Practices and Procedures · Rules and penalties

Signing returns and furnishing identifying numbers

Two obligations that travel together and are penalised separately. One person signs, and that same person’s identifying number goes on the return — plus, where there is an employment arrangement, the firm’s. The rules sound mechanical until an e-filed return, a preparer on leave, or a firm structure gets in the way, and each of those is where the exam looks.

The rule

Who signs, and when. The signing tax return preparer must sign a paper return after it is completed and before it is presented to the taxpayer for signature (Reg. § 1.6695-1(b)(1)). If that preparer is unavailable, another preparer must review the entire preparation of the return and then sign it. Reviewing part of it is not enough.

Electronically signed returns are different. The signing preparer need not sign before presenting the copy to the taxpayer, but must furnish all the information that will be transmitted as the electronically signed return contemporaneously with the Form 8879 or other e-file signature form (Reg. § 1.6695-1(b)(2)). The preparer then signs electronically in the manner the Commissioner prescribes.

Whose number goes on the return. Every filed return or claim prepared by a preparer must carry the identifying number of the preparer required to sign it (Reg. § 1.6109-2(a)(1); IRC § 6109(a)(4)). Where there is an employment arrangement or association between that individual and another person, that other person’s identifying number must also appear — and for an employing or associated person, whether individual or entity, the number is the employer identification number (Reg. § 1.6109-2(a)(3)).

Which number. For returns filed after 31 December 2010, an individual preparer’s identifying number is the preparer tax identification number (Reg. § 1.6109-2(a)(2)(ii)). Before that it was the social security number. All preparers must have a PTIN, applied for and received in the prescribed manner including payment of a user fee (Reg. § 1.6109-2(d)). The current fee is $18.75 to apply or renew — a $10 annual IRS fee plus $8.75 charged by the contractor^TY2026.

Two penalties, not one. Failure to sign costs $65 per return or claim, capped at $33,000^TY2026 (IRC § 6695(b)); failure to furnish the identifying number costs the same again (IRC § 6695(c)). Each carries its own calendar-year cap, and each yields to reasonable cause and not willful neglect — for which the IRS will require a written statement, reasonable cause being cause arising despite ordinary care and prudence exercised by the individual preparer (Reg. § 1.6695-1(b)(3)).

And a third consequence. Willfully failing to sign a return the practitioner prepared where signature is required, and willfully preparing or signing without a current valid PTIN, are both disreputable conduct under Circular 230 § 10.51(a)(14) and (a)(17).

Current figures

How it works in practice

The paper sequence is exact and often reversed in practice: complete, sign, then present to the taxpayer. A firm that has the client sign first and the preparer sign later has the order wrong, and the regulation is written in that order deliberately — the taxpayer is meant to see a return that a named professional has already stood behind.

The unavailability rule is the one that costs firms money. When the assigned preparer is out, a colleague may sign — but only after reviewing the entire preparation, not merely the output. A reviewer who signs on a quick scan has both signed a return they did not review and, if the return proves defective, acquired the signing preparer’s exposure under § 6694. The rule is a burden, not a convenience.

On identifying numbers, the doubling is what gets missed. An employed preparer’s return carries two numbers: the individual’s PTIN and the employer’s EIN. A sole practitioner who is not employed by another preparer supplies only their own. The trigger for the second number is an employment arrangement or association, not the size of the firm.

Because the two penalties are independent, a single return prepared by an unsigned, un-numbered preparer draws both — and each has its own annual cap, so the exposures do not merge. That is worth saying to a firm whose software profile is misconfigured, because the arithmetic is twice what they expect.

How this has changed

The identifying number regime changed at the end of 2010. For returns filed on or before 31 December 2010 an individual preparer’s number was the social security number; for returns filed after that date it is the PTIN (Reg. § 1.6109-2(a)(2)). The same amendment required every preparer to hold a PTIN obtained in the prescribed manner and on payment of a user fee (Reg. § 1.6109-2(d)). The registered tax return preparer category that regulation contemplates did not survive later litigation, but the PTIN requirement itself was never disturbed and applies to every preparer today. The § 6695(b) and (c) amounts, flat when enacted, are indexed under § 6695(h) and move annually.

Exam focus

The paper signing sequence and the e-file exception. The “entire preparation” standard for a substitute signer. Which numbers appear on a filed return, and that the employing person’s number is an EIN. That the PTIN replaced the social security number for returns filed after 31 December 2010. That § 6695(b) and § 6695(c) are separate penalties with separate annual caps, and that both yield to reasonable cause substantiated in writing. Expect the Circular 230 § 10.51(a)(14) and (a)(17) overlay as a second-half answer.

Check yourself

1. For a paper return, the signing tax return preparer must sign: (A) After the taxpayer signs (B) After the return is completed and before it is presented to the taxpayer for signature (C) At any time before filing (D) Only if the taxpayer requests it Answer: B. Reg. § 1.6695-1(b)(1).

2. The assigned preparer is unavailable. Another preparer may sign: (A) Immediately, as a matter of firm convenience (B) After reviewing the entire preparation of the return (C) Only with the taxpayer’s written consent (D) Never; the return must wait Answer: B.

3. A preparer employed by a firm prepares a client’s return. The filed return must carry: (A) The preparer’s PTIN only (B) The preparer’s PTIN and the firm’s EIN (C) The firm’s EIN only (D) The preparer’s social security number Answer: B. Reg. § 1.6109-2(a)(1), (a)(3).

4. A single return is filed unsigned and without any preparer identifying number. The exposure is: (A) One penalty, the failures being related (B) Two separate penalties under § 6695(b) and § 6695(c), each with its own annual cap (C) A single penalty at double the rate (D) No penalty absent willfulness Answer: B.

5. For an electronically signed return, the preparer must: (A) Sign before presenting the copy, as for paper (B) Furnish all information to be transmitted contemporaneously with the Form 8879, then sign electronically (C) Sign only after the IRS accepts the return (D) Obtain a paper signature as well Answer: B. Reg. § 1.6695-1(b)(2).