Defending the Defenders of Tax Law Because your reputation deserves a winning defense!

If you are a tax professional, you know that IRS Due Diligence Audits are not routin, they are high-stakes reviews that can lead to severe financial penalties, loss of your EFIN/PTIN, and even criminal referrals.

The IRS conducts Due Diligence Audits to determine whether tax preparers are following the strict compliance rules when claiming refundable credits, including:

• Earned Income Tax Credit (EITC)
• Child Tax Credit (CTC/ACTC/ODC)
• Head of Household Filing Status
• American Opportunity Tax Credit (AOTC)
   

Failure to meet the IRS’s standards even for one client can result in penalties of $650 per failure, per return (IRC §6695(g)). With multiple clients, penalties can quickly reach tens of thousands of dollars. Worse, repeated or willful violations can lead to:

• Suspension or expulsion from IRS e-file (EFIN loss)
• PTIN suspension or revocation
• Referral to the IRS Office of Professional Responsibility (OPR)
• Criminal Investigation (IRS CI)
   

The IRS views preparers as the gatekeepers of the tax system. If they believe you “should have known” about false information, they can hold you responsible even if your client provided incorrect details. 

This makes Due Diligence Audits uniquely dangerous for tax professionals, because the IRS often assumes negligence or fraud.

At The Walton Firm, we defend tax professionals nationwide in Due Diligence Audits and Penalty cases. Our strategies include:

1. Audit Representation – Handling all communications with the IRS so you don’t risk making statements that harm your case.
2. Penalty Defense – Arguing against §6695(g) penalties by showing you met the due diligence standard or that the IRS misapplied the law.
3. Abatement Requests – Seeking relief or reduction of penalties where appropriate. 
4. Appeals & Litigation – Taking your case before the IRS Office of Appeals or U.S. Tax Court when necessary. 
5. Compliance Planning – Helping you implement systems to protect against future audits and penalties.