42-1103.02. Understatement of taxpayer's liability by return preparer; civil penalty; definition

A. The department may impose a civil penalty of two hundred fifty dollars against a return preparer who knew or reasonably should have known that an understatement of liability was on a return or claim for refund.  The penalty under this subsection may be imposed only if there was not a realistic possibility that the position would be sustained on its merits and the position was not disclosed to the department in the return or in a statement attached to the return.

B. The department may impose a civil penalty of one thousand dollars against a return preparer who wilfully made an understatement of liability on a return or claim for refund.

C. A return preparer is required to only pay eighty-five per cent of the imposed penalty if the payment is made within thirty days from the date of the receipt of notification that the penalty was imposed.  A return preparer may not appeal to the department pursuant to section 42-1251 if the return preparer fails to file the appeal within thirty days from the date of the receipt of notification that the penalty was imposed. If there is a final order or decision stating that the return preparer did not make an understatement of liability in a return or claim for refund, the department shall refund any penalty amount paid and interest to the return preparer.

D. For the purposes of this section, "understatement of liability" means any understatement of the net amount payable with respect to any imposed tax or any overstatement of the net amount creditable or refundable with respect to any tax.