Practices and Procedures · Rules and penalties
Employees engaged or employed during a return period (e.g. IRC Section 6060)
tax year · reviewed 2026-08-18 · I. Ohu
This is the outline item most likely to be answered from the statute and got wrong. Section 6060 says a person who employs preparers “shall make a return” listing them, filed by 31 July. The regulation says something different — keep a record and produce it on request — because the Secretary exercised the alternative-reporting power the statute grants. Nothing is filed. A candidate who answers from § 6060(a) alone will describe a filing obligation that does not exist in practice.
The rule
The statute. Any person who employs a tax return preparer to prepare a return or claim for someone other than that person, at any time during a return period, shall make a return setting out the name, identifying number and place of work of each preparer so employed, filed on or before the first 31 July following the end of the return period (IRC § 6060(a)).
The alternative. In lieu of that return, the Secretary may approve an alternative reporting method if satisfied the necessary information is available from other sources (IRC § 6060(b)).
What the regulation actually requires. The Secretary took that route. A person who employs one or more signing tax return preparers satisfies § 6060 by retaining a record of the name, identifying number and principal place of work of each preparer employed at any time during the return period, and making that record available for inspection on request by the Commissioner (Reg. § 1.6060-1(a)(1)). The record is kept 3 years following the close of the return period to which the record relatesTY2026 (Reg. § 1.6060-1(a)(2)).
Any form will do, if it does one thing. The employer may choose any form of documentation, provided the record discloses on its face which individuals were employed as tax return preparers during that period (Reg. § 1.6060-1(a)(3)). A general payroll record that does not distinguish preparers from other staff fails that test.
Who is an employer here. An individual who, acting as a signing preparer, is not employed by another preparer is treated as their own employer — so a sole proprietor keeps a record about themselves (Reg. § 1.6060-1(a)(5)(i); IRC § 6060(a)). A partnership is treated as the employer of its partners and keeps a record about the partners as well as anyone else it employs (Reg. § 1.6060-1(a)(5)(ii)).
The return period. the 12-month period beginning on 1 July each yearTY2026 — the same definition that governs the § 6107(b) retention clock (IRC § 6060(c); Reg. § 1.6060-1(b)).
The penalty. Failure to comply costs $65 per return or claim, capped at $33,000TY2026 for each failure to file the return required and for each failure to set forth an item in it, unless due to reasonable cause and not willful neglect (IRC § 6695(e)). The maximum runs per return period — as it does for § 6695(d), and unlike the calendar-year caps in § 6695(a) to (c). The regulation routes the penalty for failing to retain or produce the record to § 1.6695-1(e) (Reg. § 1.6060-1(c)).
Current figures
| Item | Value |
|---|---|
| Return period | the 12-month period beginning on 1 July each yearTY2026 |
| Retention of the record | 3 years following the close of the return period to which the record relatesTY2026 |
| Penalty per failure | $65 per return or claim, capped at $33,000TY2026 |
How it works in practice
The gap between statute and regulation is the whole of this topic. Section 6060(a) reads as an annual information return due 31 July; § 6060(b) authorises an alternative; § 1.6060-1 exercises it. What survives is a retain-and-produce obligation with no filing date attached, which is why practitioners who have never filed anything under § 6060 are nevertheless in compliance — or are not, without knowing it, because the record they keep does not identify who the preparers were.
The self-employment rule catches sole practitioners. Treating oneself as one’s own employer sounds like a drafting nicety; its effect is that a solo preparer must keep a § 6060 record about themselves, containing their own name, identifying number and principal place of work, for three years after each return period. Practices that have never thought about § 6060 because they employ nobody are inside it.
Partnerships are inside it twice over. The partnership is the employer of its partners, so the record covers the partners themselves as well as employed staff — a point that matters when partners think of themselves as principals rather than as people someone employs.
Note the scope word. The regulation speaks of signing tax return preparers throughout. A firm employing non-signing preparers — reviewers, researchers, staff who prepare substantial portions without signing — is not required by § 1.6060-1 to record them, though other obligations may reach them. The statute’s broader “tax return preparer” is narrowed by the regulation to the people who sign.
The firm that filed nothing and was right
A ten-person practice has never filed anything on 31 July. During an examination the agent asks how it complies with section 6060. The office manager produces a spreadsheet listing every preparer employed since 2023 with PTINs and office locations.
Analysis. Compliant, provided the spreadsheet distinguishes preparers from other staff on its face. Section 6060(b) let the Secretary approve an alternative reporting method, and Reg. § 1.6060-1(a)(1) substituted a retained record for the filed return. Nothing is due on 31 July. The examinable question is whether the record identifies the preparers and is produced on request.
The payroll report that did not distinguish
Asked for its § 6060 record, a firm produces the payroll register for each return period. It lists everyone the firm paid — preparers, administrative staff, the receptionist — with names and addresses but no role.
Analysis. Insufficient. Reg. § 1.6060-1(a)(3) allows any form of documentation, but the record "must disclose on its face which individuals were employed as tax return preparers during that period". A register from which the preparers cannot be identified without outside knowledge fails. The penalty under § 6695(e) applies, capped per return period.
The sole practitioner who employed nobody
An enrolled agent works alone, signs every return himself, and employs no one. He keeps no § 6060 record, reasoning that the section applies to employers.
Analysis. He is inside it. Both IRC § 6060(a) and Reg. § 1.6060-1(a)(5)(i) treat an individual acting as a signing preparer who is not employed by another preparer as his own employer, so he must retain a record about himself — name, identifying number and principal place of work — for three years after the close of each return period. Employing nobody is not an exemption.
Traps
Nothing is filed. The statute's 31 July return was displaced by the retained-record alternative in Reg. § 1.6060-1.
A sole proprietor is their own employer and keeps a record about themselves.
A partnership is the employer of its partners.
The record must identify the preparers on its face. A general payroll list does not.
The regulation covers signing preparers. The statute's wider term is narrowed.
The § 6695(e) cap is per return period, and the return period begins on 1 July, not 1 January.
How this has changed
Section 6060 was enacted by the Tax Reform Act of 1976 (Pub. L. 94-455) as part of the original preparer regulation package. The regulation dates from T.D. 7640 (44 FR 49451, 23 August 1979) and was amended by T.D. 9436 (73 FR 78437, 22 December 2008), applicable to returns and claims filed after 31 December 2008 — the same amendment that rewrote §§ 1.6107-1 and 1.6695-1. It is that 2008 text which speaks of signing tax return preparers throughout, narrowing the recorded population from the statute’s broader term. The § 6695(e) amount was flat when enacted and is now indexed under § 6695(h).
Exam focus
The single most testable point is that the retained record replaced the filed return under the § 6060(b) alternative — know it and know why. Then: the return period beginning 1 July, the three-year retention, the three data items, the requirement that the record identify preparers on its face, and the two deeming rules for sole proprietors and partnerships. Distinguish the § 6695(e) per-return-period cap from the calendar-year caps in § 6695(a) to (c).
Check yourself
1. Under the current regulation, a person employing signing tax return preparers must: (A) File an information return by 31 July following the return period (B) Retain a record of each preparer and make it available for inspection on request (C) File Form 8867 for each preparer (D) Register each preparer with the IRS Answer: B. Reg. § 1.6060-1(a)(1), under the alternative authorised by IRC § 6060(b).
2. The record must show, for each preparer: (A) Name only (B) Name, identifying number and principal place of work (C) Name and salary (D) Name and the returns prepared Answer: B.
3. An enrolled agent practising alone and employing nobody: (A) Is outside § 6060 (B) Is treated as his own employer and must keep a record about himself (C) Must file the 31 July return the statute describes (D) Is covered only if he signs more than 10 returns Answer: B.
4. A firm produces its payroll register, which lists all employees without indicating who prepared returns. This: (A) Satisfies the regulation, any documentation being acceptable (B) Fails, because the record must disclose on its face which individuals were preparers (C) Satisfies it if the firm explains verbally (D) Fails only if the IRS cannot identify them at all Answer: B. Reg. § 1.6060-1(a)(3).
5. The maximum penalty under IRC 6695(e) is measured: (A) Per calendar year (B) Per return period (C) Per preparer (D) Per return prepared Answer: B.
Change log
- Initial publication from IRC §§ 6060, 6695(e) and Reg. § 1.6060-1.