The TAS Act Penalty Math to Fix Before January

S. 3931, the Taxpayer Assistance and Service Act, is not law. That matters. A tax office should not rewrite client-facing language as if Congress already passed it.

But a bill can still be a useful stress test. S. 3931 points directly at weak spots small offices already have: Form 8867 diligence files, preparer signatures, PTIN hygiene, and seasonal-staff training.

If your workflow would break under the proposed numbers, it is probably too fragile under today's numbers too.

What the bill would change

The preparer-facing piece is simple enough to model.

The bill would move the §6695(g) due-diligence penalty floor to $1,000 per failure and remove the annual cap. Covered benefits include EITC, child tax credit and related dependent credits, AOTC, and head of household. A return with several covered benefits can create several failures.

It would also raise the failure-to-sign penalty under §6695(b), increase the related annual cap, criminalize certain incorrect or fraudulent PTIN behavior, and expand training expectations for unlicensed return preparers.

Those are proposed changes. The current law still matters, and Rev. Proc. 2025-32 already lists meaningful inflation-adjusted amounts for §6695 failures. The practical question is not "will the bill pass?" The practical question is "would our files survive if the floor moved higher?"

Why waiting is expensive

The controls the bill would force are the same controls an examiner wants today.

Form 8867 should not be a checkbox added after the return is done. It should be supported by an intake trail: who asked, what the client answered, what document or fact supported the answer, and how the preparer resolved contradictions.

The signing pipeline should not depend on habit. Every return that leaves the office should have a final check that the preparer signature, PTIN, and assigned preparer match.

PTIN hygiene should not be handled by memory. Seasonal staff, contract reviewers, and returning preparers all need current PTIN verification before they prepare or review returns.

Training should not be informal. If unlicensed staff touch covered-benefit returns, the office should be able to show what they were trained on, when, and by whom.

None of that requires a new law. It requires discipline before January.

The penalty math that changes behavior

Model one complex family return: EITC, CTC, AOTC, and head of household, with weak documentation across all four benefits.

At a $665 current planning figure from the 2027 filing-season table, four due-diligence failures equal $2,660. At the proposed $1,000 floor, the same file becomes $4,000.

Now add one signing failure. The issue is no longer a theoretical "maybe the IRS asks." It is a file-level economics problem. A handful of weak returns can erase the margin from dozens of clean ones.

Use the preparer penalty calculator with your real covered-benefit count. Do not use a perfect-file assumption. Use the miss rate you would expect if an examiner opened last season's folders tomorrow.

Four controls to ship before intake opens

Start with a hard Form 8867 gate. A return with EITC, CTC/ACTC/ODC, AOTC, or HOH does not move to review until the supporting questions and documents are complete. The Form 8867 checklist is a practical starting point because it forces the office to map the benefit, the question, and the evidence.

Second, add a signing checkpoint. The reviewer confirms that the preparer signature is present, the PTIN is current, and the return is assigned to the human who prepared it. Do this before e-file, not at year-end.

Third, create a PTIN log. One row per preparer. PTIN, renewal date, software user, verification date, and removal date when the preparer leaves. This is dull by design. Dull logs beat reconstructed explanations.

Fourth, document seasonal training. A 90-minute internal class on EITC, CTC, AOTC, HOH, and office documentation standards is better than a verbal "watch how we do it." Record topic, date, attendee, and materials.

Pricing has to reflect diligence work

Covered-benefit returns take more work when done properly. The preparer has to ask more, document more, and review more. If your price treats that work like a free checkbox, the penalty regime is being subsidized by your margin.

You do not need to scare clients with code sections. You can explain it plainly: refundable-credit and HOH returns include additional required diligence and documentation review. That work is part of the fee.

For next season, separate simple returns from covered-benefit returns in the fee schedule. Add a due-diligence documentation line or build the cost into the tier. The important part is that the office stops pretending a high-risk family return costs the same to prepare as a simple W-2 file.

The practical takeaway

Do not publish office language saying S. 3931 is law. It is not.

Do use the bill to audit your current workflow. If a $1,000 due-diligence floor, tighter signing penalties, PTIN scrutiny, and training expectations would create a crisis, the problem is not the bill. The problem is the system.

Fix the system while it is still off-season: 8867 gate, signing checkpoint, PTIN log, and documented training. That is the work you control.