Posting these topics helps me remember them...
A taxpreparer must retain records properly. My book says "the tax preparer is required to keep, for 3 years following the last day of the return period, either a copy of the return or claim or a listing of the name and ID of each taxpayer for whom the preparer prepared a return or claim". The penalty is only $50 per individual for a maximum of $25,000 per return period.
So if I were a taxpreparer, I would probably just keep a listing electronically...sounds a lot easier! The penalty does not apply to the extent the failure is due to reasonable cause and not due to willful neglect.
What would be a reasonable cause? Taxpreparer business was burnt down?