Final regs. governing practice before the IRS.

• Author: Adams, Jordan

On May 31, 2011, Treasury issued final regulations governing practice before the IRS to increase taxpayer compliance and to ensure uniform and high ethical standards of conduct for all tax return preparers (T.D. 9527). The final regulations, which became effective August 2, 201 I, amend Circular 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, Enrolled Retirement Plan Agents, and Appraisers Before the Internal Revenue Service (31 C.F.R. Part 10). The new rules create a new class of practitioner called a registered tax return preparer. They also revise the professional standards applicable to all practitioners with respect to the standards for tax return preparation under Circular 230, Section 10.34(a), to align these rules with the civil penalty standards under Sec. 6694(a). In addition, the final regulations provide guidance surrounding incompetence and disreputable conduct by tax return preparers.

Background

In June 2009, the IRS initiated a review of tax return preparers with the intent to both increase taxpayer compliance and propose a comprehensive set of recommendations to ensure uniform and high ethical standards of conduct for all tax return preparers. As part of the industry review, the IRS received input through public forums, solicitation of written comments, and meetings with advisory groups. An overwhelming number of commentators supported increased government oversight of tax return preparers, particularly for individuals who are not attorneys, CPAs, or others currently authorized to practice before the IRS. They believed that taxpayers, the IRS, and tax administration would all benefit from the registration of tax return preparers. In addition, the commentators favored minimum education or testing requirements and the establishment of quality and ethics standards for paid tax return preparers. The IRS reported the findings and recommendations of its review in Publication 4832, Return Preparer Review (December 2009), which it released on January 4, 2010. The report recommends increased oversight of the tax return preparer industry through the issuance of regulations.

To implement recommendations made in the report, in September 2010 the IRS issued final regulations under Sec. 6109 that require all individuals who prepare tax returns to register with the IRS and to obtain a preparer tax identification number (PTIN). The tax return preparer must furnish the PTIN when he or she signs a tax return or claim for refund. The PTIN registration mandate is expected to improve the accuracy, completeness, and timeliness of tax returns. The IRS will be able to match preparers with the tax returns and claims for refund that they...