When to use non-paid preparer?

[pmb3cpa]

I am confused about what designation to use if I am preparing a return pro bono. The 3 choices are self-prepared, non-paid preparer, and preparer.

[itonewbie · Accepted solution]

§7701(a)(36) states, in part, "[t]he term “tax return preparer” means any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by this title or any claim for refund of tax imposed by this title. For purposes of the preceding sentence, the preparation of a substantial portion of a return or claim for refund shall be treated as if it were the preparation of such return or claim for refund.".

If you are not preparing your own ("self-prepared") return and do not meet the conditions outlined under the subsection, you are not a paid preparer.  Nevertheless, if you try to e-file a return as nonpaid preparer, you may run into problems and the return may not be accepted because of diagnostic programming issues as others have observed.  The workaround would be to sign the return as a paid preparer although it is not technically correct and some may worry about the potential liability for signing the return as such.  Another alternative would be to have whoever you prepare the return for file it on paper.

[IRonMaN]

"some may worry the potential liability for signing the return as such"

If you have your name on the return as a preparer, what additional liability do you have if you are noted as paid vs not being paid?

[itonewbie]

The difference is that preparer penalties with respect to that return are only applicable to signed and nonsigned preperer of that return as far as liabilities are concerned.  That, however, does not negate the practitioner's responsibilities and obligations as regulated by Circular 230.

[IRonMaN]

I was referring to your comment about potential liabilities from signing as a paid preparer vs nonpaid preparer.

[itonewbie]

But if the OP is not a paid preparer, he wouldn't be signing the return in the first place.

[IRonMaN]

I'm getting dizzy from this discussion.  

I still fall back on the rules from 1893 when I was in college.  A CPA signs a return, whether or not he is paid to prepare it.

[itonewbie]

The line for preparer signature is explicitly for Paid Preparer and the instructions for that line says "Someone who prepares your return but doesn't charge you shouldn’t sign your return."

[George4Tacks]

I like this post - https://accountants-community.intuit.com/questions/219369-efiling-as-non-paid-preparer which does address the issue with Lacerte. I am not sure pmb3cpa is really using Lacerte, but ...