A tax preparer who endorses or cashes a client’s federal refund check faces a $500-per-check civil penalty under Internal Revenue Code Section 6695(f), adjusted each year for inflation and currently set at $635 per check.1Internal Revenue Service. Tax Preparer Penalties The penalty for a tax preparer endorsing a refund check does not stop there. The same conduct violates Treasury’s Circular 230 and can end in suspension or disbarment from IRS practice, and if the preparer forged the endorsement, federal law authorizes up to ten years in prison.
The Per-Check Civil Penalty
Section 6695(f) sets a base fine of $500 for each check a preparer endorses or negotiates, and Section 6695(h) indexes that figure to the cost-of-living adjustment.2Office of the Law Revision Counsel. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons For returns filed in 2025, the adjusted amount is $635 per check.1Internal Revenue Service. Tax Preparer Penalties
The fine applies per check, with no aggregate cap. A preparer who negotiates ten clients’ refund checks owes the penalty ten times over. Because the violation is an affirmative act rather than an oversight, the IRS treats it as a serious enforcement matter.
What Counts as Endorsing or Negotiating
Two federal rules bar the conduct. Section 6695(f) covers endorsing the check, cashing it, or arranging for someone else to negotiate it on the preparer’s behalf.2Office of the Law Revision Counsel. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons Circular 230 Section 10.31 goes further, prohibiting a practitioner from directing or accepting any refund payment, including an electronic transfer, into an account the practitioner or their firm owns or controls. That closes the loophole of routing a direct-deposit refund to the preparer’s own account.3eCFR. 31 CFR 10.31 – Negotiation of Taxpayer Checks
There is one narrow exception. A preparer who works at a bank may deposit the full amount of the check into the taxpayer’s own account at that bank.4GovInfo. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons – Section: Negotiation of Check Depositing only part of the check, sending any portion to the preparer’s account, or using a different institution all fall outside the exception. “I was just deducting my fee” is not a defense.
Suspension or Disbarment Under Circular 230
Because the same conduct violates Circular 230, the IRS Office of Professional Responsibility can pursue disciplinary action against any enrolled agent, CPA, or attorney with practice rights before the IRS.5Internal Revenue Service. Due Process Procedures in Circular 230 Matters The available sanctions run from a private reprimand to permanent disbarment:
- A private reprimand is a written warning that stays between the OPR and the practitioner.
- Censure is a public reprimand recorded on the practitioner’s file.
- Suspension bars the practitioner from representing taxpayers before the IRS for a set period.
- Disbarment is permanent and effectively ends the practitioner’s tax-representation career.
- A monetary penalty may be imposed by the OPR on top of the Section 6695(f) fine.
Many cases settle through negotiated sanctions or deferred discipline agreements, in which the practitioner admits the violation and enters a probationary period. Contested cases go to the Office of Chief Counsel for a formal disciplinary proceeding.5Internal Revenue Service. Due Process Procedures in Circular 230 Matters
Criminal Charges for a Forged Endorsement
When a preparer signs a client’s name on a Treasury check or cashes it without authorization, the case moves from civil penalty into federal criminal territory. Under 18 U.S.C. § 510, forging an endorsement on a Treasury check with intent to defraud carries up to ten years in federal prison and a fine. The same ten-year maximum applies to anyone who knowingly buys, receives, or conceals a Treasury check bearing a forged endorsement. If the face value (or combined value of multiple checks) is $1,000 or less, the ceiling drops to one year.6Office of the Law Revision Counsel. 18 USC 510 – Forging Endorsements on Treasury Checks or Bonds or Securities of the United States Most refund checks exceed that threshold, so the felony penalty is what preparers typically face.
Criminal prosecution runs on its own track. A preparer can be hit with the per-check civil fine, disciplinary action under Circular 230, and a criminal case at the same time. Federal prosecutors tend to charge when a preparer targeted multiple clients or the amount stolen was substantial.
If Your Preparer Cashed Your Refund Check
Report the preparer to the IRS on Form 14157, Complaint: Tax Return Preparer. If the preparer also filed a return you didn’t authorize or altered one you did, add Form 14157-A, which must be submitted together with Form 14157.7Internal Revenue Service. Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit Complaints can be submitted through the IRS website, faxed to 855-889-7957, or mailed to the Return Preparer Office at 401 W. Peachtree Street NW, Mail Stop 421-D, Atlanta, GA 30308. Complaints about conduct more than three years old are generally not actionable, so file promptly.8Internal Revenue Service. Make a Complaint About a Tax Return Preparer
Include copies of the negotiated check or bank statements showing the transaction, along with the preparer’s name and business address. File a report with your local police as well, since the conduct is likely theft or fraud under state law, and the report creates a record you can use if you sue for the funds.
To recover the money, request a refund trace. Single, separate, and head-of-household filers can call the IRS Refund Hotline at 800-829-1954 or use “Where’s My Refund?” on IRS.gov. Joint filers file Form 3911, Taxpayer Statement Regarding Refund. If the Bureau of the Fiscal Service confirms the check was cashed, it sends a claim package within about six weeks; return it so the Bureau can investigate the endorsement. If the Bureau finds the check was improperly negotiated, it issues a replacement refund. A denial letter includes appeal instructions.9Taxpayer Advocate Service. Lost or Stolen Refund
The refund trace and the preparer complaint are separate processes. Filing one does not trigger the other, so pursue both, and keep copies and call dates for everything you submit.