audit Representation

An IRS Due Diligence Audit is a high-stakes review of your professional judgment and record-keeping that can lead to six-figure penalties and the loss of your PTIN. Based in Houston and representing preparers nationwide, our firm specializes in defending tax professionals against IRC § 6695(g) assessments. We manage the entire audit process from responding to Letter 6199 to representing you during the interview and filing administrative appeals. Protect your livelihood and your practice from the devastating consequences of due diligence failures by securing expert tax attorney representation today.

Expert IRS Due Diligence Audit Representation in Houston and Nationwide

For the modern tax professional, the IRS is no longer just auditing your clients; they are auditing you. Under IRC § 6695(g), the IRS has the power to scrutinize your internal office procedures and individual client files to ensure you are meeting strict due diligence standards. A single oversight can lead to “draconian” financial penalties and the potential loss of your ability to file returns.

IRS due diligence audits are not routine reviews. They are focused examinations of how you prepare returns, ask questions, document answers, and retain records, often with significant penalties on the line. Even a single alleged failure can trigger thousands of dollars in penalties and place your PTIN, EFIN, and professional reputation at risk.

Based in Houston, Texas, our firm specializes in tax preparer defense, providing nationwide representation for EAs, CPAs, and unlicensed preparers facing high-stakes due diligence visits. We understand the government’s playbook and work to protect your practice from the devastating consequences of an unfavorable audit.

The Four Pillars of Tax Preparer Due Diligence

The IRS views preparers as the “gatekeepers” of the tax system. To satisfy the requirements of Section 6695(g), you must prove compliance in four specific areas for every return involving refundable credits or Head of Household status:

Completion of Form 8867: You must accurately complete and submit the Paid Preparer’s Due Diligence Checklist with every applicable return.
Credit Computation: You must keep worksheets showing exactly how you calculated credits like the EITC, CTC/ACTC/ODC, and AOTC.
The Knowledge Requirement: This is the most subjective and dangerous area. You must not only ask the right questions but also “probe” further if client information appears incorrect, inconsistent, or incomplete.
Record Retention: You must maintain copies of all client-provided documents, worksheets, and notes of your interviews for at least three years.

What to Expect During an IRS Due Diligence Visit

Unlike a standard audit, a due diligence visit is a targeted review of your professional conduct. The IRS typically initiates this process with Letter 6199 (Request for Visit) or Letter 6222 (Correspondence IDR).

The Audit Process:

The 14-Day Window: You generally have only two weeks to respond and schedule your interview.
File Review: The IRS examiner will typically pull a minimum of 25 client files. If they find errors in the initial sample, they may expand the audit to 50 files or more.
The Interview: Investigators will probe your “professional judgment.” They want to know how you verify that a child actually lives with the taxpayer or why you didn’t question a Schedule C that seems optimized just to max out the Earned Income Tax Credit.

Defending Against “Draconian” Penalties

The financial impact of a due diligence audit can be practice-ending. For the 2023 tax year, the penalty is $600 per failure, per credit, per return. For example, if a preparer fails to document due diligence for a client claiming the EITC, CTC, and Head of Household status on one return, the penalty is $1,800 for that single client. Across 50 audited files, penalties can easily soar past $90,000.

Beyond the Money:

If the IRS identifies a pattern of willful neglect or reckless disregard, the consequences escalate:

Loss of EFIN/PTIN: Permanent suspension from the IRS e-file program.
OPR Referral: Investigation by the Office of Professional Responsibility for Circular 230 violations.
Criminal Investigation: Referral to IRS-CI if fraud or “kickbacks” are suspected.

Why Choose Our Houston-Based Firm for Nationwide Defense?

We provide more than just a buffer; we provide a strategic defense. Our team, which includes former government-side insights, knows how to argue for penalty abatement and how to demonstrate that you met the “well-informed preparer” standard.

File Review & Preparation: We review your records before the IRS sees them to identify and explain gaps.
Communication Management: We handle all correspondence with the agent so you don’t inadvertently make statements that lead to a criminal referral.
Administrative Appeals: If the IRS proposes a massive penalty, we fight for a reduction or reversal through formal and informal protests.

Don’t let a due diligence audit end your career. Whether you are in Texas or anywhere in the U.S., contact us today to protect your professional future.

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