Tax Preparer Injunctions Under IRC Section 7407: Conduct, Scope, and Penalties

Tax preparer injunctions under IRC Section 7407 are civil court orders that stop a return preparer from continuing to prepare federal tax returns. The Department of Justice files the lawsuit at the IRS’s request, and a federal judge decides whether to issue a narrow restriction on specific practices or a full ban from the industry. The tool is used often: in the first months of 2026, the DOJ obtained preliminary and permanent injunctions against preparers in Florida, Illinois, and New Jersey for fabricating deductions, inflating credits, and filing false returns.¹

What Conduct Can Trigger an Injunction

Section 7407(b)(1) sets out four categories of preparer conduct that support an injunction. Any one is enough on its own.²

The first is conduct already penalizable under Sections 6694 or 6695, or under any criminal tax provision. Section 6694 covers preparers who take unreasonable positions that understate a client’s tax; Section 6695 covers procedural failures like not signing the return, not giving the client a copy, or skipping the due diligence required for credits such as the Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit.³

The second is misrepresenting credentials or experience. Claiming to be a CPA, Enrolled Agent, or attorney without holding that credential, or lying about education or years in practice, is independently sufficient.²

The third is guaranteeing a specific refund amount or the allowance of any particular credit. Preparers who make those promises typically deliver on them by inflating the numbers. The 2026 Miami-area case is illustrative: the preparer fabricated Schedule C business losses, invented residential energy credits, and inflated education credits to hit promised refund figures.¹

The fourth is a catch-all covering any other fraudulent or deceptive conduct that substantially interferes with the administration of the tax laws. That flexibility means a preparer who invents a new scheme can’t avoid an injunction by pointing out that the method isn’t specifically named in the first three categories.²

How the Case Gets to Court

The IRS doesn’t issue Section 7407 injunctions itself. It refers the matter to the Department of Justice, which files a civil suit in the federal district court where the preparer lives, has a principal place of business, or where an affected taxpayer lives. This is a civil action, though the DOJ can bring separate criminal charges when the conduct supports them.⁴

When the misconduct is ongoing, often during filing season, the DOJ can ask for a preliminary injunction before trial. Courts weigh likelihood of success on the merits, irreparable harm to the public, and the public interest.⁵ A preliminary order can shut down a preparation business within days of the complaint being filed.

A permanent injunction requires two findings after a full hearing. The court must conclude that the preparer engaged in one of the four categories of prohibited conduct, and that injunctive relief is appropriate to keep it from recurring. A history of ignoring prior penalties or warnings makes the recurrence finding easy for the government to establish.²

Limited Injunction or Total Ban

Courts choose between two levels of restriction. A limited injunction bars specific conduct, such as claiming certain credits without documented due diligence, while letting the preparer continue in other work. This is the usual remedy when the violations are narrow and correctable.⁶

A total ban removes the preparer from the industry. To justify it, the court must find that the preparer “continually or repeatedly” engaged in prohibited conduct and that a limited injunction would not be enough to prevent interference with the tax system. A full bar typically prohibits preparing any federal returns, working for or owning any stake in a preparation business, and transferring the client list to someone else.² The IRS generally reserves total bans for preparers who have already worked through earlier compliance efforts without changing course.

Consequences of Violating the Order

An injunction is a court order. A preparer who keeps filing returns after being barred faces criminal contempt, which carries up to six months in prison and a $10,000 fine.⁷ Preparers who help understate a client’s tax also face an additional penalty of $1,000 per return under Section 6701, or $10,000 if the return involves a corporation.⁸

Working behind the scenes doesn’t help. Modern injunction orders explicitly cover the workarounds. The 2026 Miami-area order barred the preparer from advising anyone on return preparation, not just from filing returns directly.¹

How Section 7407 Differs From Circular 230 Discipline

A court injunction is not the only way a preparer gets shut down. The IRS Office of Professional Responsibility can censure, suspend, or disbar credentialed practitioners under Circular 230 through its own administrative proceedings, without any lawsuit. Circular 230 reaches practitioners who represent clients before the IRS, which is why a return-preparation-only business without any audit or appeals work can fall outside OPR’s authority. In that gap, Section 7407 becomes the primary enforcement tool. The two tracks can also run together, and OPR can impose monetary penalties up to the gross income earned from the offending conduct on top of a suspension or disbarment.⁹

If Your Preparer Has Been Enjoined

You remain legally responsible for everything on any return you signed, regardless of who prepared it. Inflated deductions or fabricated credits can trigger an accuracy-related penalty of 20% of the underpayment.¹⁰ If the return was fraudulent, even without your knowledge, the normal three-year assessment window disappears entirely; there is no statute of limitations on tax assessments for false or fraudulent returns filed with intent to evade tax, and filing a later accurate amended return doesn’t reset that clock.¹¹

Get copies of every return the preparer filed for you and compare them against the documents you actually handed over. If items were altered or added without your authorization, report the preparer to the IRS using Form 14157 (Complaint: Tax Return Preparer) and Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit). Submit online, by fax at 855-889-7957, or by mail to the IRS Return Preparer Office in Atlanta.¹²

Include evidence that the person was in the business of preparing returns (a business card, advertisement, or copy of the return showing their name) and proof of your engagement, such as a fee receipt or emails. If any part of your refund was stolen, add a police report.¹³ Then hire a reputable preparer to review your prior returns and file amendments where needed. That won’t erase fraud penalties the IRS may pursue, but it demonstrates good faith and caps the additional tax and interest. Move quickly. The IRS notes that complaints about matters more than three years old are generally not actionable.¹²

Checking a Preparer Before You Hire

Two IRS resources tell you whether a preparer is legitimate. The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications lists preparers with a current PTIN who hold credentials as a CPA, attorney, or Enrolled Agent, or who participate in the Annual Filing Season Program. It’s updated weekly.¹⁴

The Office of Professional Responsibility’s disciplinary look-up covers preparers who have been permanently enjoined, suspended, disbarred, or censured over the past 25 years, including the person’s name, location, type of sanction, and effective date.¹⁵

Every paid preparer must have a valid PTIN before preparing any federal return.¹⁶ A preparer who won’t share their PTIN, who isn’t in the IRS directory, and who won’t show credentials is at best operating without oversight and at worst already barred by a court order.

1
U.S. Department of Justice. Miami-Area Tax Return Preparers Preliminarily Enjoined From Preparing Returns for Others
2
Office of the Law Revision Counsel. 26 USC 7407 – Action to Enjoin Tax Return Preparers
3
Internal Revenue Service. Tax Preparer Penalties
4
U.S. Department of Justice. Justice Department Continues Efforts to Stop Unlawful Tax Return Preparers
5
U.S. Department of Justice. Preliminary Injunction Order – United States v Fuselier and Ortt
6
Internal Revenue Service. Barring Non-Compliant EITC Return Preparers From Filing Tax Returns
7
Department of Justice. Federal Court Convicts Tax Return Preparer of Criminal Contempt
8
Office of the Law Revision Counsel. 26 USC 6701 – Penalties for Aiding and Abetting Understatement of Tax Liability
9
eCFR. 31 CFR 10.50 – Sanctions
10
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
11
Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
12
Internal Revenue Service. Make a Complaint About a Tax Return Preparer
13
Internal Revenue Service. Form 14157-A – Tax Return Preparer Fraud or Misconduct Affidavit
14
Internal Revenue Service. FAQs – Directory of Federal Tax Return Preparers With Credentials and Select Qualifications
15
Internal Revenue Service. Search for Disciplined Tax Professionals
16
Internal Revenue Service. PTIN Requirements for Tax Return Preparers