IRS issues interim guidance providing relief from "more likely than not" reporting standards.

The Internal Revenue Service and U.S. Treasury Department on Dec. 31 issued interim guidance for tax preparers to provide temporary relief from potential penalties under the "more likely than not" (MLTN) tax reporting standards. The new standards stem from statutory changes to Section 6694-tax preparer penalties in the tax code that took effect when the Iraq war funding bill became law in May 2007.

Under the law, to protect themselves from a potential penalty, any tax positions taken by a taxpayer that did not meet the Internal Revenue code's MLTN standard would have to be disclosed on the return. The MLTN standard is higher than taxpayers' "substantial authority" standard, creating the potential for conflicts of interest between taxpayers and tax preparers.

IRS Notices 2008-11, 2008-12 and 2008-13 provide needed guidance to implement the changes. In particular, Notice 2008-13 gives preparers options for meeting reporting standards for tax return positions. Under the notice, tax preparers would not be required to make disclosures in returns and would not be subject to penalties under...