In the world of tax preparation, few events are as disruptive and potentially damaging as an IRS due diligence penalty audit. These audits—often triggered by claims involving refundable credits like the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), or Head of Household (HOH) status—can expose tax return preparers to steep penalties, reputational harm, and even criminal investigation.
For preparers facing this level of scrutiny, hiring a former IRS attorney isn’t just a smart move—it’s a strategic necessity.
This article explores why the former IRS attorneys at Gregory Law Group, PLLC are uniquely qualified to defend tax return preparers during due diligence audits, how they mitigate risk, and what makes their representation so effective.
Understanding the IRS Due Diligence Audit
The IRS due diligence audit is designed to ensure that tax return preparers comply with the requirements of IRC § 6695(g), which mandates specific documentation and interview procedures when preparing returns that claim certain credits. These audits are intensive examinations of a preparer’s practices, policies, and client files.
The IRS examiner may request:
Copies of intake forms, interview notes, and supporting documentation
Client records such as Social Security cards, birth certificates, and school records
Evidence of how eligibility for credits was determined
These audits can last days or weeks and often include an interview of the tax preparer under examination.
The Stakes: Penalties and Reputational Damage
The penalties for failing due diligence requirements are steep and cumulative. As of 2025, the penalty under IRC § 6695(g) is $560 per failure. Considering each file can contain 4 potential violations, and the IRS often reviews multiple files, penalties can easily exceed $50,000.
Additional penalties can include:
$60 per return for failing to provide a copy of the return to the taxpayer
$60 per return for failing to sign the return
$1,000 to $5,000 per return for unreasonable positions or reckless conduct
Beyond financial penalties, preparers risk:
Suspension or revocation of PTIN or EFIN
Reputational harm
Loss of clients and revenue
Possible referral to IRS Criminal Investigation
Why Gregory Law Group’s Former IRS Attorneys Are the Best Defense
Representation matters in a due diligence audit. While CPAs and enrolled agents can represent clients, the former IRS attorneys of Gregory Law Group, PLLC offer insider knowledge and strategic advantages that others cannot match.
They Know the IRS Playbook
Former IRS attorneys know how audits are conducted, what examiners look for, and how cases are built. They understand internal procedures, escalation thresholds, and communication protocols—allowing them to anticipate the examiner’s next move.
They Speak the IRS’s Language
IRS attorneys are trained to interpret the Internal Revenue Code, Treasury Regulations, and IRS procedures. They know how to:
Frame arguments the IRS responds to
Cite relevant precedent
Communicate effectively with IRS personnel
This fluency can make all the difference in resolving an audit favorably.
They Can Control the Narrative
IRS audits often involve an interview with the tax preparer. A skilled attorney can:
Limit the scope of questioning
Ensure legally sound responses
Push back against overly broad document requests
Prevent the preparer from making harmful admissions
They Understand the Consequences
Former IRS attorneys know how quickly a civil audit can escalate into a criminal investigation. They recognize red flags and take steps to prevent escalation, protecting not just the preparer’s finances but their career.
Strategic Defense: What Gregory Law Group’s Former IRS Attorneys Do
Gregory Law Group’s attorneys build a comprehensive, proactive defense strategy. This includes:
Pre-Audit Preparation: Reviewing client files, documentation procedures, and office policies
Audit Representation: Attending meetings, responding to information requests, negotiating with examiners
Staff Training: Preparing employees to respond appropriately
Client Management: Advising on how to handle IRS contact with clients
Penalty Mitigation: Arguing for abatements based on reasonable cause or procedural errors
Appeals and Litigation: Filing appeals or representing the preparer in court when necessary
Their focus is on minimizing exposure from the very beginning.
The Cost of Self-Representation
Some preparers believe they can handle the audit themselves, but this confidence often backfires.
Common mistakes include:
Providing inconsistent or incomplete documentation
Allowing staff to speak directly with IRS agents
Failing to challenge improper requests
Missing deadlines
Making statements that can be used against them
The IRS is an enforcement agency—not a neutral party. Without skilled representation, preparers are at a significant disadvantage.
ROI: The Value of Hiring a Former IRS Attorney
Hiring a former IRS attorney is an investment that often saves money, time, and reputation. Benefits include:
Reduced penalties through negotiation
Protection of staff and client relationships
Preservation of PTIN and EFIN
Identification of internal weaknesses
Peace of mind
In many cases, attorney involvement results in faster and more favorable resolutions.
Final Thoughts: Don’t Face the IRS Alone
Due diligence audits are high-stakes investigations that can reshape a tax preparer’s career. The IRS aggressively pursues violations, and the burden of proof rests on the preparer. In this environment, hiring a former IRS attorney is not a luxury—it’s a necessity.
Former IRS attorneys bring insider knowledge, legal expertise, and strategic defense that can mean the difference between survival and shutdown.
If you’re a tax return preparer facing a due diligence audit, don’t go it alone. Partner with someone who knows the IRS from the inside—and how to protect you from the outside.
To schedule a free consultation with the former IRS attorneys at Gregory Law Group, call 972.331.6666.
