[Federal Register Volume 73, Number 246 (Monday, December 22, 2008)]
[Rules and Regulations]
[Pages 78430-78465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-29750]
[[Page 78429]]
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Part II
Department of the Treasury
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Internal Revenue Service
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26 CFR Parts 1, 20, 25, et al.
Tax Return Preparer Penalties Under Sections 6694 and 6695; Final Rule
Federal Register / Vol. 73, No. 246 / Monday, December 22, 2008 /
Rules and Regulations
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, 25, 26, 31, 40, 41, 44, 53, 54, 55, 56, 156,
157, 301, and 602
[TD 9436]
RIN 1545-BG83
Tax Return Preparer Penalties Under Sections 6694 and 6695
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations implementing
amendments to the tax return preparer penalties under sections 6694 and
6695 of the Internal Revenue Code (Code) and related provisions under
sections 6060, 6107, 6109, 6696, and 7701(a)(36) reflecting amendments
to the Code made by section 8246 of the Small Business and Work
Opportunity Tax Act of 2007 and section 506 of the Tax Extenders and
Alternative Minimum Tax Relief Act of 2008. The final regulations
affect tax return preparers and provide guidance regarding the amended
provisions.
DATES: Effective Date: These regulations are effective on December 22,
2008.
Applicability Date: For dates of applicability, see Sec. Sec.
1.6060-1(d), 1.6107-1(e), 1.6109-2(d), 1.6694-1(g), 1.6694-2(f),
1.6694-3(g), 1.6694-4(d), 1.6695-1(g), 1.6695-2(d), 1.6696-1(k),
20.6060-1(b), 20.6107-1(b), 20.6109-1(b), 20.6694-1(b), 20.6694-2(b),
20.6694-3(b), 20.6694-4(b), 20.6695-1(b), 20.6696-1(b), 20.7701-1(b),
25.6060-1(b), 25.6107-1(b), 25.6109-1(b), 25.6694-1(b), 25.6694-2(b),
25.6694-3(b), 25.6694-4(b), 25.6695-1(b), 25.6696-1(b), 25.7701-1(b),
26.6060-1(b), 26.6107-1(b), 26.6109-1(b), 26.6694-1(b), 26.6694-2(b),
26.6694-3(b), 26.6694-4(b), 26.6695-1(b), 26.6696-1(b), 26.7701-1(b),
31.6060-1(b), 31.6107-1(b), 31.6109-2(b), 31.6694-1(b), 31.6694-2(b),
31.6694-3(b), 31.6694-4(b), 31.6695-1(b), 31.6696-1(b), 31.7701-1(b),
40.6060-1(b), 40.6107-1(b), 40.6109-1(b), 40.6694-1(b), 40.6694-2(b),
40.6694-3(b), 40.6694-4(b), 40.6695-1(b), 40.6696-1(b), 40.7701-1(b),
41.6060-1(b), 41.6107-1(b), 41.6109-2(b), 41.6694-1(b), 41.6694-2(b),
41.6694-3(b), 41.6694-4(b), 41.6695-1(b), 41.6696-1(b), 41.7701-1(b),
44.6060-1(b), 44.6107-1(b), 44.6109-1(b), 44.6694-1(b), 44.6694-2(b),
44.6694-3(b), 44.6694-4(b), 44.6695-1(b), 44.6696-1(b), 44.7701-1(b),
53.6060-1(b), 53.6107-1(b), 53.6109-1(b), 53.6694-1(b), 53.6694-2(b),
53.6694-3(b), 53.6694-4(b), 53.6695-1(b), 53.6696-1(b), 53.7701-1(b),
54.6060-1(b), 54.6107-1(b), 54.6109-1(b), 54.6694-1(b), 54.6694-2(b),
54.6694-3(b), 54.6694-4(b), 54.6695-1(b), 54.6696-1(b), 54.7701-1(b),
55.6060-1(b), 55.6107-1(b), 55.6109-1(b), 55.6694-1(b), 55.6694-2(b),
55.6694-3(b), 55.6694-4(b), 55.6695-1(b), 55.6696-1(b), 55.7701-1(b),
56.6060-1(b), 56.6107-1(b), 56.6109-1(b), 56.6694-1(b), 56.6694-2(b),
56.6694-3(b), 56.6694-4(b), 56.6695-1(b), 56.6696-1(b), 56.7701-1(b),
156.6060-1(b), 156.6107-1(b), 156.6109-1(b), 156.6694-1(b), 156.6694-
2(b), 156.6694-3(b), 156.6694-4(b), 156.6695-1(b), 156.6696-1(b),
156.7701-1(b), 157.6060-1(b), 157.6107-1(b), 157.6109-1(b), 157.6694-
1(b), 157.6694-2(b), 157.6694-3(b), 157.6694-4(b), 157.6695-1(b),
157.6696-1(b), 157.7701-1(b), and 301.7701-15(g).
FOR FURTHER INFORMATION CONTACT: Michael E. Hara, (202) 622-4910, and
Matthew S. Cooper, (202) 622-4940 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in these final regulations
were previously reviewed and approved by the Office of Management and
Budget in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)) under control number 1545-1231. The collections of
information in this final regulation are in Sec. Sec. 1.6060-1(a)(1),
1.6107-1, 1.6694-2(d)(3), 20.6060-1(a)(1), 20.6107-1, 25.6060-1(a)(1),
25.6107-1, 26.6060-1(a)(1), 26.6107-1, 31.6060-1(a)(1), 31.6107-1,
40.6060-1(a)(1), 40.6107-1, 41.6060-1(a)(1), 41.6107-1, 44.6060-
1(a)(1), 44.6107-1, 53.6060-1(a)(1), 53.6107-1, 54.6060-1(a)(1),
54.6107-1, 55.6060-1(a)(1), 55.6107-1, 56.6060-1(a)(1), 56.6107-1,
156.6060-1(a)(1), 156.6107-1, 157.6060-1(a)(1), and 157.6107-1. This
information is necessary to make the record of the name, taxpayer
identification number, and principal place of work of each tax return
preparer, make each return or claim for refund prepared available for
inspection by the Commissioner of Internal Revenue, and to document
that the tax return preparer advised the taxpayer of the penalty
standards applicable to the taxpayer in order for the tax return
preparer to avoid penalties under section 6694. The collection of
information is required to comply with the provisions of section 8246
of the Small Business and Work Opportunity Tax Act of 2007 and section
506 of the Tax Extenders and Alternative Minimum Tax Relief Act of
2008. The likely respondents are tax return preparers and their
employers.
Estimated total annual reporting burden: 10,679,320 hours.
Estimated average annual burden per respondent: 15.6 hours.
Estimated number of respondents: 684,268.
Estimated frequency of responses: 127,801,426.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Background
This document contains final amendments to the Income Tax
Regulations (26 CFR part 1), the Estate Tax Regulations (26 CFR part
20), the Gift Tax Regulations (26 CFR part 25), the Generation-Skipping
Transfer Tax Regulations (26 CFR part 26), the Employment Tax and
Collection of Income Tax at Source Regulations (26 CFR part 31), the
Excise Tax Procedural Regulations (26 CFR part 40), the Highway Use Tax
Regulations, (26 CFR part 41), the Wagering Tax Regulations (26 CFR
part 44), the Foundation and Similar Excise Tax Regulations (26 CFR
part 53), the Pension Excise Tax Regulations (26 CFR part 54), the
Excise Tax on Real Estate Investment Trusts and Regulated Investment
Companies Regulations (26 CFR part 55), the Public Charity Excise Tax
Regulations (26 CFR part 56), the Excise Tax on Greenmail Regulations
(26 CFR part 156), the Excise Tax on Structured Settlement Factoring
Transactions Regulations (26 CFR part 157), and the Regulations on
Procedure and Administration (26 CFR part 301) implementing the
amendments to tax return preparer penalties under sections 6694 and
6695 (and the related provisions under sections 6060, 6107, 6109, 6696,
and 7701(a)(36)) made by section 8246 of the Small Business and Work
Opportunity Tax Act of 2007, Title VIII-B of Public Law 110-28 (121
Stat. 190) (May 25, 2007) (the 2007 Act) and section 506 of the Tax
Extenders and Alternative Minimum Tax Relief Act of 2008, Div. C of
Public Law 110-343 (122 Stat. 3765) (October 3, 2008) (the 2008 Act).
Section 8246 of the 2007 Act amended sections 6694 and 7701(a)(36)
and made conforming changes to other Code provisions to make tax return
preparer penalties applicable to a
[[Page 78431]]
broader range of tax returns and claims for refund. The 2007 Act's
amendments to section 6694 also changed the standards of conduct that
tax return preparers must meet in order to avoid imposition of
penalties in the event that a return prepared results in an
understatement of tax. For undisclosed positions, the 2007 Act replaced
the ``realistic possibility'' standard with a standard requiring the
tax return preparer to have a ``reasonable belief that the position
would more likely than not be sustained on its merits.'' For disclosed
positions, the 2007 Act replaced the ``not-frivolous'' standard with a
standard requiring the tax return preparer to have a ``reasonable
basis'' for the tax treatment of the position.
The 2007 Act also increased the first-tier penalty under section
6694(a) from $250 to the greater of $1,000 or 50 percent of the income
derived (or to be derived) by the tax return preparer from the
preparation of a return or claim for refund with respect to which the
penalty was imposed. In addition, the 2007 Act increased the second-
tier penalty under section 6694(b) from $1,000 to the greater of $5,000
or 50 percent of the income derived (or to be derived) by the tax
return preparer. The amendments made by the 2007 Act were effective for
tax returns prepared after the date of enactment, May 25, 2007.
The Treasury Department and the IRS released Notice 2008-13 (2008-3
IRB 282) on December 31, 2007, to provide interim guidance under the
2007 Act. Additional guidance was simultaneously provided in Notice
2008-12 (2008-3 IRB 280) with respect to the implementation of the tax
return preparer signature requirement of section 6695(b), and in Notice
2008-11 (2008-3 IRB 279), which clarified the earlier transition relief
provided in Notice 2007-54 (2007-27 IRB 12 (July 2, 2007)). Notice
2008-46 (2008-18 IRB 868) was released on April 16, 2008, to add
certain returns and documents to Exhibits 1, 2, and 3 of Notice 2008-
13.
On June 17, 2008, the Treasury Department and the IRS published in
the Federal Register (73 FR 34560) proposed amendments to the
regulations (REG-129243-07) reflecting amendments made by the 2007 Act
and comments received on the notices. A public hearing was held on
these proposals on August 18, 2008. Written public comments responding
to the proposed regulations were received.
On October 3, 2008, section 506 of the 2008 Act modified the
standards of conduct that tax return preparers must meet in order to
avoid imposition of the section 6694(a) penalty. Specifically, the 2008
Act changed the standard for undisclosed positions from ``reasonable
belief that the position more likely than not will be sustained on the
merits'' to ``substantial authority for the position.'' The 2008 Act
maintained the ``reasonable basis'' standard for disclosed positions.
If a position is with respect to a tax shelter (as defined in section
6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A
applies, it must be ``reasonable to believe that the position more
likely than not will be sustained on the merits.'' The amendments made
by the 2008 Act are retroactively effective for tax returns prepared
after May 25, 2007, except that the special rules applicable to
positions with respect to tax shelters and reportable transactions to
which section 6662A applies are effective for tax returns or claims for
refund prepared for tax years ending after October 3, 2008, the date of
enactment of the 2008 Act.
After consideration of the public comments and the amendments made
by the 2008 Act, the proposed regulations are adopted as revised by
this Treasury decision. Section 1.6694-2 of these final regulations
does not provide substantive guidance reflecting amendments to the Code
made by the 2008 Act. Rather, the Treasury Department and the IRS are
reserving Sec. 1.6694-2(c) in these final regulations and are
simultaneously issuing a notice in the Internal Revenue Bulletin
providing interim guidance on the amendments to the Code made by the
2008 Act. With these final regulations, the Treasury Department and the
IRS are also simultaneously issuing a revenue procedure in the Internal
Revenue Bulletin that specifically identifies the returns and claims
for refund subject to penalty under sections 6694 and 6695.
Summary of Comments and Explanation of Revisions
Over 30 written comments were received in response to the notice of
proposed rulemaking. All comments were considered and are available for
public inspection upon request. A number of these comments are
summarized in this preamble. The changes included in these final
regulations are discussed in order of the Code sections to which they
relate.
In accordance with the 2007 Act, these final regulations amend
existing regulations defining tax return preparers, which were
previously limited to income tax return preparers, to broaden the scope
of that definition to include preparers of estate, gift, and
generation-skipping transfer tax returns, employment tax returns,
excise tax returns, and returns of exempt organizations. These final
regulations also revise current regulations to amend the standards of
conduct that must be met to avoid imposition of the tax return preparer
penalty under section 6694. In addition, these final regulations
reflect changes to the computation of the section 6694 tax return
preparer penalty made by the 2007 Act. These final regulations also
amend current regulations under the penalty provisions of section 6695
to conform them with changes made by the 2007 Act expanding the scope
of that statute beyond income tax returns. These final regulations are
applicable to returns and claims for refund filed (and advice given)
after December 31, 2008.
Furnishing of Copy of the Tax Return and Retaining Copy
The final regulations adopt the proposed amendments to Sec.
1.6107-1 regarding the requirement of a signing tax return preparer to
furnish a copy of the completed tax return to the taxpayer and also to
retain a copy, with modification.
One commentator requested that the final regulations make clear
that a tax return preparer may provide copies of tax returns to
taxpayers in either hard copy or electronic formats. The Treasury
Department and the IRS recognize that because many returns are prepared
and filed electronically and consist of electronic data, it may be
unclear what is an acceptable copy of a return that must be furnished
to the taxpayer. Upon further consideration, the Treasury Department
and the IRS agree that clarification is necessary. Under Sec. 1.6107-
1(a) of the final regulations, the tax return preparer must provide a
complete copy of the return filed with the IRS to the taxpayer in any
medium, including electronic, that is acceptable to both the taxpayer
and the return preparer. In the case of an electronically-filed return,
a complete copy of a taxpayer's return consists of the electronic
portion of the return, including all schedules, forms, pdf attachments,
and jurats, that was filed with the IRS. The copy provided to the
taxpayer must include all information submitted to the IRS to enable
the taxpayer to determine which schedules, forms, electronic files, and
other supporting materials have been filed with the return. The copy,
however, need not contain the identification number of the tax return
preparer. The electronic portion of the return can be contained on a
replica of an official form or on an unofficial form. On an unofficial
form, however, data entries
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must reference the line numbers or descriptions on an official form.
The same commentator requested that the final regulations
specifically provide that the copy of the tax return retained by tax
return preparers may be retained electronically. The Treasury
Department and the IRS, however, have concluded that revising the
existing regulations to include this rule is not necessary. Existing
revenue procedures address the maintenance of business records through
use of electronic storage systems. See, for example, Rev. Proc. 97-22,
1997-1 CB 652. Tax return preparers may retain copies of tax returns in
accordance with existing revenue procedures to comply with the final
regulations.
Another commentator agreed with the general approach taken in Sec.
1.6107-1(c) but suggested clarification of the language regarding who
is a signing tax return preparer for purposes of the section 6107
requirements. Upon consideration, the Treasury Department and the IRS
agree that there is a potential for the proposed language to be
misconstrued. Section 1.6107-1(c) of the final regulations clarifies
that for purposes of complying with the requirements of section 6107, a
corporation, partnership or other organization that employs a signing
tax return preparer to prepare for compensation (or in which a signing
tax return preparer is compensated as a partner or member to prepare) a
return of tax or claim for refund shall be treated as the sole signing
tax return preparer.
Furnishing Identification Number
A commentator requested that the final regulations clarify whether
the tax return preparer's identifying number must be included on the
taxpayer's copy of the tax return as well as on the copy filed with the
IRS. Section 6109(a)(4) provides that any return or claim for refund
prepared by a tax return preparer shall bear an identification number
for securing proper identification of the tax return preparer, his
employer, or both as may be prescribed. Upon further consideration, the
Treasury Department and the IRS agree that for identification purposes,
it is only important for the tax return preparer identification number
to be included on the return that is filed with the IRS. Section
1.6109-2(a) of the final regulations, therefore, is amended to provide
that each filed return or claim for refund containing the
identification number of the tax return preparer required to sign the
return (and the identification number of the person who has an
employment arrangement or association with the individual tax return
preparer, if applicable) will meet the needs of the IRS. This
modification will assist in maintaining the privacy of the tax return
preparer's information. Additional guidance may be provided in the
future regarding tax return preparer identification numbers under
section 6109.
Defining the Preparer Within a Firm
The final regulations adopt the proposed amendments to Sec.
1.6694-1(b)(1), with modification. Accordingly, the final regulations
maintain a framework defining a ``preparer per position within a
firm'', with the focus of any penalty on the position(s) giving rise to
the understatement on the return or claim for refund and any
responsible parties with respect to such position(s).
Under this framework, an individual is a tax return preparer
subject to section 6694 if the individual is primarily responsible for
the position on the return or claim for refund giving rise to the
understatement. Under Sec. 1.6694-1(b)(1), only one person within a
firm will be considered primarily responsible for each position giving
rise to an understatement and, accordingly, be subject to the penalty.
Three commentators questioned whether this framework will lead to
significant problems in return preparer firms, in particular whether
the framework may discourage any particular person within the firm from
looking at the return in whole. These commentators also questioned
whether the IRS will be able to identify the responsible party if
individuals at the firm attempt to identify others at the firm who may
be more responsible for the position. Two other commentators, however,
agreed with this framework in light of the high level of specialization
that exists in modern tax practice. The Treasury Department and the IRS
continue to conclude that the expansion from a ``one preparer per
firm'' to a ``one preparer per position within a firm'' will further
compliance and will result in more equitable administration of the tax
return preparer penalty regime. This framework, therefore, is adopted
in the final regulations.
Section 1.6694-1(b)(2) of the proposed regulations provided that
the individual who signs the return or claim for refund as the tax
return preparer generally will be considered the person within a firm
who is primarily responsible for all of the positions on the return or
claim for refund giving rise to an understatement. This language is
finalized as proposed except for some minor conforming changes.
Proposed Sec. 1.6694-1(b)(3) established a similar rule for
situations when there are one or more nonsigning tax return preparers
at the same firm and either no signing tax return preparer within the
firm, it is concluded that the signer is not primarily responsible for
the position, or the IRS cannot conclude which individual is primarily
responsible for the position for purposes of section 6694. In these
situations, the proposed regulations stated that the individual within
the firm with overall supervisory responsibility for the position(s)
giving rise to the understatement is the tax return preparer who is
primarily responsible for the position for purposes of section 6694.
Several commentators requested that this rule for nonsigning tax
return preparers not be adopted as proposed because it will lead to
more harm than good. Specifically, one commentator requested the
deletion of the clause ``or the IRS cannot conclude which individual
(as between the signing tax return preparer and other persons within
the firm) is primarily responsible for the position'' from proposed
Sec. 1.6694-1(b)(3) because a tax return preparer penalty is not
appropriate when the IRS is not able to reach a conclusion as to who is
primarily responsible for the conduct giving rise to the position. The
other commentator recommended qualifying the rule in proposed Sec.
1.6694-1(b)(3) with the requirement that the individual with overall
supervisory responsibility for the position either possess actual
knowledge of the position or fail to exercise appropriate diligence in
the review of the position subject to penalty through willfulness,
recklessness, or gross indifference.
Upon consideration of these comments, the Treasury Department and
the IRS have revised Sec. 1.6694-1(b)(3) to provide that if there is
no signing tax return preparer for the return or claim for refund
within that firm or if, after the application of Sec. 1.6694-1(b)(2),
it is concluded that the signing tax return preparer is not primarily
responsible for the position, the nonsigning tax return preparer within
the firm with overall supervisory responsibility for the position(s)
giving rise to the understatement generally will be considered the tax
return preparer who is primarily responsible for the position for
purposes of section 6694. Based upon credible information from any
source, however, it may be concluded that another nonsigning tax return
preparer within the firm is primarily responsible for the position(s)
on the return or claim for refund giving rise to an understatement.
[[Page 78433]]
In response to the commentators' concerns that the default rule in
proposed Sec. 1.6694-1(b)(3) assigning liability for the penalty to
the nonsigning tax return preparer may lead to more harm than good,
Sec. 1.6694-1(b)(4) of the final regulations is added. The final
regulations in Sec. 1.6694-1(b)(4) provide that, if the information
presented would support a finding that either the signing tax return
preparer or a nonsigning tax return preparer within a firm is primarily
responsible for the position(s) giving rise to the understatement, the
IRS may assess the penalty against either one of the individuals within
the firm, but not both, as the primarily responsible tax return
preparer. This determination will be based upon all the evidence
presented and will allow for certainty regarding the identification of
the primarily responsible tax return preparer within the expiration of
the period of limitations on making an assessment under section
6694(a). It is expected that the IRS will assess the penalty under
section 6694 under these rules against the tax return preparer with the
greatest amount of responsibility for the position based upon the best
information available to the IRS. The rule adopted in Sec. 1.6694-
1(b)(4) is not a rule reflecting joint and several liability for the
penalty among the signing tax return preparer and nonsigning tax return
preparer as the penalty may be assessed against one of these
individuals, but not both.
Reliance on Information Provided
The final regulations adopt the proposed amendments to Sec.
1.6694-1(e), with modification. Most commentators supported expanding
the regulations in Sec. 1.6694-1(e) to provide that a tax return
preparer may rely in good faith and without verification on information
furnished by another advisor, another tax return preparer, or other
party (even if the advisor or tax return preparer is within the tax
return preparer's same firm) as long as the tax return preparer does
not ignore the implications of information furnished to the tax return
preparer or actually known by the tax return preparer, and makes
reasonable inquiries if the information as furnished appears to be
incorrect or incomplete.
Commentators, however, requested that the final regulations clarify
that a tax return preparer may rely on ``advice'' furnished by another
advisor, another tax return preparer, or other party (even if the
advisor or tax return preparer is within the tax return preparer's same
firm). This recommendation is adopted in Sec. 1.6694-1(e)(1) of the
final regulations. The same changes are made for conformity to the
definitions of ``reasonable to believe that the position would more
likely than not be sustained on its merits'' in Sec. 1.6694-2(b)(1),
``reasonable basis'' in Sec. 1.6694-2(d)(2) and ``reasonable cause''
in Sec. 1.6694-2(e)(5). These modifications are consistent with the
intent of the rules in the proposed regulations regarding reliance
given the heightened standards imposed on tax return preparers by the
2007 and 2008 Acts and the increased complexity of the law.
Section 1.6694-1(e) of the proposed regulations also proposed a new
rule providing that a tax return preparer may not rely on legal
conclusions regarding Federal tax issues furnished by taxpayers. The
purpose behind this proposal was the belief that in general, although
it was reasonable to allow a tax return preparer to rely on facts
furnished by the taxpayer in good faith without verification, the tax
return preparer should not be able to rely on legal conclusions on
issues when the taxpayer may not be an expert and looked to the tax
return preparer to determine the legal issue for purposes of preparing
the return or claim for refund.
Most commentators expressed concern, however, that tax return
preparers have long relied on information that involve mixed questions
of fact and law furnished by taxpayers, in addition to legal
conclusions. Moreover, the commentators point out that many large
entity taxpayers have in-house tax departments staffed by tax
professionals who are qualified to perform research and analysis
necessary to address many legal issues.
The Treasury Department and the IRS acknowledge that the proposed
regulations may be unclear on how the ``no reliance on legal
conclusions by taxpayers'' language in proposed Sec. 1.6694-1(e)
interacts with the language in proposed Sec. 1.6694-2(b)(2) regarding
unreasonable assumptions. Accordingly, the ``no reliance on legal
conclusions by taxpayers'' is removed from Sec. 1.6694-1(e) of the
final regulations. While this phrase is removed from the text of the
final regulations, the tax return preparer nevertheless must meet the
diligence standards otherwise imposed by this regulation in order to
rely properly on information and advice provided by taxpayers or other
individuals. Tax return preparers must have no reason to believe that
the taxpayer is incompetent to make these conclusions, have no
knowledge that the conclusions are incorrect or incomplete, and make
reasonable inquiries if the information as furnished appears to be
incorrect or incomplete.
Use of Estimates
One commentator noted that the nature of accounting, upon which
calculations of taxable income are based, requires the use of
estimates, and urged the Treasury Department and the IRS to include a
specific reference to allow the use of estimates in the final
regulations. The Treasury Department and the IRS recognize that there
are some circumstances when the use of reasonable estimates may be
appropriate in the preparation of tax returns (see, for example,
Sec. Sec. 1.448-2(d), 1.451-1(a), and 1.451-5(c)(1)(ii)), and there
are some circumstances in which there may be no practical alternative
to the use of reasonable estimates, for example, when the taxpayer's
records are destroyed accidentally or through computer failure. The
Treasury Department and the IRS, however, conclude that including a
general rule regarding the use of estimates in the preparer penalty
regulations that could impact other substantive tax provisions is not
appropriate.
Income Derived Determination in Computing Penalty Amount
The final regulations adopt the proposed amendments to Sec.
1.6694-1(f), with minor modification. Section 1.6694-1(f) defines
``income derived (or to be derived)'' with respect to a return or claim
for refund as all compensation the tax return preparer receives or
expects to receive with respect to the engagement of preparing the
return or claim for refund or providing tax advice (including research
and consultation) with respect to the position(s) taken on the return
or claim for refund that gave rise to the understatement.
Several commentators requested clarification on this definition of
``income derived (or to be derived)'' for purposes of computing the
section 6694 penalty because it is not necessarily clear what
compensation is captured by this definition, which could be interpreted
broadly. The final regulations maintain the same definition of ``income
derived (or to be derived)'' as proposed because the Treasury
Department and the IRS conclude that the other rules described in Sec.
1.6694-1(f) provide appropriate limitations to this definition.
In response to a commentator's request, the final regulations in
Sec. 1.6694-1(f)(4) also add an example illustrating how the penalty
will be computed in cases involving employees and partners who spend a
portion of their time on a particular position
[[Page 78434]]
subject to the section 6694 penalty for which the firm earns a specific
amount.
Firm Liability
The final regulations adopt the proposed amendments to Sec. Sec.
1.6694-2(a)(2) and 1.6694-3(a)(2), without modification. One
commentator requested examples of a firm disregarding its review
procedures through willfulness, recklessness, or gross indifference in
the formulation of the advice, or the preparation of the return or
claim for refund, that included the position for which the penalty is
imposed. The determination as to whether a firm disregards its review
procedures will be made based upon all facts and circumstances. Because
any example necessarily would be limited to the facts of a particular
firm's review procedures, additional examples on this issue would not
meaningfully add to the guidance provided in the proposed regulations.
Reasonable To Believe That More Likely Than Not
Section 1.6694-2(b) of the final regulations defines the
``reasonable to believe that the position would more likely than not be
sustained on its merits'' standard that now applies to positions that
are tax shelters and reportable transactions to which section 6662A
applies. While the 2008 Act amendment to section 6694 includes a
``reasonable to believe'' standard rather than the ``reasonable
belief'' standard used in the 2007 Act, the Treasury Department and the
IRS are of the view that the two standards have the same meaning.
Conforming changes are made throughout the final regulations to reflect
the 2008 Act terminology.
Proposed Sec. 1.6694-2(b)(1) provided that the ``reasonable belief
that the position would more likely than not be sustained on its
merits'' standard will be satisfied if the tax return preparer analyzes
the pertinent facts and authorities and, in reliance upon that
analysis, reasonably concludes in good faith that the position has a
greater than 50 percent likelihood of being sustained on its merits.
The proposed regulations stated that whether a tax return preparer
meets this standard will be determined based upon all facts and
circumstances, including the tax return preparer's due diligence.
Moreover, in determining the level of diligence in a particular case,
the proposed regulations provided that the IRS would take into account
the tax return preparer's experience with the area of tax law and
familiarity with the taxpayer's affairs, as well as the complexity of
the issues and facts in the case.
Several commentators requested that the final regulations specify
that the amount of due diligence required on the part of the tax return
preparer should not be disproportionate to the amount of the tax
liability that would be affected by the position at issue. There was
also some confusion on whether the due diligence rules in the proposed
regulations allowed a less educated, sophisticated, or experienced tax
return preparer to escape penalty liability more easily than educated,
sophisticated, or experienced tax return preparers. This was not the
intent of this rule in the proposed regulations. Due diligence is only
one of many factors to consider in determining whether a tax return
preparer meets the ``reasonable to believe that the position would more
likely than not be sustained on its merits'' standard and all of the
facts and circumstances of each specific case will need to be evaluated
in making this determination.
Several commentators suggested that the provisions in Sec. 1.6694-
2(d)(5) of the proposed regulations permitting tax return preparers to
rely upon generally accepted administrative or industry practice in
establishing reasonable cause relief from penalties under section 6694
should be extended to allow consideration of generally accepted
administrative or industry practice in determining whether the
``reasonable to believe that the position would more likely than not be
sustained on its merits'' standard is satisfied. These comments are not
adopted in the final regulations because the Treasury Department and
the IRS continue to conclude that the authorities contained in Sec.
1.6662-4(d)(3)(iii) (or any successor provision) are the appropriate
authorities to be considered in determining whether it is reasonable to
believe that the position would more likely than not be sustained on
its merits. The ``reasonable to believe that the position would more
likely than not be sustained on its merits'' standard relates to the
tax return preparer's evaluation of the merits of a return position,
and the merits of a tax return position must be considered in light of
established relevant legal authorities. Generally accepted
administrative or industry practice are less relevant in considering
the merits of a tax return position under applicable law and guidance,
although they may be appropriate factors to consider in the context of
a tax return preparer's reasonable cause and good faith.
Based upon a comment received, the final regulations in Sec.
1.6694-2(b)(4) adopt the same rule as in Sec. 1.6662-4(d)(3)(iv)(B)
regarding the effect of the taxpayer's jurisdiction on meeting the
appropriate standard. The Treasury Department and the IRS are of the
view that it is appropriate that the same rule apply for purposes of
satisfying the ``reasonable to believe that the position more likely
than not be sustained on its merits'' standard. This approach supports
uniform disclosure by taxpayers and tax return preparers and prevents
conflicts between taxpayers and tax return preparers in complying with
the federal tax laws.
Adequate Disclosure
The final regulations adopt the proposed amendments to Sec.
1.6694-2(d)(3), with modification based upon comments received and
revisions made in the 2008 Act. For a signing tax return preparer
within the meaning of Sec. 301.7701-15(b)(1), the final regulations
provide that disclosure of a position for which there is a reasonable
basis but for which there is not substantial authority is adequate in
one of three ways. First, the position may be disclosed on a properly
completed and filed Form 8275, Disclosure Statement, or Form 8275-R,
Regulation Disclosure Statement, as appropriate, or on the tax return
in accordance with the applicable annual revenue procedure. See Revenue
Procedure 2008-14 (2008-7 IRB 435 (February 19, 2008)). Second,
disclosure of the position is adequate if the tax return preparer
provides the taxpayer with a prepared tax return that includes the
appropriate disclosure in accordance with Sec. 1.6662-4(f). Third, for
tax returns or claims for refund that are subject to penalties other
than the accuracy-related penalty for substantial understatements under
sections 6662(b)(2) and (d), the tax return preparer advises the
taxpayer of the penalty standards applicable to the taxpayer under
section 6662. This third rule is intended to address the situation when
the penalty standard applicable to the taxpayer is based on compliance
with requirements other than disclosure on the return (for example,
section 6662(e)). In the case of a nonsigning tax return preparer
within the meaning of Sec. 301.7701-15(b)(2), the final regulations in
Sec. 1.6694-2(d)(3)(ii) maintain the same three disclosure rules that
were in the proposed regulations.
Two commentators requested clarification of the prohibition against
a boilerplate disclaimer and recommended clarifying that a firm does
not violate the prohibition simply by adopting a standard approach to
disclosure issues. Section 1.6694-2(d)(3)(iii) of the final regulations
is revised to provide that no general disclaimer is allowed with
respect to the
[[Page 78435]]
specific facts and circumstances of the taxpayer and the position for
which there is no substantial authority. Tax return preparers, and
their firms, may use standard language to describe applicable law and
may adopt a standard approach to disclosure issues.
One commentator stated that it is unclear what specifically must be
documented by the nonsigning tax return preparer in order to avoid
imposition of penalties. The final regulations are revised by
clarifying that the documented advice that would constitute adequate
disclosure in Sec. 1.6694-2(d)(3)(ii)(A) with respect to a nonsigning
tax return preparer's advice to a taxpayer, if the firm is advising the
taxpayer, should confirm that the affected taxpayer has been advised by
a tax return preparer in the firm of the potential penalties and the
opportunity, if any, to avoid penalty through disclosure.
Similarly, in Sec. 1.6694-2(d)(3)(ii)(B) with respect to a
nonsigning preparer's advice to another tax return preparer, if
providing nonsigning preparer advice to another preparer in the same
firm, contemporaneous documentation should be satisfied if there is a
single instance of contemporaneous documentation within the firm. If
the firm is advising another preparer outside of the firm, the final
regulations provide that this documentation should confirm that the
preparer outside the firm has been advised that disclosure under
section 6694(a) may be required.
Finally, the disclosure rules in Sec. 1.6694-3(c)(2) of the final
regulations are revised to clarify that a tax return preparer is not
considered to have recklessly or intentionally disregarded a rule or
regulation if the position contrary to the rule or regulation has a
reasonable basis as defined in Sec. 1.6694-2(d)(2) and is adequately
disclosed in accordance with Sec. Sec. 1.6694-2(d)(3)(i)(A) or (C) or
1.6694-2(d)(3)(ii). In the case of a position contrary to a revenue
ruling or notice, a tax return preparer also is not considered to have
recklessly or intentionally disregarded the ruling or notice if the
position meets the substantial authority standard described in Sec.
1.6662-4(d) and is not with respect to a reportable transaction to
which section 6662A applies. This modification ensures that tax return
preparers may advise their clients to challenge an IRS ruling or notice
under the appropriate circumstances.
Reasonable Cause
The final regulations in Sec. 1.6694-2(e) adopt the proposed
amendments to Sec. 1.6694-2(e) regarding reasonable cause, with minor
conforming changes.
Section 1.6694-2(e)(5) permits tax return preparers to rely upon
generally accepted administrative or industry practice in establishing
reasonable cause relief from penalties under section 6694. Several
commentators indicated that guidance is necessary to explain how a tax
return preparer should determine whether a practice is ``generally
accepted'' and ``industry practice.'' The final regulations do not
provide further guidance regarding these terms. An accepted
administrative or industry practice will be determined based upon all
facts and circumstances.
Burden of Proof
One commentator urged that the rules regarding ``burden of proof''
in tax return preparer penalty litigation cases should be either
eliminated or be substantially revised to comport with section 7491.
Section 7427 imposes upon the Secretary the burden of proof on the
issue of whether a tax return preparer has willfully attempted in any
manner to understate the liability for tax. Section 7491(c) imposes
upon the Secretary the burden of production in any court proceeding
with respect to the liability of any individual for a penalty. After
consideration of the comment, proposed Sec. Sec. 1.6694-2(f) and
1.6694-3(g) are removed from the final regulations because these other
Code sections as well as case law provide the substantive rules
regarding burden of proof and burden of production for penalties.
Negotiation of Check
Section 6695(f) and Sec. 1.6695-1(f)(1) prohibit a tax return
preparer from endorsing or negotiating a refund check relating to a
return for which he or she is a preparer. One commentator recommended
that the regulations be clarified to state specifically that a tax
return preparer is not prohibited from affixing the taxpayer's name on
a refund check (typically accomplished via a mechanical stamp) for the
purpose of depositing the check into an account in the name of the
taxpayer. This comment is adopted in Sec. 1.6695-1(f)(1) of the final
regulations.
Due Diligence for Earned Income Credit
Section 1.6695-2(b)(3) of these final regulations adopt the rules
regarding a signing tax return preparer's due diligence requirements
with respect to determining eligibility for the earned income credit,
with minor modification. Based upon the concerns of a commentator about
one of the examples in this section addressing the representation of
married but separated individuals, Example 3 in the proposed
regulations is removed. The Treasury Department and the IRS agree that
this example may raise conflict of interest issues and, therefore,
replace the example with another example focusing on the need of the
tax return preparer to ask relevant questions if a taxpayer attempts to
claim a niece or nephew as a qualifying child.
Definition of Tax Return Preparer
The final regulations adopt the proposed amendments to Sec.
301.7701-15(b)(1) and (2), with modification. Section 301.7701-15(b)(1)
and (2) of the final regulations adds to the section 7701 regulations
the definitions of ``signing tax return preparer'' and ``nonsigning tax
return preparer.''
Several commentators requested that the final regulations expressly
state who is required to sign a tax return. Section 301.7701-15(b)(1)
of the final regulations is revised to provide that a signing tax
return preparer is the individual tax return preparer who has the
primary responsibility for the overall substantive accuracy of the
preparation of such return or claim for refund. Conforming changes are
additionally made to Sec. 1.6695-1(b). The definitions of nonsigning
tax return preparer in Sec. 301.7701-15(b)(2) and substantial portion
in Sec. 301.7701-15(b)(3) are generally adopted as proposed. An anti-
abuse rule, however, is added in Sec. 301.7701-15(b)(2)(i) based upon
several commentators' suggestions. The anti-abuse rule provides that
time spent on advice given after events have occurred, even if such
time is less than 5 percent of the aggregate time incurred by such
individual with respect to the position(s) giving rise to the
understatement, will be taken into account if all facts and
circumstances show that an individual is primarily responsible for a
position taken on a return, gave advice on that position before events
occurred primarily to avoid treatment as a tax return preparer subject
to section 6694, and for purposes of preparing a tax return the
individual confirmed the advice after events had occurred.
List of Returns Subject to Penalty
Several commentators contended that proposed Sec. 301.7701-
15(b)(4) and the accompanying revenue procedure listing the returns and
claims for refund subject to the section 6694 penalty should not
include information returns and should limit the definition of return
to exclude documents that do not report a tax liability. Similarly,
commentators requested excluding Form 8038, Information Return for Tax-
Exempt Private Activity Bond Issues, Form
[[Page 78436]]
8038-G, Information Return for Government Purpose Tax-Exempt Bond
Issues, Form 8038-GC, Consolidated Information Return for Small Tax-
Exempt Government Bond Issues, and Form 5500, Annual Return/Report of
Employee Benefit Plan. After consideration of the comments, the Forms
8038, 8038-G, and 8038-GC are classified in the contemporaneously
issued revenue procedure with forms that will not subject the preparer
to a penalty under section 6694(a), but may subject the preparer to a
willful or reckless conduct penalty under section 6694(b) if the
information reported on the form constitutes a substantial portion of
the tax return or claim for refund and is prepared willfully in any
manner to understate the liability of tax on a tax return or claim for
refund, or in reckless or intentional disregard of rules or
regulations. Also, Form 8038-T, Arbitrage Rebate and Penalty in Lieu of
Arbitrage Rebate, and Form 8038-R, Request for Recovery of Overpayment
Under Arbitrage Rebate Provisions, are added to the list of forms of
returns in the revenue procedure subject to the section 6694 penalties.
Form 5500 remains in the same category as in Notice 2008-13.
The same commentators also raised the issue of whether the Treasury
Department and the IRS should publish the list of returns and claims
for refund subject to penalty under sections 6694 and 6695 in these
final regulations, rather than in separate guidance in the Internal
Revenue Bulletin. The Treasury Department and the IRS continue to
conclude that it is appropriate to publish a revenue procedure in the
Internal Revenue Bulletin. Notices 2008-12, -13, and -46, along with
the previously issued proposed regulations, provided the public with
notice of, and an opportunity to comment on, the forms subject to
penalty.
Another commentator requested that the final regulations in both
Sec. 301.7701-15(f) and Circular 230 specifically define the terms
``in-house tax professional'' and ``employer'' and provide other
guidance on the applicability of these return preparer rules to in-
house counsel in Circular 230. Section 7701(a)(36) and Sec. 301.7701-
15(f)(ix) already except from the definition of tax return preparer any
person who prepares a return or claim for refund of the employer (or of
an officer or employee of the employer) by whom he or she is regularly
and continuously employed. Additionally, Sec. 301.7701-15(f)(4) of the
final regulations deems an employee of a corporation owning more than
50 percent of the voting power of another corporation, or the employee
of a corporation more than 50 percent of the voting power of which is
owned by another corporation, to be the employee of the other
corporation as well. The Treasury Department and the IRS will consider
if any other changes are necessary on this issue in future revisions to
Sec. 10.34 of Circular 230.
Appraisers
Under Treasury Regulations in place since 1977 and the proposed
regulations, an appraiser might be subject to penalties under section
6694 as a nonsigning tax return preparer if the appraisal is a
substantial portion of the return or claim for refund and the
applicable standards of care under section 6694 are not met. Several
commentators have stated that appraisers should not be subject to
penalties under section 6694 because they are subject to new, higher
standards of conduct under section 6695A as set out in the Pension
Protection Act of 2006, Public Law No. 109-280. The commentators have
also urged that assessment of penalties under section 6694 against
appraisers would result in imposition of a gratuitous and unnecessary
layer of requirements and sanctions without any additional public
policy benefit.
After consideration of the comment, the Treasury Department and the
IRS continue to include appraisers in the definition of both signing
and non-signing preparers, thereby providing the IRS with discretion to
impose the section 6694 and 6695A penalties in the alternative against
an appraiser depending on the facts and circumstances of the
appraiser's conduct. The IRS, however, will not stack the penalties
under sections 6694 and 6695A with respect to the same conduct. A
separate regulation will provide guidance under section 6695A.
Disclosure Under Section 6103
One commentator recommended that the Treasury Department and the
IRS issue regulations under section 6103 authorizing the disclosure of
tax returns and return information to a tax return preparer at the tax
return preparer's request upon initiation of an examination of the tax
return preparer for tax return preparer penalties to the extent the
returns and return information are relevant and material to the tax
return preparer examination. The Treasury Department and the IRS
conclude that no further guidance on this issue in these regulations is
necessary because section 6103(h)(4) already authorizes the disclosure
of returns and return information by the Government in federal or
state, judicial or administrative tax proceedings if the disclosure
meets an item or transaction test and the third-party return or return
information is directly related to the resolution of an issue in the
case.
Appeal Rights
A number of individual commentators questioned whether the proposed
regulations would remove the administrative appeal rights available to
tax return preparers who are subject to penalty under section 6694.
Under Treasury Regulations in place since 1991, the IRS will send a 30-
day letter to the tax return preparer notifying the tax return preparer
of the proposed penalty or penalties and offering an opportunity to the
tax return preparer to request further administrative consideration and
a final administrative determination by the IRS concerning the proposed
assessment prior to assessment of a penalty under section 6694 (unless
the period of limitations (if any) under section 6696(d) may expire
without adequate opportunity for assessment). If the tax return
preparer then makes a timely request, assessment may not be made until
the IRS makes a final administrative determination adverse to the tax
return preparer. These appeal rights are maintained in Sec. 1.6694-
4(a) of the final regulations.
Applicability Dates
To eliminate any adverse impact that the adoption of these final
regulations could have on pending or recently filed returns, these
final regulations will apply to returns and claims for refund filed,
and advice provided, after December 31, 2008.
Availability of IRS Documents
The IRS notices referred to in this preamble are published in the
Internal Revenue Bulletin and are available at http://www.irs.gov.
Effect on Other Documents
The following publications are obsolete as of January 1, 2009:
Notice 2007-54 (2007-27 IRB 12).
Notice 2008-11 (2008-3 IRB 279).
Notice 2008-12 (2008-3 IRB 280).
Notice 2008-13 (2008-3 IRB 282).
Notice 2008-46 (2008-18 IRB 868).
Special Analyses
It has been determined that this final rule is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to these regulations.
[[Page 78437]]
When an agency issues a rulemaking, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) (RFA), requires the agency to ``prepare and make
available for public comment an initial regulatory flexibility
analysis'' that will ``describe the impact of the proposed rule on
small entities.'' (5 U.S.C. 603(a)). Section 605 of the RFA provides an
exception to this requirement if the agency certifies that the final
rulemaking will not have a significant economic impact on a substantial
number of small entities.
The final rules affect tax return preparers. The IRS estimates
there are 38,566 tax return preparation firms and 260,338 self-employed
tax return preparers that qualify as small entities. Therefore, the IRS
has determined that these final rules will have an impact on a
substantial number of small entities.
The IRS has determined, however, that the impact on entities
affected by the final rule will not be significant. The statute and
final regulations would require entities that employ tax return
preparers to retain a record of the name, taxpayer identification
number and principal place of work of each tax return preparer
employed. The IRS estimates that this would not require purchase of
additional software and would take five minutes per tax return preparer
employed. The statute and final regulations would also require tax
return preparers to retain a complete copy of a return (or claim for
refund) or a list of the name, taxpayer identification number and
taxable year for each return (or claim for refund) and the name of the
tax return preparer required to sign the return or claim for refund.
Many tax return preparers have copying machines or scanners and already
make copies of the returns prepared, and the IRS estimates this would
not require the purchase of additional equipment. The IRS estimates
that it would take an average of five minutes to make copies or prepare
a record of the returns or claims for refund prepared. Accordingly, the
burden on employers of tax return preparers to make a record of the
name, taxpayer identification number, and principal place of work of
each employed tax return preparer, and a copy of each return or claim
for refund prepared, or a record, is insignificant.
The final regulations also conform the standards of conduct for the
tax return preparer penalties under section 6694(a) to the provisions
of the 2007 and 2008 Acts. Tax return preparers already enroll in
educational seminars or training programs to keep up to date with the
latest changes to the Code, and the provisions of the 2007 and 2008
Acts and the regulations generally will be part of that training.
Based on these facts, it is certified that the collection of
information contained in these final regulations will not have a
significant economic impact on a substantial number of small entities.
Accordingly, a Regulatory Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Code, the notice of proposed
rulemaking preceding these regulations was submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small business.
Drafting Information
The principal authors of these final regulations are Matthew S.
Cooper and Michael E. Hara, Office of the Associate Chief Counsel
(Procedure and Administration).
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 20
Generation-skipping transfer taxes, Reporting and recordkeeping
requirements.
26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
26 CFR Part 26
Generation-skipping transfer taxes, Reporting and recordkeeping
requirements.
26 CFR Part 31
Employment taxes, Income taxes, Penalties, Pensions, Railroad
Retirement, Reporting and recordkeeping requirements, Social Security,
Unemployment compensation.
26 CFR Part 40
Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 41
Excise taxes, Motor vehicles, Reporting and recordkeeping
requirements.
26 CFR Part 44
Excise taxes, Gambling, Reporting and recordkeeping requirements.
26 CFR Part 53
Excise taxes, Foundations, Investments, Lobbying, Reporting and
recordkeeping requirements.
26 CFR Part 54
Excise taxes, Pensions, Reporting and recordkeeping requirements.
26 CFR Part 55
Excise taxes, Investments, Reporting and recordkeeping
requirements.
26 CFR Part 56
Excise taxes, Lobbying, Nonprofit organizations, Reporting and
recordkeeping requirements.
26 CFR Part 156
Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 157
Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR parts 1, 20, 25, 26, 31, 40, 41, 44, 53, 54, 55,
56, 156, 157, 301, and 602 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 1.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 1.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 1.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 2. Section 1.6060-1 is amended by revising the section heading and
paragraphs (a) and (c) and adding paragraph (d) to read as follows:
Sec. 1.6060-1 Reporting requirements for tax return preparers.
(a) In general. (1) Each person who employs one or more signing tax
return preparers to prepare any return of tax or claim for refund of
tax, other than for the person, at any time during a return period
shall satisfy the requirements of section 6060 of the Internal Revenue
Code by--
(i) Retaining a record of the name, taxpayer identification number,
and
[[Page 78438]]
principal place of work during the return period of each tax return
preparer employed by the person at any time during that period; and
(ii) Making that record available for inspection upon request by
the Commissioner.
(2) The record described in this paragraph (a) must be retained and
kept available for inspection for the 3-year period following the close
of the return period to which that record relates.
(3) The person may choose any form of documentation to be used
under this section as a record of the signing tax return preparers
employed during a return period. The record, however, must disclose on
its face which individuals were employed as tax return preparers during
that period.
(4) For the definition of the term ``signing tax return preparer'',
see Sec. 301.7701-15(b)(1) of this chapter. For the definition of the
term ``return period'', see paragraph (b) of this section.
(5)(i) For purposes of this section, any individual who, in acting
as a signing tax return preparer, is not employed by another tax return
preparer shall be treated as his or her own employer. Thus, a sole
proprietor shall retain and make available a record with respect to
himself (or herself) as provided in this section.
(ii) A partnership shall, for purposes of this section, be treated
as the employer of the partners of the partnership and shall retain and
make available a record with respect to the partners and others
employed by the partnership as provided in this section.
* * * * *
(c) Penalty. For the civil penalty for failure to retain and make
available a record of the tax return preparers employed during a return
period as required under this section, or for failure to include an
item in the record required to be retained and made available under
this section, see Sec. 1.6695-1(e).
(d) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 3. Section 1.6107-1 is revised to read as follows:
Sec. 1.6107-1 Tax return preparer must furnish copy of return or
claim for refund to taxpayer and must retain a copy or record.
(a) Furnishing copy to taxpayer--(1) A person who is a signing tax
return preparer of any return of tax or claim for refund of tax under
the Internal Revenue Code shall furnish a completed copy of the return
or claim for refund to the taxpayer (or nontaxable entity) not later
than the time the return or claim for refund is presented for the
signature of the taxpayer (or nontaxable entity). The signing tax
return preparer may, at its option, request a receipt or other evidence
from the taxpayer (or nontaxable entity) sufficient to show
satisfaction of the requirement of this paragraph (a).
(2) The tax return preparer must provide a complete copy of the
return or claim for refund filed with the IRS to the taxpayer in any
media, including electronic media, that is acceptable to both the
taxpayer and the tax return preparer. In the case of an electronically
filed return, a complete copy of a taxpayer's return or claim for
refund consists of the electronic portion of the return or claim for
refund, including all schedules, forms, pdf attachments, and jurats,
that was filed with the IRS. The copy provided to the taxpayer must
include all information submitted to the IRS to enable the taxpayer to
determine what schedules, forms, electronic files, and other supporting
materials have been filed with the return. The copy, however, need not
contain the identification number of the paid tax return preparer. The
electronic portion of the return or claim for refund may be contained
on a replica of an official form or on an unofficial form. On an
unofficial form, however, data entries must reference the line numbers
or descriptions on an official form.
(3) For electronically filed Forms 1040EZ, ``Income Tax Return for
Single Filers and Joint Filers With No Dependents,'' and Form 1040A,
``U.S. Individual Income Tax Return,'' filed for the 2009, 2010 and
2011 taxable years, the information may be provided on a replica of a
Form 1040, ``U.S. Individual Income Tax Return'', that provides all of
the information. For other electronically filed returns, the
information may be provided on a replica of an official form that
provides all of the information.
(b) Copy or record to be retained. (1) A person who is a signing
tax return preparer of any return or claim for refund shall--
(i)(A) Retain a completed copy of the return or claim for refund;
or
(B) Retain a record, by list, card file, or otherwise of the name,
taxpayer identification number, and taxable year of the taxpayer (or
nontaxable entity) for whom the return or claim for refund was
prepared, and the type of return or claim for refund prepared;
(ii) Retain a record, by retention of a copy of the return or claim
for refund, maintenance of a list, card file, or otherwise, for each
return or claim for refund presented to the taxpayer (or nontaxable
entity), of the name of the individual tax return preparer required to
sign the return or claim for refund pursuant to Sec. 1.6695-1(b); and
(iii) Make the copy or record of returns and claims for refund and
record of the individuals required to sign available for inspection
upon request by the Commissioner.
(2) The material described in this paragraph (b) shall be retained
and kept available for inspection for the 3-year period following the
close of the return period during which the return or claim for refund
was presented for signature to the taxpayer (or nontaxable entity). In
the case of a return that becomes due (with extensions, if any) during
a return period following the return period during which the return was
presented for signature, the material shall be retained and kept
available for inspection for the 3-year period following the close of
the later return period in which the return became due. For the
definition of ``return period,'' see section 6060(c). If the person
subject to the record retention requirement of this paragraph (b) is a
corporation or a partnership that is dissolved before completion of the
3-year period, then all persons who are responsible for the winding up
of the affairs of the corporation or partnership under state law shall
be subject, on behalf of the corporation or partnership, to these
record retention requirements until completion of the 3-year period. If
state law does not specify any person or persons as responsible for
winding up, then, collectively, the directors or general partners shall
be subject, on behalf of the corporation or partnership, to the record
retention requirements of this paragraph (b). For purposes of the
penalty imposed by section 6695(d), such designated persons shall be
deemed to be the tax return preparer and will be jointly and severally
liable for each failure.
(c) Tax return preparer. For the definition of ``signing tax return
preparer,'' see Sec. 301.7701-15(b)(1) of this chapter. For purposes
of applying this section, a corporation, partnership or other
organization that employs a signing tax return preparer to prepare for
compensation (or in which a signing tax return preparer is compensated
as a partner or member to prepare) a return of tax or claim for refund
shall be treated as the sole signing tax return preparer.
(d) Penalties. (1) For the civil penalty for failure to furnish a
copy of the return or claim for refund to the taxpayers (or nontaxable
entity) as required under paragraphs (a) of this section, see section
6695(a) and Sec. 1.6695-1(a).
[[Page 78439]]
(2) For the civil penalty for failure to retain a copy of the
return or claim for refund, or to retain a record as required under
paragraphs (b) of this section, see section 6695(d) and Sec. 1.6695-
1(d).
(e) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 4. Section 1.6109-2 is amended by revising the section heading and
paragraphs (a) and (d) to read as follows:
Sec. 1.6109-2 Tax return preparers furnishing identifying numbers for
returns or claims for refund filed after December 31, 2008.
(a) Furnishing identifying number. (1) Each filed return of tax or
claim for refund of tax under the Internal Revenue Code prepared by one
or more tax return preparers must include the identifying number of the
tax return preparer required by Sec. 1.6695-1(b) to sign the return or
claim for refund. In addition, if there is an employment arrangement or
association between the individual tax return preparer and another
person (except to the extent the return prepared is for the person),
the identifying number of the other person must also appear on the
filed return or claim for refund. For the definition of the term ``tax
return preparer,'' see section 7701(a)(36) and Sec. 301.7701-15 of
this chapter.
(2) The identifying number of an individual tax return preparer is
that individual's social security account number or such alternative
number as may be prescribed by the Internal Revenue Service in forms,
instructions, or other appropriate guidance.
(3) The identifying number of a person (whether an individual or
entity) who employs or associates with an individual tax return
preparer described in paragraph (a)(2) of this section to prepare the
return or claim for refund (other than a return prepared for the
person) is the person's employer identification number.
* * * * *
(d) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008. For returns or claims for refund filed before January 1, 2000,
see Sec. 1.6109-2A(a).
0
Par. 5. Section 1.6694-0 is revised to read as follows:
Sec. 1.6694-0 Table of contents.
This section lists the captions that appear in Sec. Sec.
1.6694-1 through 1.6694-4.
Sec. 1.6694-1 Section 6694 penalties applicable to tax return
preparers.
(a) Overview.
(1) In general.
(2) Date return is deemed prepared.
(b) Tax return preparer.
(1) In general.
(2) Responsibility of signing tax return preparer.
(3) Responsibility of nonsigning tax return preparer.
(4) Responsibility of signing and nonsigning tax return
preparer.
(5) Tax return preparer and firm responsibility.
(6) Examples.
(c) Understatement of liability.
(d) Abatement of penalty where taxpayer's liability not
understated.
(e) Verification of information furnished by taxpayer or other
third party.
(1) In general.
(2) Verification of information on previously filed returns.
(3) Examples.
(f) Income derived (or to be derived) with respect to the return
or claim for refund.
(1) In general.
(2) Compensation.
(i) Multiple engagements.
(ii) Reasonable allocation.
(iii) Fee refunds.
(iv) Reduction of compensation.
(3) Individual and firm allocation.
(4) Examples.
(g) Effective/applicability date.
Sec. 1.6694-2 Penalty for understatement due to an unreasonable
position.
(a) In general.
(1) Proscribed conduct.
(2) Special rule for corporations, partnerships, and other
firms.
(b) Reasonable to believe that the position would more likely
than not be sustained on its merits.
(1) In general.
(2) Authorities.
(3) Written determinations.
(4) Taxpayer's jurisdiction.
(5) When ``more likely than not'' standard must be satisfied.
(c) Substantial authority.
(d) Exception for adequate disclosure of positions with a
reasonable basis.
(1) In general.
(2) Reasonable basis.
(3) Adequate disclosure.
(i) Signing tax return preparers.
(ii) Nonsigning tax return preparers.
(A) Advice to taxpayers.
(B) Advice to another tax return preparer.
(iii) Requirements for advice.
(iv) Pass-through entities.
(v) Examples.
(e) Exception for reasonable cause and good faith.
(1) Nature of the error causing the understatement.
(2) Frequency of errors.
(3) Materiality of errors.
(4) Tax return preparer's normal office practice.
(5) Reliance on advice of others.
(6) Reliance on generally accepted administrative or industry
practice.
(f) Effective/applicability date.
Sec. 1.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general.
(1) Proscribed conduct.
(2) Special rule for corporations, partnerships, and other
firms.
(b) Willful attempt to understate liability.
(c) Reckless or intentional disregard.
(d) Examples.
(e) Rules or regulations.
(f) Section 6694(b) penalty reduced by section 6694(a) penalty.
(g) Effective/applicability date.
Sec. 1.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of
taxpayer's liability and certain other procedural matters.
(a) In general.
(b) Tax return preparer must bring suit in district court to
determine liability for penalty.
(c) Suspension of running of period of limitations on
collection.
(d) Effective/applicability date.
0
Par. 6. Section 1.6694-1 is revised to read as follows:
Sec. 1.6694-1 Section 6694 penalties applicable to tax return
preparers.
(a) Overview--(1) In general. Sections 6694(a) and (b) impose
penalties on tax return preparers for conduct giving rise to certain
understatements of liability on a return (including an amended or
adjusted return) or claim for refund. For positions other than those
with respect to tax shelters (as defined in section 6662(d)(2)(C)(ii))
and reportable transactions to which section 6662A applies, the section
6694(a) penalty is imposed in an amount equal to the greater of $1,000
or 50 percent of the income derived (or to be derived) by the tax
return preparer for an understatement of tax liability that is due to
an undisclosed position for which the tax return preparer did not have
substantial authority or due to a disclosed position for which there is
no reasonable basis. For positions with respect to tax shelters (as
defined in section 6662(d)(2)(C)(ii)) or reportable transactions to
which section 6662A applies, the section 6694(a) penalty is imposed in
an amount equal to the greater of $1,000 or 50 percent of the income
derived (or to be derived) by the tax return preparer for an
understatement of tax liability for which it is not reasonable to
believe that the position would more likely than not be sustained on
its merits. The section 6694(b) penalty is imposed in an amount equal
to the greater of $5,000 or 50 percent of the income derived (or to be
derived) by the tax return preparer for an understatement of liability
with respect to tax that is due to a willful attempt to understate tax
liability or that is due to reckless or intentional disregard of rules
or regulations. Refer to Sec. 1.6694-2 for rules relating to the
[[Page 78440]]
penalty under section 6694(a). Refer to Sec. 1.6694-3 for rules
relating to the penalty under section 6694(b).
(2) Date return is deemed prepared. For purposes of the penalties
under section 6694, a return or claim for refund is deemed prepared on
the date it is signed by the tax return preparer. If a signing tax
return preparer within the meaning of Sec. 301.7701-15(b)(1) of this
chapter fails to sign the return, the return or claim for refund is
deemed prepared on the date the return or claim is filed. See Sec.
1.6695-1 of this section. In the case of a nonsigning tax return
preparer within the meaning of Sec. 301.7701-15(b)(2) of this chapter,
the relevant date is the date the nonsigning tax return preparer
provides the tax advice with respect to the position giving rise to the
understatement. This date will be determined based on all the facts and
circumstances.
(b) Tax return preparer--(1) In general. For purposes of this
section, ``tax return preparer'' means any person who is a tax return
preparer within the meaning of section 7701(a)(36) and Sec. 301.7701-
15 of this chapter. An individual is a tax return preparer subject to
section 6694 if the individual is primarily responsible for the
position(s) on the return or claim for refund giving rise to an
understatement. See Sec. 301.7701-15(b)(3). There is only one
individual within a firm who is primarily responsible for each position
on the return or claim for refund giving rise to an understatement. In
the course of identifying the individual who is primarily responsible
for the position, the Internal Revenue Service (IRS) may advise
multiple individuals within the firm that it may be concluded that they
are the individual within the firm who is primarily responsible. In
some circumstances, there may be more than one tax return preparer who
is primarily responsible for the position(s) giving rise to an
understatement if multiple tax return preparers are employed by, or
associated with, different firms.
(2) Responsibility of signing tax return preparer. If there is a
signing tax return preparer within the meaning of Sec. 301.7701-
15(b)(1) of this chapter within a firm, the signing tax return preparer
generally will be considered the person who is primarily responsible
for all of the positions on the return or claim for refund giving rise
to an understatement unless, based upon credible information from any
source, it is concluded that the nonsigning tax return preparer is not
primarily responsible for the position(s) on the return or claim for
refund giving rise to an understatement. In that case, a nonsigning tax
return preparer within the signing tax return preparer's firm (as
determined in paragraph (b)(3) of this section) will be considered the
tax return preparer who is primarily responsible for the position(s) on
the return or claim for refund giving rise to an understatement.
(3) Responsibility of nonsigning tax return preparer. If there is
no signing tax return preparer within the meaning of Sec. 301.7701-
15(b)(1) of this chapter for the return or claim for refund within the
firm or if, after the application of paragraph (b)(2) of this section,
it is concluded that the signing tax return preparer is not primarily
responsible for the position, the nonsigning tax return preparer within
the meaning of Sec. 301.7701-15(b)(2) of this chapter within the firm
with overall supervisory responsibility for the position(s) giving rise
to the understatement generally will be considered the tax return
preparer who is primarily responsible for the position for purposes of
section 6694 unless, based upon credible information from any source,
it is concluded that another nonsigning tax return preparer within that
firm is primarily responsible for the position(s) on the return or
claim for refund giving rise to the understatement.
(4) Responsibility of signing and nonsigning tax return preparer.
If the information presented would support a finding that, within a
firm, either the signing tax return preparer or a nonsigning tax return
preparer is primarily responsible for the position(s) giving rise to
the understatement, the penalty may be assessed against either one of
the individuals, but not both, as the primarily responsible tax return
preparer.
(5) Tax return preparer and firm responsibility. To the extent
provided in Sec. Sec. 1.6694-2(a)(2) and 1.6694-3(a)(2), an individual
and the firm that employs the individual, or the firm of which the
individual is a partner, member, shareholder, or other equity holder,
both may be subject to penalty under section 6694 with respect to the
position(s) on the return or claim for refund giving rise to an
understatement. If an individual (other than the sole proprietor) who
is employed by a sole proprietorship is subject to penalty under
section 6694, the sole proprietorship is considered a ``firm'' for
purposes of this paragraph (b).
(6) Examples. The provisions of paragraph (b) of this section are
illustrated by the following examples:
Example 1. Attorney A provides advice to Client C concerning the
proper treatment of an item with respect to which all events have
occurred on C's tax return. In preparation for providing that
advice, A seeks advice regarding the proper treatment of the item
from Attorney B, who is within the same firm as A, but A is the
attorney who signs C's return as a tax return preparer. B provides
advice on the treatment of the item upon which A relies. B's advice
is reflected on C's tax return but no disclosure was made in
accordance with Sec. 1.6694-2(d)(3). The advice constitutes
preparation of a substantial portion of the return within the
meaning of Sec. 301.7701-15(b)(3). The IRS later challenges the
position taken on the tax return, giving rise to an understatement
of liability. For purposes of the regulations under section 6694, A
is initially considered the tax return preparer with respect to C's
return, and the IRS advises A that A may be subject to the penalty
under section 6694 with respect to C's return. Based upon
information received from A or another source, it may be concluded
that B, rather than A, had primary responsibility for the position
taken on the return that gave rise to the understatement and may be
subject to penalty under section 6694 instead of A.
Example 2. Same as Example 1, except that neither Attorney A nor
any other source produce credible information that Attorney B had
primary responsibility for the position on the return giving rise to
an understatement. Attorney A is the tax return preparer who may be
subject to penalty under section 6694 with respect to C's return.
Example 3. Same as Example 1, except that neither Attorney A nor
any other attorney within A's firm signs Client C's return as a tax
return preparer. Attorney B is the nonsigning tax return preparer
within the firm with overall supervisory responsibility for the
position giving rise to an understatement. Accordingly, B is the tax
return preparer who is primarily responsible for the position on C's
return giving rise to an understatement and may be subject to
penalty under section 6694.
Example 4. Same as Example 1, except Attorney D, who works for a
different firm than A, also provides advice on the same position
upon which A relies. It may be concluded that D is also primarily
responsible for the position on the return and may be subject to
penalty under section 6694.
Example 5. Same as Example 1, except Attorney B is able to
present credible information that A is also responsible for the
position on C's return giving rise to an understatement. The IRS may
conclude between A and B, the two responsible persons for the
position, who is primarily responsible and may assess a section 6694
penalty against A or B, but not both, as the primarily responsible
tax return preparer.
(c) Understatement of liability. For purposes of this section, an
``understatement of liability'' exists if, viewing the return or claim
for refund as a whole, there is an understatement of the net amount
payable with respect to any tax imposed by the Internal Revenue Code
(Code), or an overstatement of the net amount creditable or refundable
with respect to any tax imposed by the Code. The net amount payable in
a taxable year with
[[Page 78441]]
respect to the return for which the tax return preparer engaged in
conduct proscribed by section 6694 is not reduced by any carryback. Tax
imposed by the Code does not include additions to the tax, additional
amounts, and assessable penalties imposed by subchapter 68 of the Code.
Except as provided in paragraph (d) of this section, the determination
of whether an understatement of liability exists may be made in a
proceeding involving the tax return preparer that is separate and apart
from any proceeding involving the taxpayer.
(d) Abatement of penalty where taxpayer's liability not
understated. If a penalty under section 6694(a) or (b) concerning a
return or claim for refund has been assessed against one or more tax
return preparers, and if it is established at any time in a final
administrative determination or a final judicial decision that there
was no understatement of liability relating to the position(s) on the
return or claim for refund, then--
(1) The assessment shall be abated; and
(2) If any amount of the penalty was paid, that amount shall be
refunded to the person or persons who so paid, as if the payment were
an overpayment of tax, without consideration of any period of
limitations.
(e) Verification of information furnished by taxpayer or other
party--(1) In general. For purposes of sections 6694(a) and (b)
(including demonstrating that a position complied with relevant
standards under section 6694(a) and demonstrating reasonable cause and
good faith under Sec. 1.6694-2(e)), the tax return preparer generally
may rely in good faith without verification upon information furnished
by the taxpayer. A tax return preparer also may rely in good faith and
without verification upon information and advice furnished by another
advisor, another tax return preparer or other party (including another
advisor or tax return preparer at the tax return preparer's firm). The
tax return preparer is not required to audit, examine or review books
and records, business operations, documents, or other evidence to
verify independently information provided by the taxpayer, advisor,
other tax return preparer, or other party. The tax return preparer,
however, may not ignore the implications of information furnished to
the tax return preparer or actually known by the tax return preparer.
The tax return preparer must make reasonable inquiries if the
information as furnished appears to be incorrect or incomplete.
Additionally, some provisions of the Code or regulations require that
specific facts and circumstances exist (for example, that the taxpayer
maintain specific documents) before a deduction or credit may be
claimed. The tax return preparer must make appropriate inquiries to
determine the existence of facts and circumstances required by a Code
section or regulation as a condition of the claiming of a deduction or
credit.
(2) Verification of information on previously filed returns. For
purposes of section 6694(a) and (b) (including meeting the reasonable
to believe that the position would more likely than not be sustained on
its merits and reasonable basis standards in Sec. Sec. 1.6694-2(b) and
(d)(2), and demonstrating reasonable cause and good faith under Sec.
1.6694-2(e)), a tax return preparer may rely in good faith without
verification upon a tax return that has been previously prepared by a
taxpayer or another tax return preparer and filed with the IRS. For
example, a tax return preparer who prepares an amended return
(including a claim for refund) need not verify the positions on the
original return. The tax return preparer, however, may not ignore the
implications of information furnished to the tax return preparer or
actually known by the tax return preparer. The tax return preparer must
make reasonable inquiries if the information as furnished appears to be
incorrect or incomplete. The tax return preparer must confirm that the
position being relied upon has not been adjusted by examination or
otherwise.
(3) Examples. The provisions of this paragraph (e) are illustrated
by the following examples:
Example 1. During an interview conducted by Preparer E, a
taxpayer stated that he had made a charitable contribution of real
estate in the amount of $50,000 during the tax year, when in fact he
had not made this charitable contribution. E did not inquire about
the existence of a qualified appraisal or complete a Form 8283,
Noncash Charitable Contributions, in accordance with the reporting
and substantiation requirements under section 170(f)(11). E reported
a deduction on the tax return for the charitable contribution, which
resulted in an understatement of liability for tax, and signed the
tax return as the tax return preparer. E is subject to a penalty
under section 6694.
Example 2. While preparing the 2008 tax return for an individual
taxpayer, Preparer F realizes that the taxpayer did not provide a
Form 1099-INT, ``Interest Income'', for a bank account that produced
significant taxable income in 2007. When F inquired about any other
income, the taxpayer furnished the Form 1099-INT to F for use in
preparation of the 2008 tax return. F did not know that the taxpayer
owned an additional bank account that generated taxable income for
2008, and the taxpayer did not reveal this information to the tax
return preparer notwithstanding F's general inquiry about any other
income. F signed the taxpayer's return as the tax return preparer. F
is not subject to a penalty under section 6694.
Example 3. In preparing a tax return, for purposes of
determining the deductibility of a contribution by an employer for a
qualified pension plan, Accountant G relies on a computation of the
section 404 limit on deductible amounts made by the enrolled actuary
for the plan. On the basis of this calculation, G completed and
signed the tax return. It is later determined that there is an
understatement of liability for tax that resulted from the
overstatement of the section 404 limit on deductible amounts made by
the actuary. G had no reason to believe that the actuary's
calculation of the limit on deductible contributions was incorrect
or incomplete, and the calculation appeared reasonable on its face.
G was also not aware at the time the return was prepared of any
reason why the actuary did not know all of the relevant facts or
that the calculation of the limit on deductible contributions was no
longer reliable due to developments in the law since the time the
calculation was given. G is not subject to a penalty under section
6694. The actuary, however, may be subject to penalty under section
6694 if the calculation provided by the actuary constitutes a
substantial portion of the tax return within the meaning of Sec.
301.7701-15(b)(3) of this chapter.
(f) Income derived (or to be derived) with respect to the return or
claim for refund--(1) In general. For purposes of sections 6694(a) and
(b), income derived (or to be derived) means all compensation the tax
return preparer receives or expects to receive with respect to the
engagement of preparing the return or claim for refund or providing tax
advice (including research and consultation) with respect to the
position(s) taken on the return or claim for refund that gave rise to
the understatement. In the situation of a tax return preparer who is
not compensated directly by the taxpayer, but rather by a firm that
employs the tax return preparer or with which the tax return preparer
is associated, income derived (or to be derived) means all compensation
the tax return preparer receives from the firm that can be reasonably
allocated to the engagement of preparing the return or claim for refund
or providing tax advice (including research and consultation) with
respect to the position(s) taken on the return or claim for refund that
gave rise to the understatement. In the situation where a firm that
employs the individual tax return preparer (or the firm of which the
individual tax return preparer is a partner, member, shareholder, or
other equity holder) is subject to a penalty under section 6694(a) or
(b) pursuant to the provisions
[[Page 78442]]
in Sec. Sec. 1.6694-2(a)(2) or 1.6694-3(a)(2), income derived (or to
be derived) means all compensation the firm receives or expects to
receive with respect to the engagement of preparing the return or claim
for refund or providing tax advice (including research and
consultation) with respect to the position(s) taken on the return or
claim for refund that gave rise to the understatement.
(2) Compensation--(i) Multiple engagements. For purposes of
applying paragraph (f)(1) of this section, if the tax return preparer
or the tax return preparer's firm has multiple engagements related to
the same return or claim for refund, only those engagements relating to
the position(s) taken on the return or claim for refund that gave rise
to the understatement are considered for purposes of calculating the
income derived (or to be derived) with respect to the return or claim
for refund.
(ii) Reasonable allocation. For purposes of applying paragraph
(f)(1) of this section, only compensation for tax advice that is given
with respect to events that have occurred at the time the advice is
rendered and that relates to the position(s) giving rise to the
understatement will be taken into account for purposes of calculating
the section 6694(a) and (b) penalties. If a lump sum fee is received
that includes amounts not taken into account under the preceding
sentence, the amount of income derived will be based on a reasonable
allocation of the lump sum fee between the tax advice giving rise to
the penalty and the advice that does not give rise to the penalty.
(iii) Fee refunds. For purposes of applying paragraph (f)(1) of
this section, a refund to the taxpayer of all or part of the amount
paid to the tax return preparer or the tax return preparer's firm will
not reduce the amount of the section 6694 penalty assessed. A refund in
this context does not include a discounted fee or alternative billing
arrangement for the services provided.
(iv) Reduction of compensation. For purposes of applying paragraph
(f)(1) of this section, it may be concluded based upon information
provided by the tax return preparer or the tax return preparer's firm
that an appropriate allocation of compensation attributable to the
position(s) giving rise to the understatement on the return or claim
for refund is less than the total amount of compensation associated
with the engagement. For example, the number of hours of the engagement
spent on the position(s) giving rise to the understatement may be less
than the total hours associated with the engagement. If this is
concluded, the amount of the penalty will be calculated based upon the
compensation attributable to the position(s) giving rise to the
understatement. Otherwise, the total amount of compensation from the
engagement will be the amount of income derived for purposes of
calculating the penalty under section 6694.
(3) Individual and firm allocation. If both an individual within a
firm and a firm that employs the individual (or the firm of which the
individual is a partner, member, shareholder, or other equity holder)
are subject to a penalty under section 6694(a) or (b) pursuant to the
provisions in Sec. Sec. 1.6694-2(a)(2) or 1.6694-3(a)(2), the amount
of penalties assessed against the individual and the firm shall not
exceed 50 percent of the income derived (or to be derived) by the firm
from the engagement of preparing the return or claim for refund or
providing tax advice (including research and consultation) with respect
to the position(s) taken on the return or claim for refund that gave
rise to the understatement. The portion of the total amount of the
penalty assessed against the individual tax return preparer shall not
exceed 50 percent of the individual's compensation as determined under
paragraphs (f)(1) and (2) of this section.
(4) Examples. The provisions of this paragraph (f) are illustrated
by the following examples:
Example 1. Signing Tax Return Preparer H is engaged by a
taxpayer and paid a total of $21,000. Of this amount, $20,000
relates to research and consultation regarding a transaction that is
later reported on a return, and $1,000 for the activities relating
to the preparation of the return. Based on H's hourly rates, a
reasonable allocation of the amount of compensation related to the
advice rendered prior to the occurrence of events that are the
subject of the advice is $5,000. The remaining compensation of
$16,000 is considered to be compensation related to the advice
rendered after the occurrence of events that are the subject of the
advice and return preparation. The income derived by H with respect
to the return for purposes of computing the penalty under section
6694(a) is $16,000, and the amount of the penalty imposed under
section 6694(a) is $8,000.
Example 2. Accountants I, J, and K are employed by Firm L. I is
a principal manager of Firm L and provides corporate tax advice for
the taxpayer after all events have occurred subject to an engagement
for corporate tax advice. J provides international tax advice for
the taxpayer after all events have occurred subject to a different
engagement for international tax advice. K prepares and signs the
taxpayer's return under a general tax services engagement. I's
advice is the source of an understatement on the return and the
advice constitutes preparation of a substantial portion of the
return within the meaning of Sec. 301.7701-15(b) of this chapter. I
is the nonsigning tax return preparer within the firm with overall
supervisory responsibility for the position on the taxpayer's return
giving rise to an understatement. Thus, I is the tax return preparer
who is primarily responsible for the position on the taxpayer's
return giving rise to the understatement. Because K's signature as
the signing tax return preparer is on the return, the IRS advises K
that K may be subject to the section 6694(a) penalty against K to
the understatement. K provides credible information that I is the
tax return preparer with primary responsibility for the position
that gave rise to the understatement. The IRS, therefore, assesses
the section 6694 penalty against I. The portion of the total amount
of the penalty allocable to I does not exceed 50 percent of that
part of I's compensation that is attributable to the corporate tax
advice engagement. In the event that Firm L is also liable under the
provisions in Sec. 1.6694-2(a)(2), the IRS assesses the section
6694 penalty in an amount not exceeding 50 percent of Firm L's firm
compensation based on the engagement relating to the corporate tax
advice services provided by I where there is no applicable reduction
in compensation pursuant to Sec. 1.6694-1(f)(2)(iii).
Example 3. Same facts as Example 2, except that I provides the
advice on the corporate matter when the events have not yet
occurred. I's advice is the cause of an understatement position on
the return, but I is not a tax return preparer pursuant to Sec.
301.7701-15(b)(2) or (3) of this chapter. K is not limited to
reliance on persons who provide post-transactional advice if such
reliance is reasonable and in good faith. Further, K has reasonable
cause because K relied on I for the advice on the corporate tax
matter. I, K and Firm L are not liable for the section 6694 penalty.
Example 4. Attorney M is an employee of Firm N with a salary of
$75,000 per year. M performs tax preparation work for Client O.
Client O's return contains a position that results in an
understatement subject to the section 6694 penalty. M spent 100
hours on the position (out of a total 2,000 billed during the year).
The total fees earned by Firm N with respect to the position
reflected on Client O's return are $50,000. If M is subject to the
penalty, the penalty amount computed under the 50 percent of income
standard is .5 x (100/2,000) x $75,000 = $1,875. If Firm N is
subject to the penalty, the penalty amount computed under the 50% of
income standard is .5 x $50,000 = $25,000, less any penalty amount
imposed against M. If a penalty of $1,875 was assessed against M and
Firm N was subject to the penalty, a penalty of $23,125 would be the
amount of penalty assessed against Firm N.
(g) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 7. Section 1.6694-2 is revised to read as follows:
Sec. 1.6694-2 Penalty for understatement due to an unreasonable
position.
(a) In general--(1) Proscribed conduct. Except as otherwise
provided in this
[[Page 78443]]
section, a tax return preparer is liable for a penalty under section
6694(a) equal to the greater of $1,000 or 50 percent of the income
derived (or to be derived) by the tax return preparer for any return or
claim for refund that it prepares that results in an understatement of
liability due to a position if the tax return preparer knew (or
reasonably should have known) of the position and either--
(i) The position is with respect to a tax shelter (as defined in
section 6662(d)(2)(C)(ii)) or a reportable transaction to which section
6662A applies, and it was not reasonable to believe that the position
would more likely than not be sustained on its merits;
(ii) The position was not disclosed as provided in this section,
the position is not with respect to a tax shelter (as defined in
section 6662(d)(2)(C)(ii)) or a reportable transaction to which section
6662A applies, and there was not substantial authority for the
position; or
(iii) The position (other than a position with respect to a tax
shelter or a reportable transaction to which section 6662A applies) was
disclosed as provided in this section but there was no reasonable basis
for the position.
(2) Special rule for corporations, partnerships, and other firms. A
firm that employs a tax return preparer subject to a penalty under
section 6694(a) (or a firm of which the individual tax return preparer
is a partner, member, shareholder or other equity holder) is also
subject to penalty if, and only if--
(i) One or more members of the principal management (or principal
officers) of the firm or a branch office participated in or knew of the
conduct proscribed by section 6694(a);
(ii) The corporation, partnership, or other firm entity failed to
provide reasonable and appropriate procedures for review of the
position for which the penalty is imposed; or
(iii) The corporation, partnership, or other firm entity
disregarded its reasonable and appropriate review procedures through
willfulness, recklessness, or gross indifference (including ignoring
facts that would lead a person of reasonable prudence and competence to
investigate or ascertain) in the formulation of the advice, or the
preparation of the return or claim for refund, that included the
position for which the penalty is imposed.
(b) Reasonable to believe that the position would more likely than
not be sustained on its merits--(1) In general. If a position is with
respect to a tax shelter (as defined in section 6662(d)(2)(C)(ii)) or a
reportable transaction to which section 6662A applies, it is
``reasonable to believe that a position would more likely than not be
sustained on its merits'' if the tax return preparer analyzes the
pertinent facts and authorities and, in reliance upon that analysis,
reasonably concludes in good faith that the position has a greater than
50 percent likelihood of being sustained on its merits. In reaching
this conclusion, the possibility that the position will not be
challenged by the Internal Revenue Service (IRS) (for example, because
the taxpayer's return may not be audited or because the issue may not
be raised on audit) is not to be taken into account. The analysis
prescribed by Sec. 1.6662-4(d)(3)(ii) (or any successor provision) for
purposes of determining whether substantial authority is present
applies for purposes of determining whether the more likely than not
standard is satisfied. Whether a tax return preparer meets this
standard will be determined based upon all facts and circumstances,
including the tax return preparer's diligence. In determining the level
of diligence in a particular situation, the tax return preparer's
experience with the area of Federal tax law and familiarity with the
taxpayer's affairs, as well as the complexity of the issues and facts,
will be taken into account. A tax return preparer may reasonably
believe that a position more likely than not would be sustained on its
merits despite the absence of other types of authority if the position
is supported by a well-reasoned construction of the applicable
statutory provision. For purposes of determining whether it is
reasonable to believe that the position would more likely than not be
sustained on the merits, a tax return preparer may rely in good faith
without verification upon information furnished by the taxpayer and
information and advice furnished by another advisor, another tax return
preparer, or other party (including another advisor or tax return
preparer at the tax return preparer's firm), as provided in Sec. Sec.
1.6694-1(e) and 1.6694-2(e)(5).
(2) Authorities. The authorities considered in determining whether
a position satisfies the more likely than not standard are those
authorities provided in Sec. 1.6662-4(d)(3)(iii) (or any successor
provision).
(3) Written determinations. The tax return preparer may avoid the
section 6694(a) penalty by taking the position that the tax return
preparer reasonably believed that the taxpayer's position satisfies the
``more likely than not'' standard if the taxpayer is the subject of a
``written determination'' as provided in Sec. 1.6662-4(d)(3)(iv)(A).
(4) Taxpayer's jurisdiction. The applicability of court cases to
the taxpayer by reason of the taxpayer's residence in a particular
jurisdiction is not taken into account in determining whether it is
reasonable to believe that the position would more likely than not be
sustained on the merits. Notwithstanding the preceding sentence, the
tax return preparer may reasonably believe that the position would more
likely than not be sustained on the merits if the position is supported
by controlling precedent of a United States Court of Appeals to which
the taxpayer has a right of appeal with respect to the item.
(5) When ``more likely than not'' standard must be satisfied. For
purposes of this section, the requirement that a position satisfies the
``more likely than not'' standard must be satisfied on the date the
return is deemed prepared, as prescribed by Sec. 1.6694-1(a)(2).
(c) [Reserved].
(d) Exception for adequate disclosure of positions with a
reasonable basis--(1) In general. The section 6694(a) penalty will not
be imposed on a tax return preparer if the position taken (other than a
position with respect to a tax shelter or a reportable transaction to
which section 6662A applies) has a reasonable basis and is adequately
disclosed within the meaning of paragraph (c)(3) of this section. For
an exception to the section 6694(a) penalty for reasonable cause and
good faith, see paragraph (d) of this section.
(2) Reasonable basis. For purposes of this section, ``reasonable
basis'' has the same meaning as in Sec. 1.6662-3(b)(3) or any
successor provision of the accuracy-related penalty regulations. For
purposes of determining whether the tax return preparer has a
reasonable basis for a position, a tax return preparer may rely in good
faith without verification upon information furnished by the taxpayer
and information and advice furnished by another advisor, another tax
return preparer, or other party (including another advisor or tax
return preparer at the tax return preparer's firm), as provided in
Sec. Sec. 1.6694-1(e) and 1.6694-2(d)(5).
(3) Adequate disclosure--(i) Signing tax return preparers. In the
case of a signing tax return preparer within the meaning of Sec.
301.7701-15(b)(1) of this chapter, disclosure of a position (other than
a position with respect to a tax shelter or a reportable transaction to
which section 6662A applies) for which there is a reasonable basis but
for which there is not substantial authority is
[[Page 78444]]
adequate if the tax return preparer meets any of the following
standards:
(A) The position is disclosed in accordance with Sec. 1.6662-4(f)
(which permits disclosure on a properly completed and filed Form 8275,
``Disclosure Statement,'' or Form 8275-R, ``Regulation Disclosure
Statement,'' as appropriate, or on the tax return in accordance with
the annual revenue procedure described in Sec. 1.6662-4(f)(2));
(B) The tax return preparer provides the taxpayer with the prepared
tax return that includes the disclosure in accordance with Sec.
1.6662-4(f); or
(C) For returns or claims for refund that are subject to penalties
pursuant to section 6662 other than the accuracy-related penalty
attributable to a substantial understatement of income tax under
section 6662(b)(2) and (d), the tax return preparer advises the
taxpayer of the penalty standards applicable to the taxpayer under
section 6662. The tax return preparer must also contemporaneously
document the advice in the tax return preparer's files.
(ii) Nonsigning tax return preparers. In the case of a nonsigning
tax return preparer within the meaning of Sec. 301.7701-15(b)(2) of
this chapter, disclosure of a position (other than a position with
respect to a tax shelter or a reportable transaction to which section
6662A applies) that satisfies the reasonable basis standard but does
not satisfy the substantial authority standard is adequate if the
position is disclosed in accordance with Sec. 1.6662-4(f) (which
permits disclosure on a properly completed and filed Form 8275 or Form
8275-R, as applicable, or on the return in accordance with an annual
revenue procedure described in Sec. 1.6662-4(f)(2)). In addition,
disclosure of a position is adequate in the case of a nonsigning tax
return preparer if, with respect to that position, the tax return
preparer complies with the provisions of paragraph (c)(3)(ii)(A) or (B)
of this section, whichever is applicable.
(A) Advice to taxpayers. If a nonsigning tax return preparer
provides advice to the taxpayer with respect to a position (other than
a position with respect to a tax shelter or a reportable transaction to
which section 6662A applies) for which there is a reasonable basis but
for which there is not substantial authority, disclosure of that
position is adequate if the tax return preparer advises the taxpayer of
any opportunity to avoid penalties under section 6662 that could apply
to the position, if relevant, and of the standards for disclosure to
the extent applicable. The tax return preparer must also
contemporaneously document the advice in the tax return preparer's
files. The contemporaneous documentation should reflect that the
affected taxpayer has been advised by a tax return preparer in the firm
of the potential penalties and the opportunity to avoid penalty through
disclosure.
(B) Advice to another tax return preparer. If a nonsigning tax
return preparer provides advice to another tax return preparer with
respect to a position (other than a position with respect to a tax
shelter or a reportable transaction to which section 6662A applies) for
which there is a reasonable basis but for which there is not
substantial authority, disclosure of that position is adequate if the
tax return preparer advises the other tax return preparer that
disclosure under section 6694(a) may be required. The tax return
preparer must also contemporaneously document the advice in the tax
return preparer's files. The contemporaneous documentation should
reflect that the tax return preparer outside the firm has been advised
that disclosure under section 6694(a) may be required. If the advice is
to another nonsigning tax return preparer within the same firm,
contemporaneous documentation is satisfied if there is a single
instance of contemporaneous documentation within the firm.
(iii) Requirements for advice. For purposes of satisfying the
disclosure standards of paragraphs (d)(3)(i)(C) and (ii) of this
section, each return position for which there is a reasonable basis but
for which there is not substantial authority must be addressed by the
tax return preparer. The advice to the taxpayer with respect to each
position, therefore, must be particular to the taxpayer and tailored to
the taxpayer's facts and circumstances. The tax return preparer is
required to contemporaneously document the fact that the advice was
provided. There is no general pro forma language or special format
required for a tax return preparer to comply with these rules. A
general disclaimer will not satisfy the requirement that the tax return
preparer provide and contemporaneously document advice regarding the
likelihood that a position will be sustained on the merits and the
potential application of penalties as a result of that position. Tax
return preparers, however, may rely on established forms or templates
in advising clients regarding the operation of the penalty provisions
of the Internal Revenue Code. A tax return preparer may choose to
comply with the documentation standard in one document addressing each
position or in multiple documents addressing all of the positions.
(iv) Pass-through entities. Disclosure in the case of items
attributable to a pass-through entity is adequate if made at the entity
level in accordance with the rules in Sec. 1.6662-4(f)(5) or at the
entity level in accordance with the rules in paragraphs (d)(3)(i) or
(ii) of this section.
(v) Examples. The provisions of paragraph (d)(3) of this section
are illustrated by the following examples:
Example 1. An individual taxpayer hires Accountant R to prepare
its income tax return. A particular position taken on the tax return
does not have substantial authority although there is a reasonable
basis for the position. The position is not with respect to a tax
shelter or a reportable transaction to which section 6662A applies.
R prepares and signs the tax return and provides the taxpayer with
the prepared tax return that includes the Form 8275, ``Disclosure
Statement,'' disclosing the position taken on the tax return. The
individual taxpayer signs and files the tax return without
disclosing the position. The IRS later challenges the position taken
on the tax return, resulting in an understatement of liability. R is
not subject to a penalty under section 6694.
Example 2. Attorney S advises a large corporate taxpayer
concerning the proper treatment of complex entries on the corporate
taxpayer's tax return. S has reason to know that the tax
attributable to the entries is a substantial portion of the tax
required to be shown on the tax return within the meaning of Sec.
301.7701-15(b)(3). When providing the advice, S concludes that one
position does not have substantial authority, although the position
meets the reasonable basis standard. The position is not with
respect to a tax shelter or a reportable transaction to which
section 6662A applies. S advises the corporate taxpayer that the
position lacks substantial authority and the taxpayer may be subject
to an accuracy-related penalty under section 6662 unless the
position is disclosed in a disclosure statement included in the
return. S also documents the fact that this advice was
contemporaneously provided to the corporate taxpayer at the time the
advice was provided. Neither S nor any other attorney within S's
firm signs the corporate taxpayer's return as a tax return preparer,
but the advice by S constitutes preparation of a substantial portion
of the tax return, and S is the individual with overall supervisory
responsibility for the position giving rise to the understatement.
Thus, S is a tax return preparer for purposes of section 6694. S,
however, will not be subject to a penalty under section 6694.
(e) Exception for reasonable cause and good faith. The penalty
under section 6694(a) will not be imposed if, considering all the facts
and circumstances, it is determined that the understatement was due to
reasonable cause and that the tax return preparer acted in good faith.
Factors to consider include:
(1) Nature of the error causing the understatement. The error
resulted from
[[Page 78445]]
a provision that was complex, uncommon, or highly technical, and a
competent tax return preparer of tax returns or claims for refund of
the type at issue reasonably could have made the error. The reasonable
cause and good faith exception, however, does not apply to an error
that would have been apparent from a general review of the return or
claim for refund by the tax return preparer.
(2) Frequency of errors. The understatement was the result of an
isolated error (such as an inadvertent mathematical or clerical error)
rather than a number of errors. Although the reasonable cause and good
faith exception generally applies to an isolated error, it does not
apply if the isolated error is so obvious, flagrant, or material that
it should have been discovered during a review of the return or claim
for refund. Furthermore, the reasonable cause and good faith exception
does not apply if there is a pattern of errors on a return or claim for
refund even though any one error, in isolation, would have qualified
for the reasonable cause and good faith exception.
(3) Materiality of errors. The understatement was not material in
relation to the correct tax liability. The reasonable cause and good
faith exception generally applies if the understatement is of a
relatively immaterial amount. Nevertheless, even an immaterial
understatement may not qualify for the reasonable cause and good faith
exception if the error or errors creating the understatement are
sufficiently obvious or numerous.
(4) Tax return preparer's normal office practice. The tax return
preparer's normal office practice, when considered together with other
facts and circumstances, such as the knowledge of the tax return
preparer, indicates that the error in question would occur rarely and
the normal office practice was followed in preparing the return or
claim for refund in question. Such a normal office practice must be a
system for promoting accuracy and consistency in the preparation of
returns or claims for refund and generally would include, in the case
of a signing tax return preparer, checklists, methods for obtaining
necessary information from the taxpayer, a review of the prior year's
return, and review procedures. Notwithstanding these rules, the
reasonable cause and good faith exception does not apply if there is a
flagrant error on a return or claim for refund, a pattern of errors on
a return or claim for refund, or a repetition of the same or similar
errors on numerous returns or claims for refund.
(5) Reliance on advice of others. For purposes of demonstrating
reasonable cause and good faith, a tax return preparer may rely without
verification upon advice and information furnished by the taxpayer and
information and advice furnished by another advisor, another tax return
preparer or other party, as provided in Sec. 1.6694-1(e). The tax
return preparer may rely in good faith on the advice of, or schedules
or other documents prepared by, the taxpayer, another advisor, another
tax return preparer, or other party (including another advisor or tax
return preparer at the tax return preparer's firm), who the tax return
preparer had reason to believe was competent to render the advice or
other information. The advice or information may be written or oral,
but in either case the burden of establishing that the advice or
information was received is on the tax return preparer. A tax return
preparer is not considered to have relied in good faith if--
(i) The advice or information is unreasonable on its face;
(ii) The tax return preparer knew or should have known that the
other party providing the advice or information was not aware of all
relevant facts; or
(iii) The tax return preparer knew or should have known (given the
nature of the tax return preparer's practice), at the time the return
or claim for refund was prepared, that the advice or information was no
longer reliable due to developments in the law since the time the
advice was given.
(6) Reliance on generally accepted administrative or industry
practice. The tax return preparer reasonably relied in good faith on
generally accepted administrative or industry practice in taking the
position that resulted in the understatement. A tax return preparer is
not considered to have relied in good faith if the tax return preparer
knew or should have known (given the nature of the tax return
preparer's practice), at the time the return or claim for refund was
prepared, that the administrative or industry practice was no longer
reliable due to developments in the law or IRS administrative practice
since the time the practice was developed.
(f) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 8. Section 1.6694-3 is amended by revising paragraphs (a), (c)(2)
and (3), (d), (e), (f), and (g) to read as follows:
Sec. 1.6694-3 Penalty for understatement due to willful, reckless, or
intentional conduct.
(a) In general--(1) Proscribed conduct. A tax return preparer is
liable for a penalty under section 6694(b) equal to the greater of
$5,000 or 50 percent of the income derived (or to be derived) by the
tax return preparer if any part of an understatement of liability for a
return or claim for refund that is prepared is due to--
(i) A willful attempt by a tax return preparer to understate in any
manner the liability for tax on the return or claim for refund; or
(ii) Any reckless or intentional disregard of rules or regulations
by a tax return preparer.
(2) Special rule for corporations, partnerships, and other firms. A
firm that employs a tax return preparer subject to a penalty under
section 6694(b) (or a firm of which the individual tax return preparer
is a partner, member, shareholder or other equity holder) is also
subject to penalty if, and only if--
(i) One or more members of the principal management (or principal
officers) of the firm or a branch office participated in or knew of the
conduct proscribed by section 6694(b);
(ii) The corporation, partnership, or other firm entity failed to
provide reasonable and appropriate procedures for review of the
position for which the penalty is imposed; or
(iii) The corporation, partnership, or other firm entity
disregarded its reasonable and appropriate review procedures through
willfulness, recklessness, or gross indifference (including ignoring
facts that would lead a person of reasonable prudence and competence to
investigate or ascertain) in the formulation of the advice, or the
preparation of the return or claim for refund, that included the
position for which the penalty is imposed.
* * * * *
(c) * * *
(2) A tax return preparer is not considered to have recklessly or
intentionally disregarded a rule or regulation if the position contrary
to the rule or regulation has a reasonable basis as defined in Sec.
1.6694-2(c)(2) and is adequately disclosed in accordance with
Sec. Sec. 1.6694-2(c)(3)(i)(A) or (C) or 1.6694-2(c)(3)(ii). In the
case of a position contrary to a regulation, the position must
represent a good faith challenge to the validity of the regulation and,
when disclosed in accordance with Sec. Sec. 1.6694-2(c)(3)(i)(A) or
(C) or 1.6694-2(c)(3)(ii), the tax return preparer must identify the
regulation being challenged. For purposes of this section, disclosure
on the return in accordance with an annual revenue procedure under
Sec. 1.6662-4(f)(2) is not applicable.
[[Page 78446]]
(3) In the case of a position contrary to a revenue ruling or
notice (other than a notice of proposed rulemaking) published by the
Internal Revenue Service in the Internal Revenue Bulletin, a tax return
preparer also is not considered to have recklessly or intentionally
disregarded the ruling or notice if the position meets the substantial
authority standard described in Sec. 1.6662-4(d) and is not with
respect to a reportable transaction to which section 6662A applies.
(d) Examples. The provisions of paragraphs (b) and (c) of this
section are illustrated by the following examples:
Example 1. A taxpayer provided Preparer T with detailed check
registers reflecting personal and business expenses. One of the
expenses was for domestic help, and this expense was identified as
personal on the check register. T knowingly deducted the expenses of
the taxpayer's domestic help as wages paid in the taxpayer's
business. T is subject to the penalty under section 6694(b).
Example 2. A taxpayer provided Preparer U with detailed check
registers to compute the taxpayer's expenses. U, however, knowingly
overstated the expenses on the return. After adjustments by the
examiner, the tax liability increased significantly. Because U
disregarded information provided in the check registers, U is
subject to the penalty under section 6694(b).
Example 3. Preparer V prepares a taxpayer's return in 2009 and
encounters certain expenses incurred in the purchase of a business.
Final regulations provide that such expenses incurred in the
purchase of a business must be capitalized. One U.S. Tax Court case
decided in 2006 has expressly invalidated that portion of the
regulations. There are no courts that ruled favorably with respect
to the validity of that portion of the regulations and there are no
other authorities existing on the issue. Under these facts, V will
have a reasonable basis for the position as defined in Sec. 1.6694-
2(d)(2) and will not be subject to the section 6694(b) penalty if
the position is adequately disclosed in accordance with paragraph
(c)(2) of this section because the position represents a good faith
challenge to the validity of the regulations.
(e) Rules or regulations. The term rules or regulations includes
the provisions of the Internal Revenue Code (Code), temporary or final
Treasury regulations issued under the Code, and revenue rulings or
notices (other than notices of proposed rulemaking) issued by the
Internal Revenue Service and published in the Internal Revenue
Bulletin.
(f) Section 6694(b) penalty reduced by section 6694(a) penalty. The
amount of any penalty to which a tax return preparer may be subject
under section 6694(b) for a return or claim for refund is reduced by
any amount assessed and collected against the tax return preparer under
section 6694(a) for the same position on a return or claim for refund.
(g) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 9. Section 1.6694-4 is revised to read as follows:
Sec. 1.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. (1) The Internal Revenue Service (IRS) will
investigate the preparation by a tax return preparer of a return of tax
under the Internal Revenue Code (Code) or claim for refund of tax under
the Code as described in Sec. 301.7701-15(b)(4) of this chapter, and
will send a report of the examination to the tax return preparer before
the assessment of either--
(i) A penalty for understating tax liability due to a position for
which either it was not reasonable to believe that the position would
more likely than not be sustained on its merits under section 6694(a)
or no substantial authority, as applicable (or not a reasonable basis
for disclosed positions); or
(ii) A penalty for willful understatement of liability or reckless
or intentional disregard of rules or regulations under section 6694(b).
(2) Unless the period of limitations (if any) under section 6696(d)
may expire without adequate opportunity for assessment, the IRS will
also send, before assessment of either penalty, a 30-day letter to the
tax return preparer notifying him of the proposed penalty or penalties
and offering an opportunity to the tax return preparer to request
further administrative consideration and a final administrative
determination by the IRS concerning the assessment. If the tax return
preparer then makes a timely request, assessment may not be made until
the IRS makes a final administrative determination adverse to the tax
return preparer.
(3) If the IRS assesses either of the two penalties described in
section 6694(a) and section 6694(b), it will send to the tax return
preparer a statement of notice and demand, separate from any notice of
a tax deficiency, for payment of the amount assessed.
(4) Within 30 days after the day on which notice and demand of
either of the two penalties described in section 6694(a) and section
6694(b) is made against the tax return preparer, the tax return
preparer must either--
(i) Pay the entire amount assessed (and may file a claim for refund
of the amount paid at any time not later than 3 years after the date of
payment); or
(ii) Pay an amount which is not less than 15 percent of the entire
amount assessed with respect to each return or claim for refund and
file a claim for refund of the amount paid.
(5) If the tax return preparer pays an amount and files a claim for
refund under paragraph (a)(4)(ii) of this section, the IRS may not
make, begin, or prosecute a levy or proceeding in court for collection
of the unpaid remainder of the amount assessed until the later of--
(i) A date which is more than 30 days after the earlier of--
(A) The day on which the tax return preparer's claim for refund is
denied; or
(B) The expiration of 6 months after the day on which the tax
return preparer filed the claim for refund; and
(ii) Final resolution of any proceeding begun as provided in
paragraph (b) of this section.
(6) The IRS may counterclaim in any proceeding begun as provided in
paragraph (b) of this section for the unpaid remainder of the amount
assessed. Final resolution of a proceeding includes any settlement
between the IRS and the tax return preparer, any final determination by
a court (for which the period for appeal, if any, has expired) and,
generally, the types of determinations provided under section 1313(a)
(relating to taxpayer deficiencies). Notwithstanding section 7421(a)
(relating to suits to restrain assessment or collection), the beginning
of a levy or proceeding in court by the IRS in contravention of
paragraph (a)(5) of this section may be enjoined by a proceeding in the
proper court.
(b) Preparer must bring suit in district court to determine
liability for penalty. The IRS may proceed with collection of the
amount of the penalty not paid under paragraph (a)(4)(ii) of this
section if the preparer fails to begin a proceeding for refund in the
appropriate United States district court within 30 days after the
earlier of--
(1) The day on which the preparer's claim for refund filed under
paragraph (a)(4)(ii) of this section is denied; or
(2) The expiration of 6 months after the day on which the preparer
filed the claim for refund.
(c) Suspension of running of period of limitations on collection.
The running of the period of limitations provided in section 6502 on
the collection by levy or by a proceeding in court of the unpaid amount
of a penalty or penalties described in section 6694(a) or section
6694(b) is suspended for the period during which the IRS, under
paragraph (a)(5) of this section, may not collect the
[[Page 78447]]
unpaid amount of the penalty or penalties by levy or a proceeding in
court.
(d) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 10. Section 1.6695-1 is revised to read as follows:
Sec. 1.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) Failure to furnish copy to taxpayer. (1) A person who is a
signing tax return preparer as described in Sec. 301.7701-15(b)(1) of
this chapter of any return of tax or claim for refund of tax under the
Internal Revenue Code (Code), and who fails to satisfy the requirements
imposed by section 6107(a) and Sec. 1.6107-1(a) to furnish a copy of
the return or claim for refund to the taxpayer (or nontaxable entity),
shall be subject to a penalty of $50 for such failure, with a maximum
penalty of $25,000 per person imposed with respect to each calendar
year, unless it is shown that the failure is due to reasonable cause
and not due to willful neglect.
(2) No penalty may be imposed under section 6695(a) and paragraph
(a)(1) of this section upon a tax return preparer who furnishes a copy
of the return or claim for refund to taxpayers who--
(i) Hold an elected or politically appointed position with the
government of the United States or a state or political subdivision
thereof; and
(ii) In order to faithfully to carry out their official duties,
have so arranged their affairs that they have less than full knowledge
of the property that they hold or of the debts for which they are
responsible, if information is deleted from the copy in order to
preserve or maintain this arrangement.
(b) Failure to sign return. (1) An individual who is a signing tax
return preparer as described in Sec. 301.7701-15(b)(1) of this chapter
with respect to a return of tax or claim for refund of tax under the
Code as described in Sec. 301.7701-15(b)(4) that is not signed
electronically shall sign the return or claim for refund after it is
completed and before it is presented to the taxpayer (or nontaxable
entity) for signature. For rules covering electronically signed
returns, see paragraph (b)(2) of this section. If the signing tax
return preparer is unavailable for signature, another tax return
preparer shall review the entire preparation of the return or claim for
refund, and then shall sign the return or claim for refund. The tax
return preparer shall sign the return in the manner prescribed by the
Commissioner in forms, instructions, or other appropriate guidance.
(2) In the case of electronically signed tax returns, the signing
tax return preparer need not sign the return prior to presenting a
completed copy of the return to the taxpayer. The signing tax return
preparer, however, must furnish all of the information that will be
transmitted as the electronically signed tax return to the taxpayer
contemporaneously with furnishing the Form 8879, ``IRS e-file Signature
Authorization,'' or other similar Internal Revenue Service (IRS) e-file
signature form. The information may be furnished on a replica of an
official form. The signing tax return preparer shall electronically
sign the return in the manner prescribed by the Commissioner in forms,
instructions, or other appropriate guidance.
(3) An individual required by this paragraph (b) to sign a return
or claim for refund shall be subject to a penalty of $50 for each
failure to sign, with a maximum of $25,000 per person imposed with
respect to each calendar year, unless it is shown that the failure is
due to reasonable cause and not due to willful neglect. If the tax
return preparer asserts reasonable cause for failure to sign, the IRS
will require a written statement to substantiate the tax return
preparer's claim of reasonable cause. For purposes of this paragraph
(b), reasonable cause is a cause that arises despite ordinary care and
prudence exercised by the individual tax return preparer.
(4) Examples. The application of this paragraph (b) is illustrated
by the following examples:
Example 1. Law Firm A employs B, a lawyer, to prepare for
compensation estate tax returns and claims for refund of taxes. Firm
A is engaged by C to prepare a Federal estate tax return. Firm A
assigns B to prepare the return. B obtains the information necessary
for completing the return from C and makes determinations with
respect to the proper application of the tax laws to such
information in order to determine the estate's tax liability. B then
forwards such information to D, a computer tax service that performs
the mathematical computations and prints the return by means of
computer processing. D then sends the completed estate tax return to
B who reviews the accuracy of the return. B is the individual tax
return preparer who is primarily responsible for the overall
accuracy of the estate tax return. B must sign the return as tax
return preparer in order to not be subject to the section 6695(b)
penalty.
Example 2. Partnership E is a national accounting firm that
prepares returns and claims for refund of taxes for compensation. F
and G, employees of Partnership E, are involved in preparing the
Form 990-T, Exempt Organization Business Income Tax Return, for H, a
tax exempt organization. After they complete the return, including
the gathering of the necessary information, analyzing the proper
application of the tax laws to such information, and the performance
of the necessary mathematical computations, I, a supervisory
employee of Partnership E, reviews the return. As part of this
review, I reviews the information provided and the application of
the tax laws to this information. The mathematical computations and
carried-forward amounts are reviewed by J, an employee of
Partnership E. The policies and practices of Partnership E require
that K, a partner, finally review the return. The scope of K's
review includes reviewing the information provided and applying to
this information his knowledge of H's affairs, observing that
Partnership E's policies and practices have been followed, and
making the final determination with respect to the proper
application of the tax laws to determine H's tax liability. K may or
may not exercise these responsibilities, or may exercise them to a
greater or lesser extent, depending on the degree of complexity of
the return, his confidence in I (or F and G), and other factors. K
is the individual tax return preparer who is primarily responsible
for the overall accuracy of H's return. K must sign the return as
tax return preparer in order to not be subject to the section
6695(b) penalty.
Example 3. L corporation maintains an office in Seattle,
Washington, for the purpose of preparing partnership returns for
compensation. L makes compensatory arrangements with individuals
(but provides no working facilities) in several states to collect
information from partners of a partnership and to make decisions
with respect to the proper application of the tax laws to the
information in order to prepare the partnership return and calculate
the partnership's distributive items. M, an individual, who has such
an arrangement in Los Angeles with L, collects information from N,
the general partner of a partnership, and completes a worksheet kit
supplied by L that is stamped with M's name and an identification
number assigned to M by L. In this process, M classifies this
information in appropriate categories for the preparation of the
partnership return. The completed worksheet kit signed by M is then
mailed to L. O, an employee in L's office, reviews the worksheet kit
to make sure it was properly completed. O does not review the
information obtained from N for its validity or accuracy. O may, but
did not, make the final decision with respect to the proper
application of tax laws to the information provided. The data from
the worksheet is entered into a computer and the return form is
completed. The return is prepared for submission to N with filing
instructions. M is the individual tax return preparer primarily
responsible for the overall accuracy of the partnership return. M
must sign the return as tax return preparer in order to not be
subject to the section 6695(b) penalty.
Example 4. P employs R, S, and T to prepare gift tax returns for
taxpayers. After R and S have collected the information from a
taxpayer and applied the tax laws to the information, the return
form is completed by
[[Page 78448]]
a computer service. On the day the returns prepared by R and S are
ready for their signatures, R is away from the city for 1 week on
another assignment and S is on detail to another office in the same
city for the day. T may sign the gift tax returns prepared by R,
provided that T reviews the information obtained by R relative to
the taxpayer, and T reviews the preparation of each return prepared
by R. T may not sign the returns prepared by S because S is
available.
(5) Effective/applicability date. This paragraph (b) is applicable
to returns and claims for refund filed after December 31, 2008.
(c) Failure to furnish identifying number. (1) A person who is a
signing tax return preparer as described in Sec. 301.7701-15(b)(1) of
this chapter of any return of tax under the Code or claim for refund of
tax under the Code, and who fails to satisfy the requirement of section
6109(a)(4) and Sec. 1.6109-2(a) to furnish one or more identifying
numbers of signing tax return preparers or persons employing the
signing tax return preparer (or with which the signing tax return
preparer is associated) on a return or claim for refund after it is
completed and before it is presented to the taxpayer (or nontaxable
entity) for signature shall be subject to a penalty of $50 for each
failure, with a maximum of $25,000 per person imposed with respect to
each calendar year, unless it is shown that the failure is due to
reasonable cause and not due to willful neglect.
(2) No more than one penalty of $50 may be imposed under section
6695(c) and paragraph (c)(1) of this section with respect to a single
return or claim for refund.
(d) Failure to retain copy or record. (1) A person who is a signing
tax return preparer as described in Sec. 301.7701-15(b)(1) of this
chapter of any return of tax under the Code or claim for refund of tax
under the Code, and who fails to satisfy the requirements imposed upon
him or her by section 6107(b) and Sec. 1.6107-1(b) and (c) (other than
the record requirement described in both Sec. 1.6107-1(b)(2) and (3))
to retain and make available for inspection a copy of the return or
claim for refund, or to include the return or claim for refund in a
record of returns and claims for refund and make the record available
for inspection, shall be subject to a penalty of $50 for the failure,
unless it is shown that the failure is due to reasonable cause and not
due to willful neglect.
(2) A person may not, for returns or claims for refund presented to
the taxpayers (or nontaxable entities) during each calendar year, be
subject to more than $25,000 in penalties under section 6695(d) and
paragraph (d)(1) of this section.
(e) Failure to file correct information returns. A person who is
subject to the reporting requirements of section 6060 and Sec. 1.6060-
1 and who fails to satisfy these requirements shall pay a penalty of
$50 for each such failure, with a maximum of $25,000 per person imposed
for each calendar year, unless such failure was due to reasonable cause
and not due to willful neglect.
(f) Negotiation of check. (1) No person who is a tax return
preparer as described in Sec. 301.7701-15 of this chapter may endorse
or otherwise negotiate, directly or through an agent, a check
(including an electronic version of a check) for the refund of tax
under the Code that is issued to a taxpayer other than the tax return
preparer if the person was a tax return preparer of the return or claim
for refund which gave rise to the refund check. A tax return preparer
will not be considered to have endorsed or otherwise negotiated a check
for purposes of this paragraph (f)(1) solely as a result of having
affixed the taxpayer's name to a refund check for the purpose of
depositing the check into an account in the name of the taxpayer or in
the joint names of the taxpayer and one or more other persons
(excluding the tax return preparer) if authorized by the taxpayer or
the taxpayer's recognized representative.
(2) Section 6695(f) and paragraphs (f)(1) and (3) of this section
do not apply to a tax return preparer-bank that--
(i) Cashes a refund check and remits all of the cash to the
taxpayer or accepts a refund check for deposit in full to a taxpayer's
account, so long as the bank does not initially endorse or negotiate
the check (unless the bank has made a loan to the taxpayer on the basis
of the anticipated refund); or
(ii) Endorses a refund check for deposit in full to a taxpayer's
account pursuant to a written authorization of the taxpayer (unless the
bank has made a loan to the taxpayer on the basis of the anticipated
refund).
(3) A tax return preparer-bank may also subsequently endorse or
negotiate a refund check as a part of the check-clearing process
through the financial system after initial endorsement or negotiation.
(4) The tax return preparer shall be subject to a penalty of $500
for each endorsement or negotiation of a check prohibited under section
6695(f) and paragraph (f)(1) of this section.
(g) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 11. Section 1.6695-2 is amended by revising the section heading
and paragraphs (a), (b)(3), (c) and (d) to read as follows:
Sec. 1.6695-2 Tax return preparer due diligence requirements for
determining earned income credit eligibility.
(a) Penalty for failure to meet due diligence requirements. A
person who is a signing tax return preparer of a tax return or claim
for refund under the Internal Revenue Code with respect to determining
the eligibility for, or the amount of, the earned income credit (EIC)
under section 32 and who fails to satisfy the due diligence
requirements of paragraph (b) of this section will be subject to a
penalty of $100 for each such failure.
(b) * * *
(3) Knowledge--(i) In general. The tax return preparer must not
know, or have reason to know, that any information used by the tax
return preparer in determining the taxpayer's eligibility for, or the
amount of, the EIC is incorrect. The tax return preparer may not ignore
the implications of information furnished to, or known by, the tax
return preparer, and must make reasonable inquiries if the information
furnished to the tax return preparer appears to be incorrect,
inconsistent, or incomplete. A tax return preparer must make reasonable
inquiries if a reasonable and well-informed tax return preparer
knowledgeable in the law would conclude that the information furnished
to the tax return preparer appears to be incorrect, inconsistent, or
incomplete. The tax return preparer must also contemporaneously
document in the files the reasonable inquiries made and the responses
to these inquiries.
(ii) Examples. The provisions of paragraph (b)(3)(i) of this
section are illustrated by the following examples:
Example 1. A 22 year-old taxpayer wants to claim two sons, ages
10 and 11, as qualifying children for purposes of the EIC. Preparer
A must make additional reasonable inquiries regarding the
relationship between the taxpayer and the children as the age of the
taxpayer appears inconsistent with the ages of the children claimed
as sons.
Example 2. An 18 year-old female taxpayer with an infant has
$3,000 in earned income and states that she lives with her parents.
Taxpayer wants to claim the infant as a qualifying child for the
EIC. This information appears incomplete and inconsistent because
the taxpayer lives with her parents and earns very little income.
Preparer B must make additional reasonable inquires to determine if
the taxpayer is the qualifying child of her parents and, therefore,
ineligible to claim the EIC.
Example 3. Taxpayer asks Preparer C to prepare his tax return
and wants to claim his niece and nephew as qualifying children for
the EIC. Preparer C should make reasonable
[[Page 78449]]
inquiries to determine whether the children meet EIC qualifying
child requirements and ensure possible duplicate claim situations
involving the parents or other relatives are properly considered.
Example 4. Taxpayer asks Preparer D to prepare her tax return
and tells D that she has a Schedule C business, that she has two
qualifying children and that she wants to claim the EIC. Taxpayer
indicates that she earned $10,000 from her Schedule C business, but
that she has no expenses. This information appears incomplete
because it is very unlikely that someone who is self-employed has no
business expenses. D must make additional reasonable inquiries
regarding taxpayer's business to determine whether the information
regarding both income and expenses is correct.
(c) Exception to penalty. The section 6695(g) penalty will not be
applied with respect to a particular tax return or claim for refund if
the tax return preparer can demonstrate to the satisfaction of the
Internal Revenue Service that, considering all the facts and
circumstances, the tax return preparer's normal office procedures are
reasonably designed and routinely followed to ensure compliance with
the due diligence requirements of paragraph (b) of this section, and
the failure to meet the due diligence requirements of paragraph (b) of
this section with respect to the particular return or claim for refund
was isolated and inadvertent.
(d) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 12. Section 1.6696-1 is revised to read as follows:
Sec. 1.6696-1 Claims for credit or refund by tax return preparers or
appraisers.
(a) Notice and demand. (1) The Internal Revenue Service (IRS) shall
issue to each tax return preparer or appraiser one or more statements
of notice and demand for payment for all penalties assessed against the
tax return preparer or appraiser under section 6694 and Sec. 1.6694-1,
under section 6695 and Sec. 1.6695-1, or under section 6695A (and any
subsequently issued regulations).
(2) For the definition of the term ``tax return preparer'', see
section 7701(a)(36) and Sec. 301.7701-15 of this chapter. A person who
prepares a claim for credit or refund under this section for another
person, however, is not, with respect to that preparation, a tax return
preparer as defined in section 7701(a)(36) and Sec. 301.7701-15 of
this chapter.
(b) Claim filed by tax return preparer or appraiser. A claim for
credit or refund of a penalty (or penalties) assessed against a tax
return preparer or appraiser under section 6694 and Sec. 1.6694-1,
under section 6695 and Sec. 1.6695-1, or under section 6695A (and any
subsequently issued regulations) may be filed under this section only
by the tax return preparer or the appraiser (or the tax return
preparer's or appraiser's estate) against whom the penalty (or
penalties) is assessed and not by, for example, the tax return
preparer's or appraiser's employer. This paragraph (b) is not intended,
however, to impose any restrictions on the preparation of this claim
for credit or refund. The claim may be prepared by the tax return
preparer's or appraiser's employer or by other persons. In all cases,
however, the claim for credit or refund shall contain the information
specified in paragraph (d) of this section and, as required by
paragraph (d) of this section, shall be verified by a written
declaration by the tax return preparer or appraiser that the
information is provided under penalty of perjury.
(c) Separation and consolidation of claims. (1) Unless paragraph
(c)(2) of this section applies, a tax return preparer shall file a
separate claim for each penalty assessed in each statement of notice
and demand issued to the tax return preparer.
(2) A tax return preparer may file one or more consolidated claims
for any or all penalties imposed on the tax return preparer by a single
IRS campus or office under section 6695(a) and Sec. 1.6695-1(a)
(relating to failure to furnish copy of return to taxpayer), section
6695(b) and Sec. 1.6695-1(b) (relating to failure to sign), section
6695(c) and Sec. 1.6695-1(c) (relating to failure to furnish
identifying number), or under section 6695(d) and Sec. 1.6695-1(d)
(relating to failure to retain copy of return or record), whether the
penalties are asserted on a single or on separate statements of notice
and demand. In addition, a tax return preparer may file one
consolidated claim for any or all penalties imposed on the tax return
preparer by a single IRS campus or office under section 6695(e) and
Sec. 1.6695-1(e) (relating to failure to file correct information
return), which are asserted on a single statement of notice and demand.
(d) Content of claim. Each claim for credit or refund for any
penalty (or penalties) paid by a tax return preparer under section 6694
and Sec. 1.6694-1, or under section 6695 and Sec. 1.6695-1, or paid
by an appraiser under section 6695A (and any subsequently issued
regulations) shall include the following information, verified by a
written declaration by the tax return preparer or appraiser that the
information is provided under penalty of perjury:
(1) The tax return preparer's or appraiser's name.
(2) The tax return preparer's or appraiser's identification number.
If the tax return preparer or appraiser is--
(i) An individual (not described in paragraph (d)(2)(iii) of this
section) who is a citizen or resident of the United States, the tax
return preparer's or appraiser's social security account number (or
such alternative number as may be prescribed by the IRS in forms,
instructions, or other appropriate guidance) shall be provided;
(ii) An individual who is not a citizen or resident of the United
States and also was not employed by another tax return preparer or
appraiser to prepare the document (or documents) with respect to which
the penalty (or penalties) was assessed, the tax return preparer's or
appraiser's employer identification number shall be provided; or
(iii) A person (whether an individual, corporation, or partnership)
that employed one or more persons to prepare the document (or
documents) with respect to which the penalty (or penalties) was
assessed, the tax return preparer's or appraiser's employer
identification number shall be provided.
(3) The tax return preparer's or appraiser's address where the IRS
mailed the statement (or statements) of notice and demand and, if
different, the tax return preparer's or appraiser's address shown on
the document (or documents) with respect to which the penalty (or
penalties) was assessed.
(4)(i) The address of the IRS campus or office that issued the
statement (or statements) of notice and demand for payment of the
penalty (or penalties).
(ii) The date (or dates) and identifying number (or numbers) of the
statement (or statements) of notice and demand.
(5)(i) The identification, by amount, type, and document to which
related, of each penalty included in the claim. Each document referred
to in the preceding sentence shall be identified by the form title or
number, by the taxpayer's (or nontaxable entity's) name and taxpayer
identification number, and by the taxable year to which the document
relates.
(ii) The date (or dates) of payment of the amount (or amounts) of
the penalty (or penalties) included in the claim.
(iii) The total amount claimed.
(6) A statement setting forth in detail--
(i) Each ground upon which each penalty overpayment claim is based;
and
(ii) Facts sufficient to apprise the IRS of the exact basis of each
such claim.
(e) Form for filing claim. Notwithstanding Sec. 301.6402-2(c) of
this
[[Page 78450]]
chapter, Form 6118, ``Claim for Refund of Tax Return Preparer and
Promoter Penalties,'' is the form prescribed for making a claim as
provided in this section with respect to penalties under sections 6694
and 6695. Form 843, Claim for Refund and Request for Abatement, is the
form prescribed for making a claim as provided in this section with
respect to a penalty under section 6695A.
(f) Place for filing claim. A claim filed under this section shall
be filed with the IRS campus or office that issued to the tax return
preparer or appraiser the statement (or statements) of notice and
demand for payment of the penalty (or penalties) included in the claim.
(g) Time for filing claim. (1)(i) Except as provided in section
6694(c)(1) and Sec. 1.6694-4(a)(4)(ii) and (5), and in section 6694(d)
and Sec. 1.6694-1(c):
(A) A claim for a penalty paid by a tax return preparer under
section 6694 and Sec. 1.6694-1, or under section 6695 and Sec.
1.6695-1, or by an appraiser under section 6695A (and any subsequently
issued regulations) shall be filed within three years from the date the
payment was made.
(B) A consolidated claim, permitted under paragraph (c)(2) of this
section, shall be filed within three years from the first date of
payment of any penalty included in the claim.
(ii) For purposes of this paragraph (g)(1), payment is considered
made on the date payment is received by the IRS or, if applicable, on
the date an amount is credited in satisfaction of the penalty.
(2) For purposes of determining whether a claim is timely filed,
the rules under sections 7502 and 7503 and the provisions of Sec. Sec.
1.7502-1, 1.7502-2, and 1.7503-1 apply.
(h) Application of refund to outstanding liability of tax return
preparer or appraiser. The IRS may, within the applicable period of
limitations, credit any amount of an overpayment by a tax return
preparer or appraiser of a penalty (or penalties) paid under section
6694 and Sec. 1.6694-1, under section 6695 and Sec. 1.6695-1, or
under section 6695A (and any subsequently issued regulations) against
any outstanding liability for any tax (or for any interest, additional
amount, addition to the tax, or assessable penalty) owed by the tax
return preparer or appraiser making the overpayment. If a portion of an
overpayment is so credited, only the balance will be refunded to the
tax return preparer or appraiser.
(i) Interest. (1) Section 6611 and Sec. 301.6611-1 of this chapter
apply to the payment by the IRS of interest on an overpayment by a tax
return preparer or appraiser of a penalty (or penalties) paid under
section 6694 and Sec. 1.6694-1, under section 6695 and Sec. 1.6695-1,
or under section 6695A (and any subsequently issued regulations).
(2) Section 6601 and Sec. 301.6601-1 of this chapter apply to the
payment of interest by a tax return preparer or appraiser to the IRS on
any penalty (or penalties) assessed against the tax return preparer
under section 6694 and Sec. 1.6694-1, under section 6695 and Sec.
1.6695-1, or under section 6695A (and any subsequently issued
regulations).
(j) Suits for refund of penalty. (1) A tax return preparer or
appraiser may not maintain a civil action for the recovery of any
penalty paid under section 6694 and Sec. 1.6694-1, under section 6695
and Sec. 1.6695-1, or under section 6695A (and any subsequently issued
regulations), unless the tax return preparer or appraiser has
previously filed a claim for credit or refund of the penalty as
provided in this section (and the court has jurisdiction of the
proceeding). See sections 6694(c) and 7422.
(2)(i) Except as provided in section 6694(c)(2) and Sec. 1.6694-
4(b), the periods of limitation contained in section 6532 and Sec.
301.6532-1 of this chapter apply to a tax return preparer's or
appraiser's suit for the recovery of any penalty paid under section
6694 and Sec. 1.6694-1, under section 6695 and Sec. 1.6695-1, or
under section 6695A (and any subsequently issued regulations).
(ii) The rules under section 7503 and Sec. 301.7503-1 of this
chapter apply to the timely commencement by a tax return preparer or
appraiser of a suit for the recovery of any penalty paid under section
6694 and Sec. 1.6694-1, under section 6695 and Sec. 1.6695-1, or
under section 6695A (and any subsequently issued regulations).
(k) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16,
1954
0
Par. 13. The authority citation for part 20 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 20.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 20.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 20.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 20.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 14. Section 20.6060-1 is added to read as follows:
Sec. 20.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of estate tax under
chapter 11 of subtitle B of the Internal Revenue Code, other than for
the person, at any time during a return period, shall satisfy the
recordkeeping and inspection requirements in the manner stated in Sec.
1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 15. Section 20.6107-1 is added to read as follows:
Sec. 20.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of estate tax under chapter 11 of
subtitle B of the Internal Revenue Code shall furnish a completed copy
of the return or claim for refund to the taxpayer and retain a
completed copy or record in the manner stated in Sec. 1.6107-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 16. Section 20.6109-1 is added to read as follows:
Sec. 20.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each estate tax return or claim for refund prepared
by one or more signing tax return preparers must include the
identifying number of the preparer required by Sec. 1.6695-1(b) of
this chapter to sign the return or claim for refund in the manner
stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 17. Section 20.6694-1 is added to read as follows:
Sec. 20.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of estate tax returns or claims see
Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for
[[Page 78451]]
refund filed, and advice provided, after December 31, 2008.
0
Par. 18. Section 20.6694-2 is added to read as follows:
Sec. 20.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of estate tax under chapter 11 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(a) of the Code in the manner stated in Sec. 1.6694-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 19. Section 20.6694-3 is added to read as follows:
Sec. 20.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of estate tax under chapter 11 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 20. Section 20.6694-4 is added to read as follows:
Sec. 20.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of the period
of collection when a tax return preparer who prepared a return or claim
for refund for estate tax under chapter 11 of subtitle B of the
Internal Revenue Code pays 15 percent of a penalty for understatement
of the taxpayer's liability, and procedural matters relating to the
investigation, assessment and collection of the penalties under
sections 6694(a) and (b), the rules under Sec. 1.6694-4 of this
chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 21. Section 20.6695-1 is added to read as follows:
Sec. 20.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of estate tax under chapter 11 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure
to furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of the Code,
in the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 22. Section 20.6696-1 is added to read as follows:
Sec. 20.6696-1 Claims for credit or refund by tax return preparers or
appraisers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for estate
tax under chapter 11 of subtitle B of the Internal Revenue Code, or by
an appraiser that prepared an appraisal in connection with such a
return or claim for refund under section 6695A, the rules under Sec.
1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 23. Section 20.7701-1 is added to read as follows:
Sec. 20.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954
0
Par. 24. The authority citation for part 25 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 25.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 25.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 25.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 25.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 25. Section 25.6060-1 is added to read as follows:
Sec. 25.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of gift tax under
chapter 12 of subtitle B of the Internal Revenue Code, other than for
the person, at any time during a return period, shall satisfy the
record keeping and inspection requirements in the manner stated in
Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 26. Section 25.6107-1 is added to read as follows:
Sec. 25.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of gift tax under chapter 12 of subtitle
B of the Internal Revenue Code shall furnish a completed copy of the
return or claim for refund to the taxpayer, and retain a completed copy
or record in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 27. Section 25.6109-1 is added to read as follows:
Sec. 25.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each gift tax return or claim for refund prepared
by one or more signing tax return preparers must include the
identifying number of the preparer required by Sec. 1.6695-1(b) of
this chapter to sign the return or claim for refund in the manner
stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 28. Section 25.6694-1 is added to read as follows:
Sec. 25.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of gift tax returns or claims, see
Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 29. Section 25.6694-2 is added to read as follows:
[[Page 78452]]
Sec. 25.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of gift tax under chapter 12 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(a) of the Code in the manner stated in Sec. 1.6694-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 30. Section 25.6694-3 is added to read as follows:
Sec. 25.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of gift tax under chapter 12 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 31. Section 25.6694-4 is added to read as follows:
Sec. 25.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules for the extension of period of collection
when a tax return preparer who prepared a return or claim for refund
for gift tax under chapter 12 of subtitle B of the Internal Revenue
Code pays 15 percent of a penalty for understatement of taxpayer's
liability, and procedural matters relating to the investigation,
assessment and collection of the penalties under section 6694(a) and
(b), the rules under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 32. Section 25.6695-1 is added to read as follows:
Sec. 25.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of gift tax under chapter 12 of subtitle B of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure
to furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of the Code,
in the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 33. Section 25.6696-1 is added to read as follows:
Sec. 25.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for gift tax
under chapter 12 of subtitle B of the Internal Revenue Code, or by an
appraiser that prepared an appraisal in connection with such a return
or claim for refund under section 6695A, the rules under Sec. 1.6696-1
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 34. Section 25.7701-1 is added to read as follows:
Sec. 25.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 26--GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX
REFORM ACT OF 1986
0
Par. 35. The authority citation for part 26 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 26.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 26.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 26.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 26.6695-2 also issued under 26 U.S.C.6695(g). * * *
0
Par. 36. Section 26.6060-1 is added to read as follows:
Sec. 26.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of generation-
skipping transfer tax under chapter 13 of subtitle B of the Internal
Revenue Code, other than for the person, at any time during a return
period, shall satisfy the record keeping and inspection requirements in
the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 37. Section 26.6107-1 is added to read as follows:
Sec. 26.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of generation-skipping transfer tax
under chapter 13 of subtitle B of the Internal Revenue Code shall
furnish a completed copy of the return or claim for refund to the
taxpayer, and retain a completed copy or record in the manner stated in
Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 38. Section 26.6109-1 is added to read as follows:
Sec. 26.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each generation-skipping transfer tax return or
claim for refund prepared by one or more signing tax return preparers
must include the identifying number of the preparer required by Sec.
1.6695-1(b) of this chapter to sign the return or claim for refund in
the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 39. Section 26.6694-1 is added to read as follows:
Sec. 26.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of generation-skipping transfer tax
returns or claims see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for
[[Page 78453]]
refund filed, and advice provided, after December 31, 2008.
0
Par. 40. Section 26.6694-2 is added to read as follows:
Sec. 26.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of generation-skipping transfer tax under chapter
13 of subtitle B of the Internal Revenue Code (Code) shall be subject
to penalties under section 6694(a) of the Code in the manner stated in
Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 41. Section 26.6694-3 is added to read as follows:
Sec. 26.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of generation-skipping transfer tax under chapter
13 of subtitle B of the Internal Revenue Code (Code) shall be subject
to penalties under section 6694(b) of the Code in the manner stated in
Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 42. Section 26.6694-4 is added to read as follows:
Sec. 26.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for generation-skipping transfer tax under chapter 13 of
subtitle B of the Internal Revenue Code pays 15 percent of a penalty
for understatement of taxpayer's liability, and procedural matters
relating to the investigation, assessment and collection of the
penalties under section 6694(a) and (b), the rules under Sec. 1.6694-4
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 43. Section 26.6695-1 is added to read as follows:
Sec. 26.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of generation-skipping transfer tax under chapter
13 of subtitle B of the Internal Revenue Code (Code) shall be subject
to penalties for failure to furnish a copy to the taxpayer under
section 6695(a) of the Code, failure to sign the return under section
6695(b) of the Code, failure to furnish an identification number under
section 6695(c) of the Code, failure to retain a copy or list under
section 6695(d) of the Code, failure to file a correct information
return under section 6695(e) of the Code, and negotiation of a check
under section 6695(f) of the Code, in the manner stated in Sec.
1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 44. Section 26.6696-1 is added to read as follows:
Sec. 26.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for
generation-skipping transfer tax under chapter 13 of subtitle B of the
Internal Revenue Code, or by an appraiser that prepared an appraisal in
connection with such a return or claim for refund under section 6695A,
the rules under Sec. 1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 45. Section 26.7701-1 is added to read as follows:
Sec. 26.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE
SOURCE
0
Par. 46. The authority citation for part 31 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 31.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 31.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 31.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 31.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 47. Section 31.6060-1 is added to read as follows:
Sec. 31.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of employment tax
under chapters 21 through 25 of subtitle C of the Internal Revenue
Code, other than for the person, at any time during a return period,
shall satisfy the recordkeeping and inspection requirements in the
manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 48. Section 31.6107-1 is added to read as follows:
Sec. 31.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of employment tax under chapters 21
through 25 of subtitle C of the Internal Revenue Code shall furnish a
completed copy of the return or claim for refund to the taxpayer and
retain a completed copy or record in the manner stated in Sec. 1.6107-
1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 49. Section 31.6109-2 is added to read as follows:
Sec. 31.6109-2 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each employment tax return or claim for refund of
employment tax under chapters 21 through 25 of subtitle C of the
Internal Revenue Code prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 50. Section 31.6694-1 is added to read as follows:
[[Page 78454]]
Sec. 31.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of employment tax returns or claims
of employment tax under chapters 21 through 25 of subtitle C of the
Internal Revenue Code, see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 51. Section 31.6694-2 is added to read as follows:
Sec. 31.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of employment tax under chapters 21 through 25 of
subtitle C of the Internal Revenue Code (Code) shall be subject to
penalties under section 6694(a) of the Code in the manner stated in
Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 52. Section 31.6694-3 is added to read as follows:
Sec. 31.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of employment tax under chapters 21 through 25 of
subtitle C of the Internal Revenue Code (Code) shall be subject to
penalties under section 6694(b) of the Code in the manner stated in
1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 53. Section 31.6694-4 is added to read as follows:
Sec. 31.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for employment tax under chapters 21 through 25 of subtitle
C of the Internal Revenue Code pays 15 percent of a penalty for
understatement of taxpayer's liability and procedural matters relating
to the investigation, assessment and collection of the penalties under
section 6694(a) and (b), the rules under Sec. 1.6694-4 of this chapter
will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 54. Section 31.6695-1 is added to read as follows:
Sec. 31.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of employment tax under chapters 21 through 25 of
subtitle C of the Internal Revenue Code (Code) shall be subject to
penalties for failure to furnish a copy to the taxpayer under section
6695(a) of the Code, failure to sign the return under section 6695(b)
of the Code, failure to furnish an identification number under section
6695(c) of the Code, failure to retain a copy or list under section
6695(d) of the Code, failure to file a correct information return under
section 6695(e) of the Code, and negotiation of a check under section
6695(f) of the Code, in the manner stated in Sec. 1.6695-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 55. Section 31.6696-1 is added to read as follows:
Sec. 31.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for
employment tax under chapters 21 through 25 of subtitle C of the
Internal Revenue Code, the rules under Sec. 1.6696-1 of this chapter
will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 56. Section 31.7701-1 is added to read as follows:
Sec. 31.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 40--EXCISE TAX PROCEDURAL REGULATIONS
0
Par. 57. The authority citation for part 40 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 40.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 40.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 40.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 40.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 58. Section 40.6060-1 is added to read as follows:
Sec. 40.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of excise tax of any
tax to which this part 40 applies other than for the person, at any
time during a return period, shall satisfy the recordkeeping and
inspection requirements in the manner stated in Sec. 1.6060-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 59. Section 40.6107-1 is added to read as follows:
Sec. 40.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of excise tax of any tax to which this
part 40 applies shall furnish a completed copy of the return or claim
for refund to the taxpayer and retain a completed copy or record in the
manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 60. Section 40.6109-1 is added to read as follows:
Sec. 40.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each return or claim for refund of excise tax of
any tax to which this part 40 applies prepared by one or more signing
tax return preparers must include the identifying number of the
preparer required by Sec. 1.6695-1(b) of this chapter to sign the
return or claim for refund in the manner stated in Sec. 1.6109-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 61. Section 40.6694-1 is added to read as follows:
[[Page 78455]]
Sec. 40.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of returns or claims for refund of
excise tax of any tax to which this part 40 applies, see Sec. 1.6694-1
of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 62. Section 40.6694-2 is added to read as follows:
Sec. 40.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax of any tax to which this part 40
applies shall be subject to penalties under section 6694(a) in the
manner stated in Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 63. Section 40.6694-3 is added to read as follows:
Sec. 40.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of return or
claim for refund of excise tax of any tax to which this part 40 applies
shall be subject to penalties under section 6694(b) in the manner
stated in Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 64. Section 40.6694-4 is added to read as follows:
Sec. 40.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared return or claim for
refund of excise tax of any tax to which this part 40 applies pays 15
percent of a penalty for understatement of taxpayer's liability and
procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 65. Section 40.6695-1 is added to read as follows:
Sec. 40.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of return or
claim for refund of excise tax of any tax to which this part 40 applies
shall be subject to penalties for failure to furnish a copy to the
taxpayer under section 6695(a) of the Code, failure to sign the return
under section 6695(b) of the Code, failure to furnish an identification
number under section 6695(c), failure to retain a copy or list under
section 6695(d), failure to file a correct information return under
section 6695(e), and negotiation of a check under section 6695(f), in
the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 66. Section 40.6696-1 is added to read as follows:
Sec. 40.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. The rules under Sec. 1.6696-1 of this chapter will
apply for claims for credit or refund by a tax return preparer who
prepared a return or claim for refund of excise tax of any tax to which
this part 40 applies.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 67. Section 40.7701-1 is added to read as follows:
Sec. 40.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 41--EXCISE TAX ON USE OF CERTAIN HIGHWAY MOTOR VEHICLES
0
Par. 68. The authority citation for part 41 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 41.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 41.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 41.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 41.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 69. Section 41.6060-1 is added to read as follows:
Sec. 41.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of excise tax under
section 4481, other than for the person, at any time during a return
period, shall satisfy the record keeping and inspection requirements in
the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 70. Section 41.6107-1 is added to read as follows:
Sec. 41.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of excise tax under section 4481 shall
furnish a completed copy of the return or claim for refund to the
taxpayer and retain a completed copy or record in the manner stated in
Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 71. Section 41.6109-2 is added to read as follows:
Sec. 41.6109-2 Tax return preparers furnishing identifying numbers
for returns or claims for refund filed after December 31, 2008.
(a) In general. Each excise tax return or claim for refund under
section 4481 prepared by one or more signing tax return preparers must
include the identifying number of the preparer required by Sec.
1.6695-1(b) of this chapter to sign the return or claim for refund in
the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 72. Section 41.6694-1 is added to read as follows:
Sec. 41.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund,
see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
[[Page 78456]]
0
Par. 73. Section 41.6694-2 is added to read as follows:
Sec. 41.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 shall be subject
to penalties under section 6694(a) in the manner stated in Sec.
1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 74. Section 41.6694-3 is added to read as follows:
Sec. 41.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 shall be subject
to penalties under section 6694(b) in the manner stated in Sec.
1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 75. Section 41.6694-4 is added to read as follows:
Sec. 41.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for excise tax under section 4481 pays 15 percent of a
penalty for understatement of taxpayer's liability, and procedural
matters relating to the investigation, assessment and collection of the
penalties under section 6694(a) and (b), the rules under Sec. 1.6694-4
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 76. Section 41.6695-1 is added to read as follows:
Sec. 41.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 shall be subject
to penalties for failure to furnish a copy to the taxpayer under
section 6695(a), failure to sign a return under section 6695(b),
failure to furnish an identification number under section 6695(c),
failure to retain a copy or list under section 6695(d), failure to file
a correct information return under section 6695(e) of the Code, and
negotiation of a check under section 6695(f), in the manner stated in
Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 77. Section 41.6696-1 is added to read as follows:
Sec. 41.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for excise
tax under section 4481, the rules under Sec. 1.6696-1 of this chapter
will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 78. Section 41.7701-1 is added to read as follows:
Sec. 41.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 44--TAXES ON WAGERING; EFFECTIVE JANUARY 1, 1955
0
Par. 79. The authority citation for part 44 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 44.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 44.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 44.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 44.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 80. Section 44.6060-1 is added to read as follows:
Sec. 44.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of tax on wagers
under sections 4401 or 4411, other than for the person, at any time
during a return period, shall satisfy the record keeping and inspection
requirements in the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 81. Section 44.6107-1 is added to read as follows:
Sec. 44.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax on wagers under sections 4401 or
4411 shall furnish a completed copy of the return or claim for refund
to the taxpayer, and retain a completed copy or record in the manner
stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 82. Section 44.6109-1 is added to read as follows:
Sec. 44.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund of tax under
sections 4401 or 4411 prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
0
Par. 83. Section 44.6694-1 is added to read as follows:
Sec. 44.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of wagering tax returns or claims for
refund under sections 4401 or 4411, see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 84. Section 44.6694-2 is added to read as follows:
Sec. 44.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 shall
be subject to penalties under section 6694(a) in the manner stated in
Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and
[[Page 78457]]
claims for refund filed, and advice provided, after December 31, 2008.
0
Par. 85. Section 44.6694-3 is added to read as follows:
Sec. 44.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 shall
be subject to penalties under section 6694(b) in the manner stated in
Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 86. Section 44.6694-4 is added to read as follows:
Sec. 44.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for tax on wagers under sections 4401 or 4411 pays 15
percent of a penalty for understatement of taxpayer's liability and
procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 87. Section 44.6695-1 is added to read as follows:
Sec. 44.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 shall
be subject to penalties for failure to furnish a copy to the taxpayer
under section 6695(a), failure to sign the return under section
6695(b), failure to furnish an identification number under section
6695(c), failure to retain a copy or list under section 6695(d),
failure to file a correct information return under section 6695(e), and
negotiation of a check under section 6695(f), in the manner stated in
Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 88. Section 44.6696-1 is added to read as follows:
Sec. 44.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax on
wagers under sections 4401 or 4411, the rules under Sec. 1.6696-1 of
this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 89. Section 44.7701-1 is added to read as follows:
Sec. 44.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 53--FOUNDATION AND SIMILAR EXCISE TAXES
0
Par. 90. The authority citation for part 53 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 53.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 53.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 53.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 53.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 91. Section 53.6060-1 is added to read as follows:
Sec. 53.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of tax under Chapter
42 of the Internal Revenue Code, other than for the person, at any time
during a return period, shall satisfy the record keeping and inspection
requirements in the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 92. Section 53.6107-1 is added to read as follows:
Sec. 53.6107-1 Tax return preparer must furnish copy of return or
claim for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under Chapter 42 of the Internal
Revenue Code shall furnish a completed copy of the return or claim for
refund to the taxpayer and retain a completed copy or record in the
manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 93. Section 53.6109-1 is added to read as follows:
Sec. 53.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund filed.
(a) In general. Each tax return or claim for refund under Chapter
42 of the Internal Revenue Code prepared by one or more signing tax
return preparers must include the identifying number of the preparer
required by Sec. 1.6695-1(b) of this chapter to sign the return or
claim for refund in the manner stated in Sec. 1.6109-2 of this
chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 94. Section 53.6694-1 is added to read as follows:
Sec. 53.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
under Chapter 42 of the Internal Revenue Code, see Sec. 1.6694-1 of
this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 95. Section 53.6694-2 is added to read as follows:
Sec. 53.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under Chapter 42 of the Internal Revenue
Code (Code) shall be subject to penalties under section 6694(a) of the
Code in the manner stated in Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 96. Section 53.6694-3 is added to read as follows:
Sec. 53.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under Chapter 42 of the
[[Page 78458]]
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 97. Section 53.6694-4 is added to read as follows:
Sec. 53.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund of tax under Chapter 42 of the Internal Revenue Code pays 15
percent of a penalty for understatement of taxpayer's liability and
procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 98. Section 53.6695-1 is added to read as follows:
Sec. 53.6695-1 Other assessable penalties with respect to the
preparation of tax returns or claims for refund for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under Chapter 42 of the Internal Revenue
Code (Code) shall be subject to penalties for failure to furnish a copy
to the taxpayer under section 6695(a) of the Code, failure to sign the
return under section 6695(b) of the Code, failure to furnish an
identification number under section 6695(c) of the Code, failure to
retain a copy or list under section 6695(d) of the Code, failure to
file a correct information return under section 6695(e) of the Code,
and negotiation of a check under section 6695(f) of the Code, in the
manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 99. Section 53.6696-1 is added to read as follows:
Sec. 53.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax under
Chapter 42 of the Internal Revenue Code, the rules under Sec. 1.6696-1
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 100. Section 53.7701-1 is added to read as follows:
Sec. 53.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 54--PENSION EXCISE TAXES
0
Par. 101. The authority citation for part 54 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 54.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 54.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 54.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 54.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 102. Section 54.6060-1 is added to read as follows:
Sec. 54.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund under Chapter 43 of
subtitle D of the Internal Revenue Code, other than for the person, at
any time during a return period, shall satisfy the record keeping and
inspection requirements in the manner stated in Sec. 1.6060-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 103. Section 54.6107-1 is added to read as follows:
Sec. 54.6107-1 Tax return preparer must furnish copy of return or
claims for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under Chapter 43 of subtitle D of
the Internal Revenue Code, shall furnish a completed copy of the return
or claim for refund to the taxpayer, and retain a completed copy or
record in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 104. Section 54.6109-1 is added to read as follows:
Sec. 54.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund filed.
(a) In general. Each tax return or claim for refund of tax under
Chapter 43 of subtitle D prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 105. Section 54.6694-1 is added to read as follows:
Sec. 54.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
of tax under Chapter 43 of subtitle D, see Sec. 1.6694-1 of this
chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 106. Section 54.6694-2 is added to read as follows:
Sec. 54.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under Chapter 43 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(a) of the Code in the manner stated in Sec. 1.6694-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 107. Section 56.6694-3 is added to read as follows:
Sec. 54.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under chapter 43 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
[[Page 78459]]
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 108. Section 54.6694-4 is added to read as follows:
Sec. 54.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for tax under chapter 43 of subtitle D of the Internal
Revenue Code pays 15 percent of a penalty for understatement of
taxpayer's liability, and procedural matters relating to the
investigation, assessment and collection of the penalties under section
6694(a) and (b), the rules under Sec. 1.6694-4 of this chapter will
apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 109. Section 54.6695-1 is added to read as follows:
Sec. 54.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under chapter 43 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure
to furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of the Code,
in the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 110. Section 54.6696-1 is added to read as follows:
Sec. 54.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for excise
tax under chapter 43 of subtitle D of the Internal Revenue Code, the
rules under Sec. 1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 111. Section 54.7701-1 is added to read as follows:
Sec. 54.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 55--EXCISE TAX ON REAL ESTATE INVESTMENT TRUSTS AND REGULATED
INVESTMENT COMPANIES
0
Par. 112. The authority citation for part 55 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 55.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 55.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 55.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 55.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 113. Section 55.6060-1 is added to read as follows:
Sec. 55.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund under chapter 44 of
subtitle D of the Internal Revenue Code, other than for the person, at
any time during a return period, shall satisfy the record keeping and
inspection requirements in the manner stated in Sec. 1.6060-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 114. Section 55.6107-1 is added to read as follows:
Sec. 55.6107-1 Tax return preparer must furnish copy of return or
claim for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under Chapter 44 of subtitle D of
the Internal Revenue Code shall furnish a completed copy of the return
or claim for refund to the taxpayer, and retain a completed copy or
record in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 115. Section 55.6109-1 is added to read as follows:
Sec. 55.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund of tax under
chapter 44 of Subtitle D prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 116. Section 55.6694-1 is added to read as follows:
Sec. 55.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
of tax under chapter 44 of Subtitle D see Sec. 1.6694-1 of this
chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 117. Section 55.6694-2 is added to read as follows:
Sec. 55.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under chapter 44 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(a) of the Code in the manner stated in Sec. 1.6694-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 118. Section 55.6694-3 is added to read as follows:
Sec. 55.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under chapter 44 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and
[[Page 78460]]
claims for refund filed, and advice provided, after December 31, 2008.
0
Par. 119. Section 55.6694-4 is added to read as follows:
Sec. 55.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for excise tax under chapter 44 of subtitle D of the
Internal Revenue Code pays 15 percent of a penalty for understatement
of taxpayer's liability and procedural matters relating to the
investigation, assessment and collection of the penalties under section
6694(a) and (b), the rules under Sec. 1.6694-4 of this chapter will
apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 120. Section 55.6695-1 is added to read as follows:
Sec. 55.6695-1 Other assessable penalties with respect to the
preparation of tax returns or claims for refund for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under chapter 44 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure
to furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of the Code,
in the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 121. Section 55.6696-1 is added to read as follows:
Sec. 55.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax under
chapter 44 of subtitle D of the Internal Revenue Code, the rules under
Sec. 1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 122. Section 55.7701-1 is added to read as follows:
Sec. 55.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 56--PUBLIC CHARITY EXCISE TAXES
0
Par. 123. The authority citation for part 56 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 56.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 56.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 56.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 56.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 124. Section 56.6060-1 is added to read as follows:
Sec. 56.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of tax under chapter
41 of subtitle D of the Internal Revenue Code, other than for the
person, at any time during a return period, shall satisfy the record
keeping and inspection requirements in the manner stated in Sec.
1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 125. Section 56.6107-1 is added to read as follows:
Sec. 56.6107-1 Tax return preparer must furnish copy of return and
claim for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under Chapter 41 of subtitle D of
the Internal Revenue Code shall furnish a completed copy of the return
or claim for refund to the public charity and retain a completed copy
or record in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 126. Section 56.6109-1 is added to read as follows:
Sec. 56.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund for tax under
chapter 41 of subtitle D prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 127. Section 56.6694-1 is added to read as follows:
Sec. 56.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
of tax under chapter 41 of subtitle D see Sec. 1.6694-1 of this
chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 128. Section 56.6694-2 is added to read as follows:
Sec. 56.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under chapter 41 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(a) of the Code in the manner stated in Sec. 1.6694-2 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 129. Section 56.6694-3 is added to read as follows:
Sec. 56.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under chapter 41 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties under
section 6694(b) of the Code in the manner stated in Sec. 1.6694-3 of
this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
[[Page 78461]]
0
Par. 130. Section 56.6694-4 is added to read as follows:
Sec. 56.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for tax under chapter 41 of subtitle D of the Internal
Revenue Code pays 15 percent of a penalty for understatement of
taxpayer's liability and procedural matters relating to the
investigation, assessment and collection of the penalties under section
6694(a) and (b), the rules under Sec. 1.6694-4 of this chapter will
apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 131. Section 56.6695-1 is added to read as follows:
Sec. 56.6695-1 Other assessable penalties with respect to the
preparation of tax returns or claims for refund for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under chapter 41 of subtitle D of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure
to furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of the Code,
in the manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 132. Section 56.6696-1 is added to read as follows:
Sec. 56.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules relating to claims for credit or refund
by a tax return preparer who prepared a return or claim for refund for
tax under chapter 41 of subtitle D of the Internal Revenue Code, the
rules under Sec. 1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 133. Section 56.7701-1 is added to read as follows:
Sec. 56.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 156--EXCISE TAX ON GREENMAIL
0
Par. 134. The authority citation for part 156 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 156.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 156.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 156.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 156.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 135. Section 156.6060-1 is added to read as follows:
Sec. 156.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund under section 5881 of
the Internal Revenue Code, other than for the person, at any time
during a return period, shall satisfy the record keeping and inspection
requirements in the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 136. Section 156.6107-1 is added to read as follows:
Sec. 156.6107-1 Tax return preparer must furnish copy of return and
claim for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under section 5881 of the
Internal Revenue Code shall furnish a completed copy of the return or
claim for refund to the taxpayer and retain a completed copy or record
in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 137. Section 156.6109-1 is added to read as follows:
Sec. 156.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund for tax under
section 5881 of the Internal Revenue Code prepared by one or more
signing tax return preparers must include the identifying number of the
preparer required by Sec. 1.6695-1(b) of this chapter to sign the
return or claim for refund in the manner stated in Sec. 1.6109-2 of
this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 138. Section 156.6694-1 is added to read as follows:
Sec. 156.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
for tax under section 5881 of the Internal Revenue Code, see Sec.
1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 139. Section 156.6694-2 is added to read as follows:
Sec. 156.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5881 of the Internal Revenue
Code (Code) shall be subject to penalties under section 6694(a) of the
Code in the manner stated in Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 140. Section 156.6694-3 is added to read as follows:
Sec. 156.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5881 of the Internal Revenue
Code (Code) shall be subject to penalties under section 6694(b) of the
Code in the manner stated in Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 141. Section 156.6694-4 is added to read as follows:
[[Page 78462]]
Sec. 156.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for tax under section 5881 of the Internal Revenue Code pays
15 percent of a penalty for understatement of taxpayer's liability and
procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 142. Section 156.6695-1 is added to read as follows:
Sec. 156.6695-1 Other assessable penalties with respect to the
preparation of tax returns or claims for refund for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5881 of the Internal Revenue
Code (Code) shall be subject to penalties for failure to furnish a copy
to the taxpayer under section 6695(a) of the Code, failure to sign the
return under section 6695(b) of the Code, failure to furnish an
identification number under section 6695(c) of the Code, failure to
retain a copy or list under section 6695(d) of the Code, failure to
file a correct information return under section 6695(e) of the Code,
and negotiation of a check under section 6695(f) of the Code, in the
manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 143. Section 156.6696-1 is added to read as follows:
Sec. 156.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax under
section 5881 of the Internal Revenue Code, the rules under Sec.
1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 144. Section 156.7701-1 is added to read as follows:
Sec. 156.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 157--EXCISE TAX ON STRUCTURED SETTLEMENT FACTORING
TRANSACTIONS
0
Par. 145. The authority citation for part 157 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 157.6060-1 also issued under 26 U.S.C. 6060(a). * * *
Section 157.6109-2 also issued under 26 U.S.C. 6109(a). * * *
Section 157.6695-1 also issued under 26 U.S.C. 6695(b). * * *
Section 157.6695-2 also issued under 26 U.S.C. 6695(g). * * *
0
Par. 146. Section 157.6060-1 is added to read as follows:
Sec. 157.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund for tax under section
5891 of the Internal Revenue Code, other than for the person, at any
time during a return period, shall satisfy the record keeping and
inspection requirements in the manner stated in Sec. 1.6060-1 of this
chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 147. Section 157.6107-1 is added to read as follows:
Sec. 157.6107-1 Tax return preparer must furnish copy of return or
claim for refund to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of
any return or claim for refund of tax under section 5891 of the
Internal Revenue Code shall furnish a completed copy of the return or
claim for refund to the taxpayer and retain a completed copy or record
in the manner stated in Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 148. Section 157.6109-1 is added to read as follows:
Sec. 157.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund for tax under
section 5891 of the Internal Revenue Code prepared by one or more
signing tax return preparers must include the identifying number of the
preparer required by Sec. 1.6695-1(b) of this chapter to sign the
return or claim for refund in the manner stated in Sec. 1.6109-2 of
this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed after December 31,
2008.
0
Par. 149. Section 157.6694-1 is added to read as follows:
Sec. 157.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund
for tax under section 5891 of the Internal Revenue Code see Sec.
1.6694-1 of this chapter.
(b) Effective/applicability date. Paragraph (a) of this section is
applicable to returns and claims for refund filed, and advice provided,
after December 31, 2008.
0
Par. 150. Section 157.6694-2 is added to read as follows:
Sec. 157.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5891 of the Internal Revenue
Code (Code) shall be subject to penalties under section 6694(a) of the
Code in the manner stated in Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 151. Section 157.6694-3 is added to read as follows:
Sec. 157.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5891 of the Internal Revenue
Code (Code) shall be subject to penalties under section 6694(b) of the
Code in the manner stated in Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 152. Section 157.6694-4 is added to read as follows:
[[Page 78463]]
Sec. 157.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim
for refund for tax under section 5891 of the Internal Revenue Code pays
15 percent of a penalty for understatement of taxpayer's liability and
procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 153. Section 157.6695-1 is added to read as follows:
Sec. 157.6695-1 Other assessable penalties with respect to the
preparation of tax returns or claims for refund for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax under section 5891 of the Internal Revenue
Code (Code) shall be subject to penalties for failure to furnish a copy
to the taxpayer under section 6695(a) of the Code, failure to sign the
return under section 6695(b) of the Code, failure to furnish an
identification number under section 6695(c) of the Code, failure to
retain a copy or list under section 6695(d) of the Code, failure to
file a correct information return under section 6695(e) of the Code,
and negotiation of a check under section 6695(f) of the Code, in the
manner stated in Sec. 1.6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
0
Par. 154. Section 157.6696-1 is added to read as follows:
Sec. 157.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax under
section 5891 of the Internal Revenue Code, the rules under Sec.
1.6696-1 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
0
Par. 155. Section 157.7701-1 is added to read as follows:
Sec. 157.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 301--PROCEDURE AND ADMINISTRATION
0
Par. 156. The authority citation for part 301 continues to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 157. Section 301.7701-15 is amended to read as follows:
Sec. 301.7701-15 Tax return preparer.
(a) In general. A tax return preparer is any person who prepares
for compensation, or who employs one or more persons to prepare for
compensation, all or a substantial portion of any return of tax or any
claim for refund of tax under the Internal Revenue Code (Code).
(b) Definitions--(1) Signing tax return preparer. A signing tax
return preparer is the individual tax return preparer who has the
primary responsibility for the overall substantive accuracy of the
preparation of such return or claim for refund.
(2) Nonsigning tax return preparer--(i) In general. A nonsigning
tax return preparer is any tax return preparer who is not a signing tax
return preparer but who prepares all or a substantial portion of a
return or claim for refund within the meaning of paragraph (b)(3) of
this section with respect to events that have occurred at the time the
advice is rendered. In determining whether an individual is a
nonsigning tax return preparer, time spent on advice that is given
after events have occurred that represents less than 5 percent of the
aggregate time incurred by such individual with respect to the
position(s) giving rise to the understatement shall not be taken into
account. Notwithstanding the preceding sentence, time spent on advice
before the events have occurred will be taken into account if all facts
and circumstances show that the position(s) giving rise to the
understatement is primarily attributable to the advice, the advice was
substantially given before events occurred primarily to avoid treating
the person giving the advice as a tax return preparer, and the advice
given before events occurred was confirmed after events had occurred
for purposes of preparing a tax return. Examples of nonsigning tax
return preparers are tax return preparers who provide advice (written
or oral) to a taxpayer (or to another tax return preparer) when that
advice leads to a position or entry that constitutes a substantial
portion of the return within the meaning of paragraph (b)(3) of this
section.
(ii) Examples. The provisions of this paragraph (b)(2) are
illustrated by the following examples:
Example 1. Attorney A, an attorney in a law firm, provides legal
advice to a large corporate taxpayer regarding a completed corporate
transaction. The advice provided by A is directly relevant to the
determination of an entry on the taxpayer's return, and this advice
leads to a position(s) or entry that constitutes a substantial
portion of the return. A, however, does not prepare any other
portion of the taxpayer's return and is not the signing tax return
preparer of this return. A is considered a nonsigning tax return
preparer.
Example 2. Attorney B, an attorney in a law firm, provides legal
advice to a large corporate taxpayer regarding the tax consequences
of a proposed corporate transaction. Based upon this advice, the
corporate taxpayer enters into the transaction. Once the transaction
is completed, the corporate taxpayer does not receive any additional
advice from B with respect to the transaction. B did not provide
advice with respect to events that have occurred and is not
considered a tax return preparer.
Example 3. The facts are the same as Example 2, except that
Attorney B provides supplemental advice to the corporate taxpayer on
a phone call after the transaction is completed. Attorney B did not
provide advice before the corporate transaction occurred with the
primary intent to avoid being treated as a tax return preparer. The
time incurred on this supplemental advice by B represented less than
5 percent of the aggregate amount of time spent by B providing tax
advice on the position. B is not considered a tax return preparer.
(3) Substantial portion. (i) Only a person who prepares all or a
substantial portion of a return or claim for refund shall be considered
to be a tax return preparer of the return or claim for refund. A person
who renders tax advice on a position that is directly relevant to the
determination of the existence, characterization, or amount of an entry
on a return or claim for refund will be regarded as having prepared
that entry. Whether a schedule, entry, or other portion of a return or
claim for refund is a substantial portion is determined based upon
whether the person knows or reasonably should know that the tax
attributable to the schedule, entry, or other portion of a return or
claim for refund is a substantial portion of the tax required to be
shown on the return or claim for refund. A single tax entry may
[[Page 78464]]
constitute a substantial portion of the tax required to be shown on a
return. Factors to consider in determining whether a schedule, entry,
or other portion of a return or claim for refund is a substantial
portion include but are not limited to--
(A) the size and complexity of the item relative to the taxpayer's
gross income; and
(B) the size of the understatement attributable to the item
compared to the taxpayer's reported tax liability.
(ii)(A) For purposes of applying the rules of paragraph (b)(3)(i)
of this section to a nonsigning tax return preparer within the meaning
of paragraph (b)(2) of this section only, the schedule or other portion
is not considered to be a substantial portion if the schedule, entry,
or other portion of the return or claim for refund involves amounts of
gross income, amounts of deductions, or amounts on the basis of which
credits are determined that are--
(1) Less than $10,000; or
(2) Less than $400,000 and also less than 20 percent of the gross
income as shown on the return or claim for refund (or, for an
individual, the individual's adjusted gross income).
(B) If more than one schedule, entry or other portion is involved,
all schedules, entries or other portions shall be aggregated in
applying the de minimis rule in paragraph (b)(3)(ii)(A) of this
section.
(C) The de minimis rule in paragraph (b)(3)(ii)(A) of this section
shall not apply to a signing tax return preparer within the meaning of
paragraph (b)(1) of this section.
(iii) A tax return preparer with respect to one return is not
considered to be a tax return preparer of another return merely because
an entry or entries reported on the first return may affect an entry
reported on the other return, unless the entry or entries reported on
the first return are directly reflected on the other return and
constitute a substantial portion of the other return. For example, the
sole preparer of a partnership return of income or small business
corporation income tax return is considered a tax return preparer of a
partner's or a shareholder's return if the entry or entries on the
partnership or small business corporation return reportable on the
partner's or shareholder's return constitute a substantial portion of
the partner's or shareholder's return.
(iv) Examples. The provisions of this paragraph (b)(3) are
illustrated by the following examples:
Example 1. Accountant C prepares a Form 8886, ``Reportable
Transaction Disclosure Statement'', that is used to disclose
reportable transactions. C does not prepare the tax return or advise
the taxpayer regarding the tax return reporting position of the
transaction to which the Form 8886 relates. The preparation of the
Form 8886 is not directly relevant to the determination of the
existence, characterization, or amount of an entry on a tax return
or claim for refund. Rather, the Form 8886 is prepared by C to
disclose a reportable transaction. C has not prepared a substantial
portion of the tax return and is not considered a tax return
preparer under section 6694.
Example 2. Accountant D prepares a schedule for an individual
taxpayer's Form 1040, ``U.S. Individual Income Tax Return'',
reporting $4,000 in dividend income and gives oral or written advice
about Schedule A, which results in a claim of a medical expense
deduction totaling $5,000, but does not sign the tax return. D is
not a nonsigning tax return preparer because the total aggregate
amount of the deductions is less than $10,000.
(4) Return and claim for refund--(i) Return. For purposes of this
section, a return of tax is a return (including an amended or adjusted
return) filed by or on behalf of a taxpayer reporting the liability of
the taxpayer for tax under the Code, if the type of return is
identified in published guidance in the Internal Revenue Bulletin. A
return of tax also includes any information return or other document
identified in published guidance in the Internal Revenue Bulletin and
that reports information that is or may be reported on another
taxpayer's return under the Code if the information reported on the
information return or other document constitutes a substantial portion
of the taxpayer's return within the meaning of paragraph (b)(3) of this
section.
(ii) Claim for refund. For purposes of this section, a claim for
refund of tax includes a claim for credit against any tax that is
included in published guidance in the Internal Revenue Bulletin. A
claim for refund also includes a claim for payment under section 6420,
6421, or 6427.
(c) Mechanical or clerical assistance. A person who furnishes to a
taxpayer or other tax return preparer sufficient information and advice
so that completion of the return or claim for refund is largely a
mechanical or clerical matter is considered a tax return preparer, even
though that person does not actually place or review placement of
information on the return or claim for refund. See also paragraph
(b)(3) of this section.
(d) Qualifications. A person may be a tax return preparer without
regard to educational qualifications and professional status
requirements.
(e) Outside the United States. A person who prepares a return or
claim for refund outside the United States is a tax return preparer,
regardless of the person's nationality, residence, or the location of
the person's place of business, if the person otherwise satisfies the
definition of tax return preparer. Notwithstanding the provisions of
Sec. 301.6109-1(g), the person shall secure an employer identification
number if the person is an employer of another tax return preparer, is
a partnership in which one or more of the general partners is a tax
return preparer, is a firm in which one or more of the equity holders
is a tax return preparer, or is an individual not employed by another
tax return preparer.
(f) Persons who are not tax return preparers. (1) The following
persons are not tax return preparers:
(i) An official or employee of the Internal Revenue Service (IRS)
performing official duties.
(ii) Any individual who provides tax assistance under a Volunteer
Income Tax Assistance (VITA) program established by the IRS, but only
with respect to those returns prepared as part of the VITA program.
(iii) Any organization sponsoring or administering a VITA program
established by the IRS, but only with respect to that sponsorship or
administration.
(iv) Any individual who provides tax counseling for the elderly
under a program established pursuant to section 163 of the Revenue Act
of 1978, but only with respect to those returns prepared as part of
that program.
(v) Any organization sponsoring or administering a program to
provide tax counseling for the elderly established pursuant to section
163 of the Revenue Act of 1978, but only with respect to that
sponsorship or administration.
(vi) Any individual who provides tax assistance as part of a
qualified Low-Income Taxpayer Clinic (LITC), as defined by section
7526, subject to the requirements of paragraphs (f)(2) and (3) of this
section, but only with respect to those returns and claims for refund
prepared as part of the LITC program.
(vii) Any organization that is a qualified LITC, as defined by
section 7526, subject to the requirements of paragraphs (f)(2) and (3)
of this section.
(viii) An individual providing only typing, reproduction, or other
mechanical assistance in the preparation of a return or claim for
refund.
(ix) An individual preparing a return or claim for refund of a
taxpayer, or an officer, a general partner, member, shareholder, or
employee of a taxpayer, by whom the individual is regularly and
[[Page 78465]]
continuously employed or compensated or in which the individual is a
general partner.
(x) An individual preparing a return or claim for refund for a
trust, estate, or other entity of which the individual either is a
fiduciary or is an officer, general partner, or employee of the
fiduciary.
(xi) An individual preparing a claim for refund for a taxpayer in
response to--
(A) A notice of deficiency issued to the taxpayer; or
(B) A waiver of restriction on assessment after initiation of an
audit of the taxpayer or another taxpayer if a determination in the
audit of the other taxpayer affects, directly or indirectly, the
liability of the taxpayer for tax under subtitle A.
(xii) A person who prepares a return or claim for refund for a
taxpayer with no explicit or implicit agreement for compensation, even
if the person receives an insubstantial gift, return service, or favor.
(2) Paragraphs (f)(1)(vi) and (vii) of this section apply only if
any assistance with a return of tax or claim for refund is directly
related to a controversy with the IRS for which the qualified LITC is
providing assistance or is an ancillary part of an LITC program to
inform individuals for whom English is a second language about their
rights and responsibilities under the Code.
(3) Notwithstanding paragraph (f)(2) of this section, paragraphs
(f)(1)(vi) and (f)(1)(vii) of this section do not apply if an LITC
charges a separate fee or varies a fee based on whether the LITC
provides assistance with a return of tax or claim for refund under the
Code or if the LITC charges more than a nominal fee for its services.
(4) For purposes of paragraph (f)(1)(ix) of this section, the
employee of a corporation owning more than 50 percent of the voting
power of another corporation, or the employee of a corporation more
than 50 percent of the voting power of which is owned by another
corporation, is considered the employee of the other corporation as
well.
(5) For purposes of paragraph (f)(1)(x) of this section, an estate,
guardianship, conservatorship, committee, or any similar arrangement
for a taxpayer under a legal disability (such as a minor, an
incompetent, or an infirm individual) is considered a trust or estate.
(6) Examples. The mechanical assistance exception described in
paragraph (f)(1)(viii) of this section is illustrated by the following
examples:
Example 1. A reporting agent received employment tax information
from a client from the client's business records. The reporting
agent did not render any tax advice to the client or exercise any
discretion or independent judgment on the client's underlying tax
positions. The reporting agent processed the client's information,
signed the return as authorized by the client pursuant to Form 8655,
Reporting Agent Authorization, and filed the client's return using
the information supplied by the client. The reporting agent is not a
tax return preparer.
Example 2. A reporting agent rendered tax advice to a client on
determining whether its workers are employees or independent
contractors for Federal tax purposes. For compensation, the
reporting agent received employment tax information from the client,
processed the client's information and filed the client's return
using the information supplied by the client. The reporting agent is
a tax return preparer.
(g) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after
December 31, 2008.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 158. The authority citation for part 602 continues to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 159. In Sec. 602.101, paragraph (b) is amended by adding the
following entries to the table in numerical order to read in part as
follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
CFR part or section where identified and
described Current OMB control No.
------------------------------------------------------------------------
* * * * *
1.6060-1(a)(1)........................... 1545-1231
1.6107-1................................. 1545-1231
1.6694-2(c)(3)........................... 1545-1231
20.6060-1(a)(1).......................... 1545-1231
20.6107-1................................ 1545-1231
25.6060-1(a)(1).......................... 1545-1231
25.6107-1................................ 1545-1231
26.6060-1(a)(1).......................... 1545-1231
26.6107-1................................ 1545-1231
31.6060-1(a)(1).......................... 1545-1231
31.6107-1................................ 1545-1231
40.6060-1(a)(1).......................... 1545-1231
40.6107-1................................ 1545-1231
41.6060-1(a)(1).......................... 1545-1231
41.6107-1................................ 1545-1231
44.6060-1(a)(1).......................... 1545-1231
44.6107-1................................ 1545-1231
53.6060-1(a)(1).......................... 1545-1231
53.6107-1................................ 1545-1231
54.6060-1(a)(1).......................... 1545-1231
54.6107-1................................ 1545-1231
55.6060-1(a)(1).......................... 1545-1231
55.6107-1................................ 1545-1231
56.6060-1(a)(1).......................... 1545-1231
56.6107-1................................ 1545-1231
156.6060-1(a)(1)......................... 1545-1231
156.6107-1............................... 1545-1231
157.6060-1(a)(1)......................... 1545-1231
157.6107-1............................... 1545-1231
* * * * *
------------------------------------------------------------------------
Linda M. Kroening,
Acting Deputy Commissioner for Services and Enforcement.
Approved: December 10, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-29750 Filed 12-15-08; 4:15 pm]
BILLING CODE 4830-01-P