Due Diligence & Compliance

Due diligence and compliance for paid tax preparers refer to the legal and ethical responsibilities tax professionals must follow when preparing and filing tax returns for clients. These obligations are designed to ensure accuracy, integrity, and adherence to tax laws.

Due diligence requires tax preparers to thoroughly review their client's information, verify that all necessary documentation is accurate and complete, and apply the tax code correctly. This includes asking appropriate questions, ensuring eligibility for credits and deductions, and avoiding reliance on client-provided information that seems incorrect or incomplete.

Compliance involves adhering to all relevant tax regulations, including proper registration with the IRS, maintaining up-to-date knowledge of tax laws, and following procedures for record-keeping and reporting. Paid tax preparers must also follow ethical standards, such as safeguarding client confidentiality and avoiding conflicts of interest.

Failure to meet these standards can result in penalties, legal action, and damage to a preparer's professional reputation.