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IRS Issues Proposed Disclosure Regulations for Tax Preparers
The IRS on June 16 issued proposed regulations that give guidance to tax preparers on the new "more likely than not" disclosure standard for tax returns. In particular, the guidance sets out the procedures tax preparers may follow to avoid penalties in situations where they are required to disclose tax positions when they do not meet the this new standard.
By way of background, NSAlert readers will recall that the Small Business and Work Opportunity Act of 2007 (who makes up these names?) changed the disclosure standards for tax preparers but not for taxpayers themselves. Taxpayers are required to disclose tax positions if there is substantial authority for the position, but tax preparers are required by the Act to disclose a position unless there is a more likely than not possibility that the position would be upheld by the IRS.
The proposed regulations have attempted to deal with the different disclosure standards by allowing the tax preparer to make any required disclosure to the taxpayer rather than the IRS. Accordingly, a tax preparer who makes the disclosure to his client can avoid penalties without having to actually file Form 8275 with the IRS.
The proposed regulations provide five options for a tax preparer to make adequate disclosure regarding a tax position. The five options are:
- A tax preparer can disclose the position on a Form 8275 filed with the IRS;
- The preparer may provide the taxpayer with a prepared tax return that includes appropriate disclosures;
- If the tax position taken on a tax return meets the substantial authority standard, the disclosure is considered adequate if the tax preparer advised the taxpayer of all of the penalty standards applicable under Section 6662 of the Internal Revenue Code;
- If the position can be considered a tax shelter under Section 6662, discloser is adequate if the tax preparer advised the taxpayer that there needs to be "substantial authority" for the position, that the taxpayer has a reasonable belief that the position was "more like than not" the proper position, and that the disclosure of the position will nevertheless not protect the taxpayer from the assessment of an accuracy-related penalty.
In essence, the proposed regulations redefine adequate disclosure to mean disclosure by the tax preparer to the taxpayer, not to the IRS. A public hearing on the proposed regulations has been scheduled for August 18. The NSA Federal Tax Committee will be reviewing the document in anticipation of the hearing. You can review the proposed regulations here: Proposed Disclosure Regulations for Tax Preparers.
IRS Gives Storm Victims More Time to File and Pay; Taxpayers in Parts of 10 States Qualify
Quarterly estimated tax payment deadline postponed for victims of storms and flooding in 10 states. Click here: IR-2008-78, June 16, 2008.
IRS e-Services Unavailable of June 27 through June 30
The IRS e-Services online tool will be out of service beginning 8:00pm EDT Friday, June 27 through 6:00am Monday, June 30, 2008 to upgrade software and perform required maintenance. During this period, the e-Services Registration, Taxpayer Identification Number Matching, e-file Application, Transcript Delivery System, Disclosure Authorization, Electronic Account Resolution and Preparer Tax Identification functions will be unavailable to all users. IRS employees can provide transcript information from other systems, but it's recommend that all users hold their requests until the system returns to full operation early Monday morning.
Special Report: Congress Enacts Farm Bill Overriding Bush Veto; Passes Military Tax Relief
The Farm Act provides significant benefits to farmers, ranchers and timber producers, while raising revenue from certain gentlemen farmers, ethanol producers and large corporations. The Military Tax Relief Bill includes tax breaks for members of the military who are receiving combat pay; saving for retirement or purchasing homes. The bill helps civilian employers of servicemen and women keep jobs available for reservists who are called to active duty. It also raises revenues by penalizing expatriates and tightening rules for government contractors using offshore shell companies, among other provisions.
CCH Tax Briefing Special Report: Farm/Military Tax Relief Acts of 2008 explains and covers the impact of farm tax incentives, farm offsets, military tax relief, military offsets, and pending tax bills, all with comments. Highlights: $1.7 billion in farm tax relief and incentives; More than $2 billion in revenue raisers; New limits on farm losses; Acceleration of large-corporation of estimated tax.
IRS Adds Functions to Online Payment Agreement Application
New features make it easier to pay taxes through an online payment agreement. Click here: IR-2008-77, June 6, 2008.
Interest Rates Drop for the Third Quarter of 2008
For the quarter beginning July 1, 2008, the interest rates drops to five percent for non-corporate taxpayers. Click here: IR-2008-76, June 2, 2008.
IRS Adds to List of Tax Returns Subject to Return Preparer Penalties
The IRS has added a number of returns and other documents to the list of those for which the preparer penalty provisions of the Internal Revenue Code will apply. The effective date of this notice is April 16, 2008, so NSA members should be aware of the items added by this notice, which is available at the following link:
Notice 2008-46.
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Your PAC Dollars At Work |
Rebecca Spencer, Secretary of the NSA Political Action Committee and John Ams, the Executive Vice President of NSA, recently attended a political fundraiser for Senator Max Baucus of Montana on behalf of the PAC. During the two-day event, they had the opportunity to discuss NSA's concerns about tax preparer registration legislation with Senator Baucus, who is currently the chair of the Senate Finance Committee. They also received a first-hand update on the stimulus package that the Senate is considering and voiced their ideas about how best to implement the business stimulus provisions for small businesses.
Amendments to Circular 230 Made Final; 'Limited Practice Rights' Retained
The Treasury Department on Tuesday, September 25 issued final rules making amendments to Circular 230. NSA Members will recall that proposed rules had been issued on February 8, 2006. NSA is pleased that the Treasury Department has agreed with our objection to the proposal to do away with the so-called "limit practice rights" for those individuals who prepared a return. Under the proposal, these individuals, who are not otherwise covered by Circular 230 because they are not attorneys, CPAs, EAs or PAs, could not even respond to IRS questions about a return they had prepared. This provision has not been retained in the final rules and we applaud Treasury for heeding the advice of practitioners to drop this rule. To quote the Treasury:
"the authorization in §10.7(c)(viii), which allows an individual, who was not otherwise a practitioner, to represent a taxpayer during an examination if that individual prepared the return for the taxable period under examination, is retained. An unenrolled return preparer who prepared the taxpayer's return for the year under examination, therefore, may continue to negotiate with the IRS on behalf of that taxpayer during an examination or bind that taxpayer to a position during an examination."
Click here for a copy of the regulation.
New Online Employer Identification Number Application Processes Requests in Minutes
Taxpayers can now request an Employer Identification Number (EIN) through a Web-based system on the IRS web site that instantly processes requests and generates identification numbers in real time. Click here: EIN.
NSA Urges Senate to Ban Tax Strategy Patents
NSA praised the U.S. House of Representatives for passing H.R. 1980, the Patent Reform Act of 2007, which includes a section that would prohibit patents on tax strategies, which are allowed under current law, and urged the Senate to act promptly on this matter as well.
NSA Urges U.S. Senate Finance Committee to Enact Tax Preparer Legislation
Proposed legislation would require tax preparers to demonstrate expertise; national exams offered by credentialing organizations would demonstrate proficiency.
National Society of Accountants Statement for the Record to the Senate Finance Committee: Filing Your Taxes: An Ounce of Prevention is Worth a Pound of Cure
Click here for: National Society of Accountants Model Bill on Tax Preparer Registration
Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many
In IR-2007-159, the IRS unveiled a new section on IRS.gov for people who have lost their homes due to foreclosure. The IRS reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes. The new section of IRS.gov includes a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.
Large Tax "Simplification" Bill in the Fall – Possible Tax Preparer Legislation?
House Ways and Means Committee Chairman Charles Rangel stated to reporters that the Committee will hold a hearing during September and the alternative minimum tax but that and change in the AMT would likely be part of a larger tax reform bill. The Senate Finance Committee is also looking at tax changes as part of a "good government" bill, and committee sources have told NSA that tax preparer registration will likely be a component of such a bill. The Senate and House bills will likely be combined into one tax package before it is sent to the President, assuming it gets to that point.
NSA has kept a steady eye on tax preparer legislation. NSA representatives have met, and will continue to meet, with key Senators, Representatives and congressional and Treasury Department staff to discuss essential elements of such legislation, including an exemption from any testing requirement for those who have passed any comprehensive national tax examination such as the examination associated with the Accredited Tax Preparer or Accredited Business Accountant credentials offered by ACAT.
With respect to the AMT, a straight repeal would deprive the IRS with billions of dollars in tax revenues, so Rangel stated his committee would look at any all means of making up the revenue. He also indicated that he had not closed the door on revamping the AMT–an approach favored by the Senate–if the revenue offsets could not be found or would not receive committee approval.
Tax Accounting Guidelines for Small Business ©
Over the years, many small businesses have seen the need for an alternative method of accounting that would serve their purposes but without the unnecessary regulatory burden and expense often associated with GAAP. NSA is pleased to make available the Tax Accounting Guidelines for Small Business© (TAGSB) to NSA members only. TAGSB—intended for those practitioners not directly licensed by their state board of accountancy or similar regulatory entity—provides guidance for the preparation of financial statements presented in conformity with the principles of accounting used in the preparation of tax returns. In contrast to GAAP-based financial statements, it requires the entity to maintain only one set of financial records. If you are an NSA member, please review TAGSB and see if these guidelines can help you serve your small business clients.
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The Engagement Process: The Life of a Client from Birth to Death
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Thursday, June 26, 2008
2:30-3:30pm Eastern Daylight Savings Time (11:30am Pacific)
NSA 63rd Annual Meeting
August 27-30, 2008
Kansas City, MO
Leadership Development Conference
Oct 31-Nov 2, 2008
Phoenix, AZ
2007-2008 NSA Income & Fee Survey Report Now Available for Download
Find out how your practice compares in term of fees, salaries, business mix and more. For the highlights and press release, click here: NSA 2007-2008 Fee Survey
NSA Learning Gateway
Education and CPE Your Way!
Quality, affordable education & CPE available online and/or CD-ROM.
Enrolled Agent Review Course Now Available!
IRS 2008 Nationwide Tax Forums
NSA Members Save on Pre-Registration Fees
Affiliate News—June 2008
The online monthly newsletter designed for NSA's Affiliated State Organizations.
The NSA WorldPoints™ Credit Card. Rewards you can really get into.
Online Job Bank!
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