A tax prepararer cannot prepare a fraudelant return and no amount of indemnity in an engagement letter will protect them. There are penalties called tax preparer penalties and they could also lose their license. While the tax preparer may only prepare the return based on the information proided to them, it is the preparer’s responsibility to know the law and apply it and ask question to ensure compliance. So if someone is a dual citizen and is filing a US return, the preparer can’t say they didn’t know that the income was subsect to US social security. If there is income which is questionable if it is, it is the preparer’s responsibility to research the issue and they cannot rely on the tax payer saying to them, this income is exempt or anything similar.
