Can I just sign my tax return without questioning it?

Where the claim comes from

Many people hire a professional so they don't have to think about their taxes, and it can feel awkward or disrespectful to question someone with a credential. Some preparers and promoters also discourage questions, especially about aggressive positions.

The idea that you should "just sign" confuses delegating the work with delegating the responsibility. You can delegate the work. The declaration on the return is still yours.

What the law actually says

IRC §6065 provides that any return required under the internal revenue laws must contain or be verified by a written declaration that it is made under the penalties of perjury. On Form 1040, the declaration reads: "Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete." The preparer's own declaration is based on all the information the preparer has.

If the return understates your tax, you owe the tax plus interest. You may also face the 20% accuracy-related penalty under IRC §6662 for negligence or a substantial understatement. Under IRC §6664(c), that penalty does not apply to any portion for which you show reasonable cause and good faith. Treas. Reg. §1.6664-4 says this is decided case by case, and that all facts and circumstances determine whether you reasonably relied in good faith on professional advice.

The Tax Court's test in Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43 (2000), asks three questions. Was the adviser a competent professional with enough expertise to justify reliance? Did you provide necessary and accurate information? Did you actually rely on the advice in good faith? Relying on a preparer for a filing deadline is different. Under United States v. Boyle, 469 U.S. 241 (1985), that generally is not reasonable cause.

Willfully signing a return you do not believe is true and correct as to every material matter is a felony under IRC §7206(1). Preparers answer separately: IRC §6694 penalizes preparers for unreasonable positions and for willful or reckless conduct.

What is true and what is not

It is true that you are not expected to be a tax expert, and reasonable reliance on a qualified preparer can protect you from penalties. It is not true that signing without reading protects you. If you never looked at the return, and it overlooks income you knew about or claims a deduction you knew was wrong, it is hard to show good-faith reliance.

• True: professional advice, reasonably relied on, can support penalty relief.
• True: your preparer has separate legal duties and penalty exposure.
• Not true: "my preparer did it" removes the tax or interest you owe.
• Not true: asking where a position comes from signals distrust. It is part of reasonable care.

What to do instead

Before you sign, read the return. Compare income with your W-2s, 1099s, and K-1s. Look at the largest deductions and credits and ask what supports each one. For any position that seems unusual, ask for the Code section or other authority and whether it should be disclosed on Form 8275.

Give your preparer complete information, including anything you are unsure about, and keep a record of what you provided and the answers you received. If something on the return does not match your understanding, do not sign until it is resolved.

If you find a mistake after filing, you can usually correct it on an amended return. Correcting an error before the IRS contacts you may also help with penalties. Keep your copy of the signed return and the supporting records for at least as long as the IRS can assess tax, which is generally three years after filing under IRC §6501. That period is six years if you omit gross income that exceeds 25% of the gross income shown on the return, and there is no time limit for a fraudulent return. Keep records on property you own for as long as you own it, plus the assessment period after you sell.

How ebotCPA helps

We walk through your return with you line by line, explain the authority for each significant position, and point out anything that should be disclosed or documented. If you already filed, we review the return and help you correct errors.

Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.

Primary sources

1. 26 U.S.C. §6065. Verification of returns.

   “shall contain or be verified by a written declaration that it is made under the penalties of perjury”

   Requires returns to be signed under penalties of perjury.

2. Form 1040, U.S. Individual Income Tax Return, signature declaration. Taxpayer's jurat.

   “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”

   The taxpayer declares that they have examined the return.

3. Treas. Reg. §1.6664-4(b)(1), (c)(1). Reasonable cause and reliance on professional advice.

   “All facts and circumstances must be taken into account in determining whether a taxpayer has reasonably relied in good faith on advice (including the opinion of a professional tax advisor) as to the treatment of the taxpayer (or any entity, plan, or arrangement) under Federal tax law.”

   Sets the facts-and-circumstances standard for penalty relief based on reliance on advice.

4. Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43 (2000). Three-part test for reliance on a professional adviser.

   Reliance is reasonable only if the adviser was competent, the taxpayer gave necessary and accurate information, and the taxpayer actually relied in good faith.

5. IRM 20.1.1.3.3.4.3. Reasonable cause: advice from a tax advisor.

   Tells IRS employees how to evaluate penalty relief requests based on reliance on a tax adviser.

6. 26 U.S.C. §6694. Tax return preparer penalties.

   Imposes separate penalties on preparers for unreasonable positions and for willful or reckless conduct.

Frequently asked questions