[Federal Register Volume 75, Number 162 (Monday, August 23, 2010)]
[Proposed Rules]
[Pages 51713-51734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20850]
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DEPARTMENT OF THE TREASURY
Office of the Secretary
31 CFR Part 10
[REG-138637-07]
RIN 1545-BH01
Regulations Governing Practice Before the Internal Revenue
Service
AGENCY: Office of the Secretary, Treasury.
ACTION: Withdrawal of notice of proposed rulemaking, notice of proposed
rulemaking, and notice of public hearing.
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SUMMARY: This document contains proposed modifications revising the
regulations governing practice before the Internal Revenue Service
(IRS). The proposed regulations affect individuals who practice before
the IRS and providers of continuing education programs. The proposed
regulations modify the general standards of practice before the IRS and
the standards with respect to tax returns. This document also provides
notice of a public hearing on these proposed regulations and withdraws
the notice of proposed rulemaking published on September 26, 2007.
DATES: Written or electronic comments must be received by October 7,
2010. Outlines of topics to be discussed at the public hearing
scheduled for Friday, October 8, 2010 at 10 am must be received by
Monday, September 27, 2010.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-138637-07), Room
5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
138637-07), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at http://www.regulations.gov (IRS REG-138637-07).
The public hearing will be held in IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Matthew D. Lucey or Matthew S. Cooper at (202) 622-4940; concerning
submissions of comments, the public hearing, and/or to be placed on the
building access list to attend the public hearing, Regina Johnson of
the Publications and Regulations Branch at (202) 622-7180 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these proposed
regulations was 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 1545-1726. Comments on
the collection of information should be sent to the Office of
Management and Budget, Attn: Desk Officer for the Department of the
Treasury, Office of Information and Regulatory Affairs, Washington, DC
20503, with copies to the Internal Revenue Service, Attn: IRS Reports
Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments
on the collection of information should be received by October 22,
2010. Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the
proper performance of the Internal Revenue Service, including whether
the information will have practical utility;
The accuracy of the estimated burden associated with the proper
collection of information;
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The collection of information in these proposed regulations is in
Sec. Sec. 10.6 and 10.9. The total annual burden of this collection of
information is an increase from the burden in the current regulations.
Section 10.6 requires a registered tax return preparer to maintain
records and educational materials regarding the completion of the
required qualifying continuing education credits. Section 10.9 also
requires providers of qualifying continuing education programs to
maintain records and educational material concerning these programs and
the individuals who attend them. Continuing education providers also
obtain approval of each program as a qualified continuing education
program. The collection of this material helps to ensure that
individuals authorized to prepare tax returns are informed of the
latest developments in Federal tax practice.
Currently, there are approximately 46,000 enrolled agents and 300
enrolled retirement plan agents who are required to maintain records
and educational materials regarding the completion of the required
continuing education credits. There are approximately 350 continuing
education providers of qualifying continuing education programs
required to maintain records and educational material concerning these
programs and the individuals who attend them. It is expected that there
will be an additional 600,000 registered tax return preparers and 1,900
continuing education providers who will be affected by the collection
of information requirements in these proposed regulations. The IRS and
the Treasury Department estimate that the total annual costs resulting
from these requirements will be $9,880,000 for all affected
practitioners and $38,632,500 for all affected continuing education
providers.
This collection of information is mandatory. The likely respondents
and record keepers are individuals and businesses.
Estimated total annual recordkeeping and reporting burden is
1,710,000 hours.
[[Page 51714]]
Estimated annual burden per practitioner varies from 30 minutes to
one hour, depending on individual circumstances, with an estimated
average of 54 minutes.
Estimated annual burden per continuing education provider varies
from five hours to 5,000 hours, depending on individual circumstances,
with an estimated average of 500 hours.
Estimated number of affected practitioners is 650,000.
Estimated number of affected continuing education providers is
2,250.
Estimated annual frequency of responses is on occasion.
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.
Books or records relating to a collection of information must be
retained as long as their contents might become material in the
administration of any internal revenue law.
Background
Section 330 of title 31 of the United States Code authorizes the
Secretary of the Treasury (the Secretary) to regulate the practice of
representatives before the Treasury Department. The Secretary is
authorized, after notice and an opportunity for a proceeding, to
censure, suspend, or disbar from practice before the Treasury
Department those representatives who are incompetent, disreputable, or
who violate regulations prescribed under section 330 of title 31. The
Secretary also is authorized to impose a monetary penalty against these
individuals and the individuals' firms or other entities that employ
them. Additionally, the Secretary may seek an injunction against these
individuals under section 7408 of the Internal Revenue Code (Code).
The Secretary has published regulations governing the practice of
representatives before the IRS in 31 CFR part 10 and reprinted the
regulations as Treasury Department Circular No. 230 (Circular 230).
These regulations authorize the Director of the Office of Professional
Responsibility (OPR) to act upon applications for enrollment to
practice before the IRS, to make inquiries with respect to matters
under OPR's jurisdiction, to institute proceedings to impose a monetary
penalty or to censure, suspend, or disbar a practitioner from practice
before the IRS, to institute proceedings to disqualify appraisers, and
to perform other duties necessary to carry out these functions.
Circular 230 has been amended periodically. The regulations were
amended most recently on September 26, 2007 (72 FR 54540), to modify
various provisions relating to the general standards of practice. For
example, the 2007 regulations established an enrolled retirement plan
agent designation, modified the conflict of interest rules, limited the
use of contingent fees by practitioners, and required public disclosure
of OPR disciplinary decisions after the decisions become final.
Those final regulations, however, did not finalize the standards
with respect to tax returns under Sec. 10.34(a) and the definitions
under Sec. 10.34(e) because of the amendments to section 6694(a) of
the Code made by the Small Business and Work Opportunity Tax Act of
2007, Public Law 110-28, 121 Stat. 190. Rather, the IRS and the
Treasury Department reserved Sec. 10.34(a) and (e) in those final
regulations and also simultaneously issued a notice of proposed
rulemaking (REG-138637-07) in the Federal Register (72 FR 54621)
proposing to conform the professional standards under Sec. 10.34 of
Circular 230 with the civil penalty standards under section 6694(a) as
amended by the 2007 Act.
On October 3, 2008, the Tax Extenders and Alternative Minimum Tax
Relief Act of 2008, Div. C. of Public Law 110-343, 122 Stat. 3765,
again amended the standard of conduct that must be met to avoid
imposition of the tax return preparer penalty under section 6694(a).
The IRS and the Treasury Department published final regulations (TD
9436) in the Federal Register (73 FR 78430) implementing amendments to
the tax return preparer penalties on December 22, 2008. This document
proposes modifications to the standards with respect to tax returns and
also withdraws the proposed amendments to Sec. 10.34 published in the
Federal Register on September 26, 2007.
The proposed regulations also provide new rules governing the
oversight of tax return preparers. Currently, an individual tax return
preparer generally is not subject to the provisions in Circular 230
unless the tax return preparer is an attorney, certified public
accountant, enrolled agent, or other type of practitioner identified in
Circular 230. Under current law, any individual may prepare tax returns
and claims for refund without meeting any qualifications or competency
standards. A tax return preparer also may exercise the privilege of
limited practice before the IRS pursuant to the rules in Sec.
10.7(c)(1)(viii) of Circular 230 and Revenue Procedure 81-38 (1981-2 CB
592). See Sec. 601.601(d)(2)(ii)(b).
In June 2009, the IRS launched a review of tax return preparers
with the intent to propose a comprehensive set of recommendations to
ensure uniform and high ethical standards of conduct for all tax return
preparers and to increase taxpayer compliance. As part of this effort,
the IRS received input from a large and diverse community through
numerous channels, including public forums, solicitation of written
comments, and meetings with advisory groups.
The IRS made findings and recommendations in Publication 4832,
``Return Preparer Review'' (the Report), which was published on January
4, 2010. The Report recommends increased oversight of the tax return
preparer industry through the issuance of regulations.
This document proposes amendments to Circular 230 based upon
certain of the recommendations in the Report. Specifically, the
proposed regulations establish ``registered tax return preparers,'' as
a new class of practitioners. Sections 10.3 through 10.6 of the
proposed regulations describe the process for becoming a registered tax
return preparer and the limitations on a registered tax return
preparer's practice before the IRS. In general, practice by registered
tax return preparers is limited to preparing tax returns, claims for
refund, and other documents for submission to the IRS. A registered tax
return preparer may prepare all or substantially all of a tax return or
claim for refund, and sign a tax return or claim for refund,
commensurate with the registered tax return preparer's level of
competence as demonstrated by written examination. The proposed
regulations also revise Sec. 10.30 regarding solicitation, Sec. 10.36
regarding procedures to ensure compliance, and Sec. 10.51 regarding
incompetence and disreputable conduct.
Proposed regulations under section 6109 of the Code (REG-134235-08)
published in the Federal Register (75 FR 14539) on March 26, 2010, also
implement certain recommendations in the Report. The proposed
regulations under section 6109 provide that, for returns or claims for
refund filed after December 31, 2010, the identifying number of a tax
return preparer is the individual's preparer tax identification number
(PTIN) or such other number prescribed by the IRS in forms,
instructions, or other appropriate guidance. The proposed regulations
under section 6109 provide that the IRS is authorized to require
through other guidance (as well as in forms and
[[Page 51715]]
instructions) that tax return preparers apply for a PTIN or other
prescribed identifying number, the regular renewal of PTINs or other
prescribed identifying number, and the payment of user fees.
Explanation of Provisions
The scope of these proposed regulations is limited to practice
before the IRS. The Director of OPR has general oversight
responsibilities for the rules in these proposed regulations, but
specific duties related to the administration of certain procedural
aspects of these rules (for example, test administration, issuance of
enrollment or registration certificates or cards) may be delegated to
employees of other IRS functions or third party vendors if the
Commissioner determines that the performance of these duties by these
organizations will aid tax administration. These proposed regulations
do not change the existing authority of attorneys, certified public
accountants, and enrolled agents to practice before the IRS under
Circular 230. These proposed regulations also do not alter or supplant
ethical standards that might otherwise be applicable to practitioners.
Definitions--Practice Before the Internal Revenue Service and Tax
Return Preparer
``Practice before the Internal Revenue Service'' under Sec.
10.2(a)(4) comprehends all matters connected with a presentation to the
IRS or any of its officers or employees relating to a taxpayer's
rights, privileges, or liabilities under laws or regulations
administered by the IRS. Under the current definition of practice,
preparing a tax return or claim for refund (even if the tax return or
claim for refund is filed by another person) is practice before the
IRS. Similarly, an individual who files a tax return or claim for
refund prepared by someone else also is engaged in practice before the
IRS. The IRS and the Treasury Department are aware that some tax
professionals have suggested that they are not engaged in practice
before the IRS unless they both prepare and file a tax return, claim
for refund, or other document. Accordingly, Sec. 10.2(a)(4) of the
proposed regulations is revised to eliminate this misunderstanding, and
specifically clarifies that either preparing a document or filing a
document may constitute practice before the IRS. Section 10.2(a)(8) of
the proposed regulations also clarifies that the definition of ``tax
return preparer'' in Circular 230 is the same as the meaning in section
7701(a)(36) of the Code and 26 CFR 301.7701-15.
Who May Practice
Section 10.3(f) of the proposed regulations establishes a new
``registered tax return preparer'' designation. A registered tax return
preparer is any individual so designated under Sec. 10.4(c) who is not
currently under suspension or disbarment from practice before the IRS.
An individual who is a registered tax return preparer pursuant to this
part is a practitioner authorized to practice before the IRS, subject
to the limitations identified in these proposed regulations.
These proposed regulations generally limit practice as a registered
tax return preparer to preparing tax returns, claims for refund, and
other documents for submission to the IRS. Pursuant to Sec. 10.3(f)(2)
of these proposed regulations, a registered tax return preparer may
only prepare, or assist in the preparation of, all or substantially all
of a tax return or claim for refund that is commensurate with the level
of competence that the registered tax return preparer has demonstrated
by written examination. Registered tax return preparers also are
permitted to sign tax returns, claims for refund, and other documents
as the preparer provided the document is commensurate with the level of
competence demonstrated, and may represent taxpayers before revenue
agents, customer service representatives or similar officers and
employees of the IRS (including the Taxpayer Advocate Service) during
an examination if the registered tax return preparer signed the tax
return or claim for refund for the taxable year or period under
examination. Consistent with the limited practice rights currently
available to unenrolled return preparers under Sec. 10.7(c)(1)(viii),
registered tax return preparers are not permitted to represent
taxpayers, regardless of the circumstances requiring representation,
before appeals officers, revenue officers, Counsel or similar officers
or employees of the IRS or the Treasury Department. A registered tax
return preparer's authorization to practice under this part also does
not include the authority to provide tax advice to a client or another
person except as necessary to prepare a tax return, claim for refund,
or other document intended to be submitted to the IRS.
The conduct of the registered tax return preparer in connection
with the preparation of the return, claim for refund, or other
document, as well as any representation of the client during an
examination, will be subject to the standards of conduct in Circular
230. Inquiries into possible misconduct and disciplinary proceedings
relating to registered tax return preparer misconduct will be conducted
under the provisions in Circular 230.
Eligibility To Become a Registered Tax Return Preparer
An individual must pass a minimum competency examination and
possess a current or otherwise valid PTIN or other prescribed
identifying number to become a registered tax return preparer. The
examination will be administered by, or administered under the
oversight of, the IRS, similar to the special enrollment examinations
for enrolled agents and enrolled retirement plan agents. After
completing competency testing, tax return preparers will be subject to
suitability checks to determine whether the tax return preparer has
engaged in disreputable conduct which, at the time the application is
filed with OPR, could result in suspension or disbarment under Circular
230. An individual who has engaged in disreputable conduct is not
eligible to become a registered tax return preparer.
Consistent with the recommendations made in the Report, these
proposed regulations do not exempt a tax return preparer from the
competency testing requirements based upon the individual's past tax
return preparation experience. Initially, the IRS will offer two
competency examinations. One examination will cover wage and
nonbusiness income Form 1040 series returns, while another examination
will cover wage and small business income Form 1040 series returns. An
individual must successfully complete an examination prior to becoming
a registered tax return preparer and obtaining a PTIN. The IRS will
prescribe by forms, instructions, or other appropriate guidance the tax
returns and claims for refund, including the schedules and forms, that
a registered tax return preparer may prepare based upon the written
examination successfully completed under Sec. 10.4(c). The registered
tax return preparer who passes the wage and small business income Form
1040 series examination, however, will be able to prepare any Form 1040
series returns. The IRS and the Treasury Department request comments on
whether a tax return preparer who solely prepares tax returns other
than Form 1040 series returns (for example, Form 941, Employer's
QUARTERLY Federal Tax Return, or Form 706, U.S. Estate Tax Return)
should be permitted to prepare these other tax returns without
successfully completing any examination.
It is currently anticipated that the examination to become a
registered tax
[[Page 51716]]
return preparer will not be available until after the effective date of
these regulations. The IRS and the Treasury Department will provide
published guidance establishing transition rules that explain the steps
individuals must take to prepare all or substantially all of a tax
return or claim for refund while awaiting full implementation of the
examination process.
Application and Renewal Procedures
Section 10.5 of the regulations sets forth the applicable
procedures relating to the application to become a registered tax
return preparer, which generally are consistent with the procedures
currently utilized for enrolled agents and enrolled retirement plan
agents. The proposed regulations provide that applicants must utilize
forms and comply with the procedures established and published by the
IRS. The proposed regulations permit the IRS to change the procedures
to apply to become a registered tax return preparer.
As a condition for consideration of an application, the IRS may
conduct a Federal tax compliance check and suitability check. The tax
compliance check will be limited to an inquiry regarding whether an
applicant has filed all required individual or business tax returns
(such as employment tax returns that might have been required to be
filed by the applicant) and whether the applicant has failed to pay, or
make proper arrangement with the IRS for payment of, any Federal tax
debts. The suitability check will be limited to an inquiry regarding
whether an applicant has engaged in any conduct that would justify
suspension or disbarment of any practitioner under the provisions of
this part, including whether the applicant has engaged in disreputable
conduct.
The IRS may deny an application only if the results of the tax
compliance or suitability check are sufficient to establish that the
practitioner engaged in conduct subject to sanctions under Circular 230
at the time the application is filed or the applicant does not pass the
required competency examination. If the applicant does not pass the
competency examination or the tax compliance or suitability check, the
applicant will not be issued an enrollment or registration card or
certificate, and will be provided information regarding the denial of
the application and the rules on appealing the denial. An applicant who
is initially denied enrollment or registration for failure to pass a
tax compliance check may reapply after the initial denial if the
applicant becomes current with respect to the applicant's tax
liabilities.
Once an application to become a registered tax return preparer is
approved, the IRS will issue a registration card or certificate to each
individual and each card or certificate will be valid for the period
stated on the card or certificate. The card or certificate will be in
addition to any certificate that may be issued to an attorney,
certified public accountant, enrolled agent, or registered tax return
preparer who obtains a PTIN. Registered tax return preparers must have
both a current and valid registration card or certificate and a current
and valid PTIN certificate to practice before the IRS.
Section 10.6 of the proposed regulations sets forth the procedures
for renewal of application to practice before the IRS as a registered
tax return preparer. A registered tax return preparer must apply for
renewal as prescribed in forms, instructions, or other appropriate
guidance. A condition of renewal, as recommended in the Report, is the
completion of continuing education requirements by registered tax
return preparers. A registered tax return preparer must complete 15
hours of continuing education during each registration year, with a
minimum of three hours of Federal tax law updates, two hours of tax-
related ethics and 10 hours of Federal tax law topics. The registration
year is defined as each 12-month period that the registered tax return
preparer is authorized to practice before the IRS. Registered tax
return preparers will be required to maintain records with respect to
the completion of the continuing education credit hours and to self-
certify the completion of the continuing education credit at the time
of renewal. The proposed regulations require that a qualifying
continuing education course enhance professional knowledge in Federal
taxation or Federal tax related matters and be consistent with the Code
and effective tax administration.
Section 10.6(f)(2)(iii) and (f)(2)(iv) of the current regulations
authorizes continuing education credit to be awarded for hours relating
to work as an instructor, discussion leader, or speaker at an education
program, as well as hours for authoring articles, books, or other
publications on Federal taxation or Federal tax-related matters. The
maximum credit for instruction and preparation currently may not exceed
50 percent of the continuing education requirement for an enrollment
cycle. After further consideration, the IRS and the Treasury Department
believe that the maximum credit for instruction and preparation should
be reduced to encourage a more diverse educational program. These
proposed regulations, therefore, reduce the maximum credit for
instruction and preparation to four hours annually of the continuing
education requirement. These proposed regulations also remove the
ability to receive hours for authoring articles, books, or other
publications.
Section 10.5(b) and Sec. 10.6(d)(6) of the proposed regulations
are revised to reflect that the IRS will charge a reasonable
nonrefundable fee for each initial application and application for
renewal as a registered tax return preparer filed with OPR. Separate
regulation projects under 26 CFR part 300 will provide further details
on the amounts of those user fees in the near future.
Continuing Education Providers
The rules regarding continuing education providers that currently
are in Sec. 10.6 of Circular 230 are moved to new Sec. 10.9. Under
Sec. 10.9 of the proposed regulations, providers of continuing
education courses are required to maintain records and educational
material concerning these programs and the individuals who attend them,
as well as obtain approval of each program to be qualified as a
qualified continuing education program. Section 10.9(a)(6) also states
that the IRS may charge a reasonable nonrefundable fee for each
application for qualification as a qualified continuing education
program. A separate regulation project under 26 CFR part 300 will
provide further details on the amounts of the user fee in the near
future.
Limited Practice Before the IRS, Return Preparation, and Application to
Other Individuals
Section 10.7(c)(1)(viii) currently authorizes an individual, who is
not otherwise a practitioner, to represent a taxpayer during an
examination if that individual prepared the return for the taxable
period under examination. The proposed regulations remove this limited
practice authorization from Sec. 10.7(c) because of the addition to
Sec. 10.3(f) regarding registered tax return preparers. Additionally,
these proposed regulations remove current Sec. 10.8 regarding
customhouse brokers from Circular 230 and move the language in current
Sec. 10.7(e) to new Sec. 10.8(a). Section 10.8(a) of the proposed
regulations provides that any individual, whether or not the individual
is a practitioner, may assist with the preparation of a tax return or
claim for refund (provided the individual prepares less than
substantially all of the tax return or claim for refund). This revision
is consistent with the inclusion of
[[Page 51717]]
registered tax return preparers as practitioners authorized to practice
before the IRS and the practice rights available to these
practitioners.
These proposed regulations also establish a new Sec. 10.8(b)
regarding other individuals. Any individual who prepares for
compensation all or a substantial portion of a document pertaining to a
taxpayer's tax liability for submission to the IRS is subject to the
duties and restrictions relating to practice before the IRS and may be
sanctioned, after notice and opportunity for a conference, for any
conduct that would justify a sanction under Sec. 10.50. An individual
described in 26 CFR 301.7701-15(f) is not treated as having prepared
all or a substantial portion of the document by reason of such
assistance. For example, an individual who only furnishes typing,
reproducing, or other mechanical assistance with respect to a document
is not subject to the duties and restrictions relating to practice
before the IRS. Only an attorney, certified public accountant, enrolled
agent, or registered tax return preparer may prepare for compensation
all or substantially all of a tax return or claim for refund, or sign
as a preparer tax returns and claims for refund.
An individual who is not an attorney, certified public accountant,
enrolled agent, or registered tax return preparer who nevertheless
prepares for compensation all or a substantial portion of a document
(including tax returns and claims for refund) for submission to the IRS
is engaged in practice before the IRS, and subject to the rules and
standards of Circular 230.
Solicitation
Section 10.30(a)(1) of these proposed regulations provides that a
practitioner may not, with respect to any IRS matter, in any way use or
participate in the use of any form of public communication or private
solicitation containing a false, fraudulent, coercive, misleading, or
deceptive statement or claim. In describing their professional
designation, registered tax return preparers may not utilize the term
``certified'' or imply an employer/employee relationship with the IRS.
An example of an acceptable description for registered tax return
preparers under Sec. 10.4(c), in describing their professional
designation, is ``designated as a registered tax return preparer with
the Internal Revenue Service.''
Standards With Respect to Tax Returns and Documents, Affidavits and
Other Papers
After careful consideration, the IRS and the Treasury Department
continue to conclude that the professional standards in Sec. 10.34(a)
generally should be consistent with the civil penalty standards in
section 6694 for tax return preparers. As discussed in this preamble,
the limited differences between the proposed standards in Sec. 10.34
and section 6694 arise from the different purposes served by those
provisions and the different manner in which the two standards will be
administered.
The standards with respect to tax returns in Sec. 10.34(a) are
being reproposed to provide broader guidelines that are more
appropriate for professional ethics standards. Under Sec.
10.34(a)(1)(i) of these proposed regulations, a practitioner may not
willfully, recklessly, or through gross incompetence, sign a tax return
or claim for refund that the practitioner knows or reasonably should
know contains a position that: (A) Lacks a reasonable basis; (B) is an
unreasonable position as described in section 6694(a)(2) (including the
related regulations and other published guidance); or (C) is a willful
attempt by the practitioner to understate the liability for tax or a
reckless or intentional disregard of rules or regulations by the
practitioner as described in section 6694(b)(2) (including the related
regulations and other published guidance).
Under Sec. 10.34(a)(1)(ii) of these proposed regulations, a
practitioner may not willfully, recklessly, or through gross
incompetence, advise a client to take a position on a tax return or
claim for refund, or prepare a portion of a tax return or claim for
refund containing a position, that: (A) Lacks a reasonable basis; (B)
is an unreasonable position as described in section 6694(a)(2)
(including the related regulations and other published guidance); or
(C) is a willful attempt by the practitioner to understate the
liability for tax or a reckless or intentional disregard of rules or
regulations by the practitioner as described in section 6694(b)(2)
(including the related regulations and other published guidance).
These proposed ethical guidelines under Sec. 10.34 closely mirror
the civil penalty standards in section 6694 with only a few minor
differences. First, these proposed regulations specifically provide
that a position on a return or claim for refund must always meet the
minimum threshold standard of reasonable basis. Because Circular 230
establishes minimum standards for practitioners, these proposed
regulations provide that a practitioner acts unethically when the
practitioner advises a taxpayer to take a return position that lacks a
reasonable basis. The proposed regulations do not provide an exception
to Sec. 10.34(a) merely because there is a final determination that no
understatement of liability for tax exists. This differs from section
6694(d), which provides that the IRS must abate (or refund) a preparer
penalty any time there is a final administrative determination or a
final judicial decision that there was no understatement of liability
by the taxpayer. A practitioner, therefore, may still be subject to
discipline under Sec. 10.34(a) for a position on a tax return or claim
for refund even if other positions on the same tax return or claim for
refund eliminate the understatement of liability.
Second, these proposed regulations provide that a practitioner is
subject to discipline under Sec. 10.34(a) only after willful,
reckless, or grossly incompetent conduct. Under section 6694, a single,
unintentional error that is not willful, reckless, or grossly
incompetent may result in a section 6694(a) penalty. Similarly, a
return preparer may claim a reasonable cause defense to the imposition
of penalties under section 6694, while Circular 230 does not provide
such a defense but rather relies on the requirement that a practitioner
must have acted willfully, recklessly, or through gross incompetence to
ensure that sanctions are not imposed on a practitioner who acts
reasonably and in good faith. If the IRS imposes a penalty against a
practitioner under section 6694 and also refers the practitioner for
possible discipline under Circular 230, OPR will make an independent
determination as to whether the practitioner engaged in willful,
reckless, or grossly incompetent conduct subject to discipline under
Sec. 10.34(a) before any disciplinary proceedings are instituted or
any sanctions are imposed. Thus, a practitioner liable for a penalty
under section 6694 is not automatically subject to discipline under
Sec. 10.34(a).
Third, multiple practitioners from the same firm may be disciplined
if their conduct in connection with the same act(s) does not comply
with the standard of conduct required under Sec. 10.34. Under the
provisions in the regulations under section 6694, only one person
within a firm is subject to the penalty under section 6694. The
provisions of section 6694 prevent unwarranted duplication of civil
penalties, but in the Circular 230 context, it may be critical that
each practitioner engaged in misconduct be subject to appropriate
sanctions.
Finally, Sec. 10.34(a)(2) of these proposed regulations expressly
provides that a pattern of conduct is a factor that will be taken into
account in
[[Page 51718]]
determining whether a practitioner acted willfully, recklessly, or
through gross incompetence for purposes of Sec. 10.34. This differs
from section 6694, which imposes a penalty based upon a single act in
violation of the applicable provisions.
With these revisions, the definitions previously proposed under
Sec. 10.34(e) are withdrawn because the well-established definitions
under the section 6662 and section 6694 penalty regulations and other
published guidance will control for purposes of Sec. 10.34.
Procedures To Ensure Compliance
Section 10.36 currently provides procedures to ensure that tax
practitioners with responsibility for overseeing a firm's practice
before the IRS take reasonable steps to ensure that the firm has
adequate procedures in effect for all members, associates, and
employees for purposes of complying with Sec. 10.35 regarding covered
opinions. The procedures to ensure compliance have produced great
successes in encouraging firms to self-regulate, while at the same time
doing so in a flexible way that is not a rigid one-size-fits-all
regulatory burden. Firm responsibility is a critical factor in ensuring
high quality advice and representation for taxpayers. Accordingly, the
IRS and the Treasury Department conclude that the procedures to ensure
compliance should be expanded to include practice involving tax return
preparation activities. Section 10.36 of the proposed regulations
provides that firm management with principal authority and
responsibility for overseeing a firm's practice of preparing tax
returns, claims for refunds and other documents filed with the IRS must
take reasonable steps to ensure that the firm has adequate procedures
in effect for purposes of complying with Circular 230.
Incompetence and Disreputable Conduct
Section 10.51 of Circular 230 defines disreputable conduct for
which a practitioner may be sanctioned. Section 6011(e)(3) of the Code,
enacted by section 17 of the Worker, Homeownership, and Business
Assistance Act of 2009, Public Law 111-92 (123 Stat. 2984, 2996) (Nov.
6, 2009), requires certain specified tax return preparers to file
individual income tax returns electronically. Because the IRS and the
Treasury Department believe that the failure to comply with this
requirement is disreputable conduct, these proposed regulations are
amended to add a new paragraph in Sec. 10.51 to address practitioners
who fail to comply with this requirement. Under Sec. 10.51(a)(16) of
the proposed regulations, disreputable conduct includes willfully
failing to file on magnetic or other electronic media a tax return
prepared by the practitioner when the practitioner is required to do so
by the Federal tax laws (unless the failure is due to reasonable cause
and not due to willful neglect).
Under Sec. 10.51(a)(17) of the proposed regulations, disreputable
conduct also includes willfully preparing all or substantially all of,
or signing as a compensated tax return preparer, a tax return or claim
for refund when the practitioner does not possess a current or
otherwise valid PTIN or other prescribed identifying number. Section
10.51(a)(18) states that it is disreputable conduct for a practitioner
to willfully represent a taxpayer before an officer or employee of the
IRS unless the practitioner is authorized to do so pursuant to Circular
230. These changes are consistent with the other revisions in these
proposed regulations and under section 6109.
Records
Under Sec. 10.90 of the current regulations, OPR must maintain and
may make available for public inspection in the time and manner
prescribed by the Secretary a roster of enrolled agents, including
those who are active, inactive, and sanctioned. These proposed
regulations clarify that the roster requirements also pertain to
registered tax return preparers and qualified continuing education
programs.
Proposed Effective Date
These regulations are generally proposed to apply 60 days after the
date that final regulations are published in the Federal Register.
Special Analyses
Executive Order 12866 requires certain regulatory assessments and
procedures for a significant regulatory action, defined as adversely
affecting in a material way the economy, a sector of the economy,
productivity, competition, or jobs. This rule has been designated as
significant and has been reviewed by the Office of Management and
Budget as required under the provisions of E.O. 12866. The Regulatory
Assessment prepared for this regulation is provided below under the
heading ``Regulatory Assessment under E.O. 12866.''
It has been determined that an initial regulatory flexibility
analysis is required for this notice of proposed rulemaking under 5
U.S.C. 603. This analysis is set forth later in this preamble under the
heading ``Initial Regulatory Flexibility Analysis.''
Pursuant to section 7805(f) of the Internal Revenue Code (Code),
this notice of proposed rulemaking has been submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small business.
A. Regulatory Assessment Under E.O. 12866
1. Description of Need for the Regulatory Action
Although the IRS has exercised its authority to regulate for
attorneys, certified public accountants, and other specified tax
professionals, regulations under Circular 230 currently do not apply to
a critical group of tax professionals: tax return preparers. As
discussed in the Report, taxpayers' reliance on tax return preparers
has grown steadily in recent decades. The number of taxpayers who
prepared their own tax returns without assistance fell by more than
two-thirds between 1993 and 2005. In fact, today, tax return preparers
assist a majority of U.S. taxpayers in meeting their Federal tax filing
obligations. In 2008 and 2009, for example, tax return preparers
prepared almost 60 percent of all federal tax returns filed, including
approximately 87 million federal individual income tax returns. The IRS
expects these numbers to increase in 2010 and the coming years.
Tax return preparers are not only responsible for assisting
taxpayers in filing complete, timely, and accurate returns, but also
help educate taxpayers about the tax laws, and facilitate electronic
filing. Tax return preparers provide advice to taxpayers, identify
items or issues for which the law or guidance is unclear, and inform
taxpayers of the benefits and risks of positions taken on a tax return,
and the tax treatment or reporting of items and transactions. The IRS
and the Treasury Department recognize that the majority of tax return
preparers serve the interests of their clients and the tax system by
preparing complete and accurate returns.
The tax system is best served by tax return preparers who are
ethical, provide good service, and are qualified. Recent government
studies, including studies from the Government Accountability Office
and the Treasury Inspector General for Tax Administration, see, e.g.,
Government Accountability Office, Paid Tax Return Preparers: In a
limited Study, Chain
[[Page 51719]]
Preparers Made Serious Errors, GAO-06-563T (Apr. 4, 2006); Treasury
Inspector General for Tax Administration, Most Tax Returns Prepared by
a Limited Sample of Unenrolled Preparers Contained Significant Errors,
Rept. 2008-40-171 (Sept. 3, 2008), illustrate the losses
incurred by both taxpayers and the system of Federal tax administration
when tax return preparers fail to properly prepare tax returns.
Additionally, many of the more than 500 public comments received by the
IRS during the agency's review of the return preparer industry
expressed concern for taxpayers, tax administration and the return
preparer industry, all of whom are hurt when tax returns are not
accurately prepared.
An overwhelming number of commentators (98 percent of the persons
who offered comments on oversight and enforcement) supported increased
government oversight of tax return preparers, particularly for
individuals who are not attorneys, certified public accountants or
others currently authorized to practice before the IRS. These
commentators argued that taxpayers, the IRS and tax administration
generally would benefit from the registration of tax return preparers.
Eighty-eight percent of the persons who expressed an opinion on
registering paid tax return preparers favor registration. Ninety
percent of the persons who commented on testing and education favor
minimum education or testing requirements for paid tax return
preparers. And 98 percent of the persons who commented on quality and
ethics favor establishment of quality and ethics standards for paid tax
return preparers.
Because the IRS has not adopted a uniform set of regulations for
tax return preparers, the amount of oversight of tax return
professionals varies greatly depending on professional affiliations and
the geographic area in which they practice. Most tax return preparers
do not have to pass any government or professionally mandated
competency requirement. Most tax return preparers are not required to
participate in a specified program of continuing professional
education. And the ethical rules found in Circular 230 currently are
not applicable to all tax return preparers.
As such, the IRS recognizes the need to apply a uniform set of
rules to offer taxpayers some assurance that their tax returns are
prepared completely and accurately. Increasing the completeness and
accuracy of returns would necessarily lead to increase compliance with
tax obligations by taxpayers.
2. Potentially Affected Tax Returns
These proposed regulations generally extend current regulations
that apply to attorneys, certified public accountants and other
specified tax professionals to all tax return preparers, including
currently unenrolled tax return preparers, who prepare all or
substantially all of a tax return or claim for refund for compensation.
The rules apply to all returns prepared by tax return preparers
regardless of the taxpayer. The rule is not limited by the type of
return or claim for refund. For example, the rule applies to self-
employed tax return preparers who prepare primarily individual tax
returns for persons who have only wage and interest income. The rule
also applies to tax return preparers employed by large accounting firms
who prepare primarily corporate and large partnership returns. It also
applies to those tax returns preparers who prepare only estate or
excise tax returns. These examples are nonexclusive and the application
of these rules is not limited to only those tax return preparers
covered by the examples.
The IRS and the Treasury Department believe that the expansion of
these regulations to currently unenrolled tax return preparers may
impact individual taxpayers more than large corporate taxpayers because
the IRS and the Treasury Department believe that large corporate
taxpayers more likely employ the services of those who are currently
regulated than those who are currently unenrolled to prepare their tax
returns. The IRS and the Treasury Department are seeking comments on
the types of returns (for example: individual versus corporate tax
returns) currently being prepared by currently unenrolled tax return
preparers.
3. An Assessment of Benefits Anticipated From the Regulatory Action
The primary benefit anticipated from these regulations is that they
will improve the accuracy, completeness, and timeliness of tax returns
prepared by tax return preparers. As illustrated in the recent
government studies, including the IRS's recent review of the tax return
preparer industry, inaccurate tax returns are costly both to taxpayers
and the government. Inaccurate returns may affect the finances of
taxpayers, who might overpay their respective share of taxes or fail to
take advantage of available tax benefits. Inaccurate tax returns may
also affect the U.S. government because of underpayments and increased
costs of enforcement and collection.
The regulations are expected to improve the accuracy, completeness,
and timeliness of tax returns in a number of ways. First, requiring tax
return preparers to demonstrate the necessary qualifications to provide
a valuable service by successfully completing a government or
professionally mandated competency examination and continued competence
by completing the specified continuing education credits annually will
result in more competent and ethical tax return preparers who are well
educated in the rules and subject matter. A more competent and ethical
tax return preparer community will prevent costly errors, potentially
saving taxpayers from unwanted problems and relieving the IRS from
expending valuable examination and collection resources. Thus, these
proposed regulations are critical to assisting the IRS curtail the
activities of noncompliant and unethical tax return preparers.
Second, these regulations, in association with new and separate
regulations under section 6109 requiring all individuals who prepare
all or substantially all of a tax return for compensation to obtain a
PTIN, are expected to improve the accuracy, completeness and timeliness
of tax returns because they will help the IRS identify tax return
preparers and the tax returns and claims for refund that they prepare,
which will aid the IRS's oversight of tax return preparers, and to
administer requirements intended to ensure that tax return preparers
are competent, trained, and conform to rules of practice. Individuals
who prepare all or substantially all of a tax return or claim for
refund will be required to obtain a PTIN prescribed by the IRS and
furnish the PTIN when the tax return preparer signs (as the tax return
preparer) a tax return or claim for refund. These individuals who are
currently not attorneys, certified public accountants, or enrolled
agents will apply for status as a registered tax return preparer and
regularly renew that status. Given the important role that tax return
preparers play in Federal tax administration, the IRS has a significant
interest in being able to accurately identify tax return preparers and
monitor the tax return preparation activities of these individuals.
These regulations, in conjunction with the final PTIN regulations, will
enable the IRS to more accurately identify tax return preparers and
improve the IRS's ability to associate filed tax returns and refund
claims with the responsible tax return preparer.
Third, the proposed regulations are expected to improve the
accuracy of tax
[[Page 51720]]
returns by providing that all registered tax return preparers are
practicing before the IRS and, therefore, are practitioners subject to
the ethical standards of conduct in Circular 230. This change will
authorize OPR to inquire into possible misconduct and institute
disciplinary proceedings relating to paid preparer misconduct under the
provisions of Circular 230. A paid preparer who is shown to be
incompetent or disreputable, fails to comply with the provisions in
Circular 230, or with intent to defraud, willfully and knowingly
misleads or threatens a client or prospective client, is subject to
censure, suspension, or disbarment from practice before the IRS, as
well as a monetary penalty.
The availability of these sanctions will act as a deterrent to paid
preparers engaging in misconduct because disreputable or incompetent
paid preparers who are suspended or disbarred from practice will no
longer be able to prepare tax returns, claims for refund, and other
documents submitted to the IRS. Competent and ethical tax return
preparers who are well educated in the rules and subject matter of
their field can prevent costly errors, potentially saving a taxpayer
from unwanted problems later on and relieving the IRS from expending
valuable examination and collection resources.
Because these regulations apply to all tax return preparers, the
IRS and the Treasury Department anticipate that they will improve the
accuracy of tax returns prepared by all types of tax professionals. The
IRS and the Treasury Department expect that the largest marginal
improvements in accuracy will be with regard to tax returns prepared by
tax return preparers who previously were unregulated through the
Circular 230 requirements. Unlike certified public accountants,
attorneys, and enrolled agents, unenrolled tax return preparers
generally are not subject to any form of testing, continuing
professional education, or uniform ethical standards. The tax returns
prepared by unenrolled tax return preparers may involve tax issues that
are less complicated and smaller in amount than issues in tax returns
prepared by other types of tax professionals. In addition, individual
taxpayers may face a variety of complex tax issues, for which the
advice of a qualified tax advisor will improve the accuracy on the
return. Finally, by requiring registration of all tax return preparers,
these regulations will allow the IRS to better monitor the relative
accuracy of tax returns prepared by various types of tax professionals.
Comments are requested on whether these proposed regulations will
improve overall tax administration. In particular, comments are
specifically requested regarding the extent to which the improved
accuracy of tax returns will be achieved through these regulations and
whether the testing and continuing education provisions of these
regulations are properly focused on currently unregulated tax return
preparers.
4. An Assessment of Costs Anticipated From the Regulatory Action
There are various costs anticipated from this regulatory action.
BILLING CODE 4830-01-P
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BILLING CODE 4830-01-C
Tax return preparers will incur costs associated with taking a
minimum competency examination, including the cost of the examination,
the amount of time required to study for the examination, and any
associated travel depending on the proximity of tax return preparer to
the test site location. Although it is anticipated that the vendor will
offer the test at several locations in the United States and outside
the United States, the vendor and the test locations have not been
selected at this time. Future regulations will be proposed that address
the costs to the government for creating, administering, and reviewing
the examination and the user fee the IRS will charge to recover these
costs. The third-party vendor who helps administer the registered tax
return preparer competency examination also will charge a reasonable
fee to take the registered tax return preparer examination. Comments
are specifically requested on the costs associated with the examination
and the impact these costs may have on tax return preparers, entities
that employ them or taxpayers who use their services.
Additionally, preparers will be subject to user fees for applying
for a PTIN and renewing the PTIN. Proposed regulations published in the
Federal Register on July 23, 2010, establish a $50 fee to apply for a
PTIN. A third party vendor will administer the PTIN application and
renewal process and will charge a fee that is independent of the user
fee charged by the government. Comments are specifically requested on
the costs associated with applying for and renewing a PTIN and the
impact these costs may have on tax return preparers and entities that
employ them.
Tax return preparers will incur recordkeeping and other costs
associated with taking continuing education classes and any associated
travel. Section 10.6 of these proposed regulations requires a
registered tax return preparer to maintain records and educational
materials regarding the completion of the required qualifying
continuing education credits. The IRS and the Treasury Department
estimate that there are 650,000 practitioners who will be affected by
these recordkeeping requirements and the estimated annual
[[Page 51724]]
burden per practitioner will vary from 30 minutes to one hour,
depending on individual circumstances, with an estimated average of 54
minutes. The total annual costs resulting from these recordkeeping
requirements will be $9,880,000 for all affected practitioners.
Comments are specifically requested on the other costs associated with
taking continuing education classes.
Continuing education providers will be subject to recordkeeping
costs and user fees for each application for qualification as a
qualified continuing education program. Section 10.9 of these proposed
regulations requires providers of qualifying continuing education
programs to maintain records and educational material concerning these
programs and the individuals who attend them. Continuing education
providers also obtain approval of each program as a qualified
continuing education program. Approximately 500 continuing education
providers are currently approved to provide continuing education
programs for the approximately 50,000 enrolled agents, enrolled
actuaries and enrolled retirement plan agents who must complete
continuing education currently, but the IRS and the Treasury Department
estimate that there are 2,250 continuing education providers who will
be affected by these recordkeeping requirements and the estimated
annual burden per continuing education provider will vary from 5 hours
to 5,000 hours, depending on individual circumstances, with an
estimated average of 500 hours. The estimated total annual costs
resulting from these requirements will be $38,632,500 for all affected
continuing education providers.
The amounts of the user fee for providing continuing education
programs are still to be determined and another regulation addressing
user fees will be proposed. These future regulations will address the
costs to the government for the review, approval, and oversight of
continuing education providers to ensure their compliance with program
design and maintenance for continuing education programs and the user
fee to be charged by the IRS to recover these costs.
Currently, the cost to the tax return preparer of any particular
continuing education course can vary greatly from free to hundreds of
dollars. Many tax return preparation firms either provide continuing
education courses at the firm to its employees for no charge or sponsor
the cost of external courses for its employees. Other tax return
preparers, however, will have to personally pay the cost of each
continuing education course, which generally ranges anywhere from $20
to $300 per course depending on whether the continuing education
provider offers the course in person, online, or over the phone. After
the publication of this regulatory action, continuing education
providers may increase the costs of the courses in response to the new
user fee on continuing education providers. Tax return preparers also
may incur additional costs if they travel to attend continuing
education programs. These costs may include the time to travel to the
program, transportation, lodging and incidentals.
Entities may be directly affected by the competency examination,
PTIN and continuing education costs if they choose to pay any or all of
the user fees or expenses for their employees. Some individuals and
entities also may lose sales and profits while preparers are studying
and sitting for the examination or taking the continuing education
courses. Finally, individual tax return preparers and entities that
employ individuals who prepare tax returns may need to close or change
their business model if all, or a majority, of their employees cannot
satisfy the necessary qualifications and competency requirements. The
IRS and the Treasury Department believe that only a small percentage of
tax return preparers will need to close or change their business model
based upon these proposed rules. Comments are specifically requested on
the costs associated with continuing education and the impact these
costs may have on tax return preparers, continuing education providers,
entities that employ tax return preparers or taxpayers who use the
services of a tax return preparer.
5. An Assessment of Costs and Benefits of Potential Alternatives
The IRS and the Treasury Department considered various alternatives
in determining the best ways to implement proposed changes to the
regulation of tax return preparers. In order to place the costs and
benefits of the proposed rule in context, E.O. 12866 requires a
comparison between the proposed rule, a baseline of what the world
would look like without the proposed rule, and reasonable alternatives
to the proposed rule.
i. Baseline Scenario
Under a baseline scenario, the current ethical standards in
Circular 230 would continue to apply only to attorneys, certified
public accountants, enrolled agents, and other practitioners who
prepare tax returns and claims for refund, but not to unenrolled tax
return preparers. Also, any unenrolled tax return preparer under this
baseline scenario would be able to prepare and sign tax returns and
claims for refund without passing an examination to establish
competence or satisfying continuing education requirements.
Remaining under the current rules regarding tax return preparers
would eliminate the benefits of the proposed rule described in section
A2 of this preamble. For example, under the baseline, OPR would not be
authorized to institute disciplinary proceedings seeking sanctions
against unenrolled tax return preparers.
Continuing to authorize any individual to prepare tax returns and
claims for refund for compensation without passing an examination or
taking continuing education courses also would eliminate any costs
associated with the proposed rule described in section A3 of this
preamble. Tax return preparers, however, would still potentially be
subject to user fees for obtaining a PTIN and renewing the PTIN if
other Treasury Department and IRS regulations specifically prescribed
those fees.
ii. Alternative One
The first alternative that was considered is to require all tax
return preparers to comply with the ethical standards in Circular 230,
but not to require any tax return preparer to pass an examination and
complete continuing education courses. Under this alternative, the
provisions of the proposed rule clarifying that tax return preparers
are subject to the ethical rules in Circular 230 would remain intact,
but all of the other changes would not be adopted.
The benefits resulting from this alternative would likely be less
than the rules in the proposed regulations because tax return preparers
would not need to meet a minimum competency level and keep educated and
up-to-date on Federal tax issues. The most significant drawback to this
alternative is the potential loss of these benefits and the benefits
that result from monitoring the return preparation activities of tax
return preparers generally. Under this alternative, however, tax return
preparers would not incur the majority of costs that exist under the
proposed regulations.
iii. Alternative Two
A second alternative is to require tax return preparers who are not
currently authorized to practice before the IRS to apply for such
authorization with the IRS, satisfy annual continuing education
requirements, and meet certain ethical
[[Page 51725]]
standards, but not to pass a minimum competency examination. This
alternative is identical to the proposed regulations other than
requiring certain preparers to successfully pass an examination
administered by, or under the oversight of, the IRS.
The benefits resulting from this alternative are more comparable to
the benefits in the proposed regulations than under the alternative
one. Nevertheless, the lack of an examination probably would not be as
effective in ensuring that tax return preparers are qualified to obtain
professional credentials and practice before the IRS. Tax return
preparers under this alternative would incur all of the same costs that
are in the proposed regulations other than the costs associated with
taking the examination.
iv. Alternative Three
A third alternative is to ``grandfather in'' unenrolled tax return
preparers who have accurately and competently prepared tax returns for
a certain amount of years. This alternative is the same as the rules in
the proposed regulations other than authorizing some unenrolled return
preparers who have a specified amount of prior experience preparing tax
returns and claims for refund to continue to prepare and sign returns
without passing a minimum competency examination.
The benefits resulting from this alternative would likely be less
than the rules in the proposed regulations because the IRS and the
Treasury Department believe a minimum level of competency needs to be
assured through examination. Additionally, this alternative is not as
likely to promote the same taxpayer confidence in the tax return
preparation community as the proposed regulations, which may, in turn,
influence taxpayers when choosing a tax return preparer. Tax return
preparers under this alternative would incur all of the same costs that
are in the proposed regulations except certain unenrolled preparers
would avoid the costs associated with taking the examination.
Comments are specifically requested on the benefits and costs of
these alternatives compared to the approach taken in the proposed
regulations.
B. Initial Regulatory Flexibility Analysis
When an agency issues a rulemaking proposal, 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.'' See 5 U.S.C. 603(a). Section 605 of the RFA
provides an exception to this requirement if the agency certifies that
the proposed rulemaking will not have a significant economic impact on
a substantial number of small entities. A small entity is defined as a
small business, small nonprofit organization, or small governmental
jurisdiction. See 5 U.S.C. 601(3) through (6). The IRS and the Treasury
Department conclude that the proposed regulations, if promulgated, will
impact a substantial number of small entities and the economic impact
will be significant. As a result, an initial regulatory flexibility
analysis is required.
1. Description of the Reasons Why the Agency Action Is Being Considered
As discussed in more detail in section A1 of this preamble, tax
return preparers are critical to ensuring compliance with the Federal
tax laws and are an important component in the IRS's administration of
those laws. More than eighty percent of U.S. taxpayers use a tax return
preparer or consumer tax return preparation software to help prepare
and file tax returns. Most tax return preparers are currently not
subject to the ethical rules governing practice before the IRS and do
not have to pass any competency requirement established by the
government or a professional organization. After completing a
comprehensive six-month review of tax return preparers, which included
receiving input through public forums, solicitation of written
comments, and meetings with advisory groups, the IRS concluded that
there was a need for increased oversight of the tax return preparer
industry. These proposed regulations implement higher standards for the
tax return preparer community with the goal of significantly enhancing
protections and service for taxpayers, increasing confidence in the tax
system, and resulting in greater long-term compliance with the tax
laws.
2. Statement of the Objectives of, and Legal Basis for, the Proposed
Rule
The principal objective of the proposed regulations is to increase
oversight of all tax return preparers and to provide guidance to tax
return preparers about the new requirements imposed on them under
Circular 230. Specifically, the proposed regulations clarify that any
registered tax return preparer is a practitioner practicing before the
IRS and thereby is subject to the ethical rules in Circular 230. The
proposed regulations require a tax return preparer to demonstrate the
necessary qualifications and competency to advise and assist other
persons in the preparation of all or substantially all of a tax return
or claim for refund. The legal basis for these requirements is
contained in section 330 of title 31.
3. Description and Estimate (Where Feasible) of the Number of Small
Entities Subject to the Proposed Rule
The proposed regulations affect all individuals currently working
as paid preparers, individuals who want to become designated as a
registered tax return preparer under the new oversight rules in
Circular 230, and those small entities that are owned by or employ paid
preparers. Only individuals, not businesses, can practice before the
IRS or become a registered tax return preparer. Thus, the economic
impact of these regulations on any small entity generally will be a
result of an unenrolled individual owning a small business or on a
small business that otherwise employs unenrolled paid return preparers.
These regulations also will economically affect any small entity that
is a provider of qualifying continuing education programs.
The appropriate NAICS codes for tax return preparers relate to tax
preparation services (NAICS code 541213) and other accounting services
(NAICS code 541219). Entities identified under these codes are
considered small under the Small Business Administration size standards
(13 CFR 121.201) if their annual revenue is less than $7 million or
$8.5 million, respectively. The IRS estimates that approximately
seventy to eighty percent of the individuals subject to these proposed
regulations are paid preparers operating as or employed by small
entities. The IRS estimates that there will be 2,250 providers of
qualifying continuing education programs.
4. Description of the Projected Reporting, Recordkeeping and Related
Requirements of the Proposed Rule, Including an Estimate of the Classes
of Small Entities That Will Be Subject to the Requirements and the Type
of Professional Skills Necessary for Preparation of the Report or
Record
The IRS estimates that there are approximately 600,000 to 700,000
unenrolled tax return preparers who are currently not attorneys,
certified public accountants, or enrolled agents and who will apply for
status as a registered tax return preparer if these proposed rules are
adopted. Under the proposed regulations, tax return preparers who
become registered tax return preparers are subject to a recordkeeping
requirement within the meaning of the PRA because they are required to
[[Page 51726]]
maintain records and educational materials regarding the satisfaction
of their qualifying continuing education requirements. These
recordkeeping requirements do not require any specific professional
skills other than general recordkeeping skills already needed to own
and operate a small business or to competently act as a tax return
preparer. It is estimated that practitioners will annually spend
approximately 30 minutes to one hour in maintaining the required
records, depending on individual circumstances.
The estimated 2,250 providers of qualifying continuing education
programs will be required to maintain records and educational material
concerning these programs and the persons who attended them. These
entities will need to obtain approval of the program as a qualified
continuing education program from OPR. These continuing education
providers will annually spend approximately 5 minutes per attendee
maintaining the required records and approximately 30 minutes to one
hour per program completing and filing the application for approval as
a qualified continuing education program.
As previously discussed in section A3 of this preamble, the
proposed rule contains a number of other compliance requirements not
subject to the PRA. These include the costs tax return preparers incur
to take a competency examination, costs for continuing education
classes, and other incidental costs and user fees. Small entities may
be directly affected by these costs if they choose to pay any or all of
these fees for their employees. In some cases, small entities may lose
sales and profits while their employees prepare for and take the
examination or participate in continuing education courses. Finally,
some small entities that employ individuals who prepare tax returns may
need to alter their business model if a significant number of their
employees cannot satisfy the necessary qualifications and competency
requirements. The IRS and the Treasury Department believe that only a
small percentage of small entities, if any, may need to cease doing
business or radically change their business model due to these proposed
rules.
5. Identification, to the Extent Practicable, of All Relevant Federal
Rules That May Duplicate, Overlap or Conflict With the Proposed Rule
All tax return preparers currently are subject to various civil and
criminal penalties under the Code. For example, section 6694 imposes
civil penalties on tax return preparers for conduct giving rise to
certain understatements of liability on a return, while section 6695
imposes civil penalties for, among other acts, failing to sign or
provide an identification number on a return they prepare. Tax return
preparers who demonstrate a pattern of misconduct may be enjoined from
preparing further returns under section 7407. Additionally, the IRS,
under its broad authority to regulate the filing of electronic returns,
requires any tax return preparer who files returns electronically to
comply with certain rules, including requiring the electronic return
originator to pass background and credit history checks. The IRS and
the Treasury Department believe that the proposed rules complement
these existing rules with a resulting comprehensive enforcement
strategy that ensures that all tax return preparers are assisting
clients appropriately.
6. Description of Any Significant Alternatives to the Proposed Rule
That Accomplish the Stated Objectives of Applicable Statutes and Which
Minimize Any Significant Economic Impact on Small Entities
The IRS received a large volume of comments, through the Return
Preparer Review, on the oversight and enforcement of tax return
preparers from all interested parties, including tax professional
groups representing large and small entities, Federal and state
organizations, IRS advisory groups, software vendors, individual return
preparers, and the public. The input received from this large and
diverse community overwhelmingly expressed support for efforts to
increase the oversight of tax return preparers, particularly for those
who are not attorneys, certified public accountants, or other
individuals currently authorized to practice before the IRS.
In concert with this tremendous public support for increased IRS
oversight of tax return preparers, the IRS and the Treasury Department
considered various alternatives in determining the best ways to
implement proposed changes to the regulation of paid preparers. As
discussed in more detail in section A4 of this preamble, these
alternatives included:
(1) Requiring all tax return preparers to comply with the ethical
standards in Circular 230 or a code of ethics similar to Circular 230,
but not requiring any tax return preparers to demonstrate their
qualifications and competency;
(2) Requiring tax return preparers who are not currently authorized
to practice before the IRS to apply for authorization with the IRS,
satisfy annual continuing education requirements, and meet certain
ethical standards, but not to pass a minimum competency examination;
and
(3) Requiring all tax return preparers who are not currently
authorized to practice before the IRS to pass a minimum competency
examination and meet other requirements, but ``grandfather in'' tax
return preparers who have accurately and competently prepared tax
returns for a certain number of years.
After consideration of these and other alternatives and all of the
input provided through the public comment process, the IRS and the
Treasury Department concluded that the provisions of the proposed
regulations are necessary for sound tax administration and are the best
way to increase oversight of all paid preparers. The testing
requirements in the proposed rules will ensure that tax return
preparers pass a minimum competency examination to obtain their
professional credentials, while the continuing education requirements
will help ensure that tax return preparers remain current on Federal
tax law and continue to expand their tax knowledge. The extension of
the rules in Circular 230 to registered tax return preparers will
require all practitioners to meet certain ethical standards and allow
the IRS to suspend or otherwise discipline tax return preparers who
engage in unethical or disreputable conduct. Accordingly, the
implementation of the qualification and competency standards in these
proposed rules is expected to increase taxpayer compliance and ensure
uniform and high ethical standards of conduct for tax return preparers.
The public comments submitted during the Return Preparer Review
overwhelmingly supported the provisions in these proposed rules.
Comments and Requests for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. The IRS and the Treasury Department request comments on the
substance of the proposed regulations, as well as on the clarity of the
proposed rules and how they can be made easier to understand. All
comments that are submitted by the public will be made available for
public inspection and copying.
A public hearing has been scheduled for Friday, October 8, 2010,
beginning at 10 a.m. in Auditorium, Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC. Due to building
[[Page 51727]]
security procedures, visitors must enter at the Constitution Avenue
entrance. All visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. For information about having your name placed on the
building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit written or
electronic comments and an outline of the topics to be discussed and
the time to be devoted to each topic by Monday, September 27, 2010. A
period of 10 minutes will be allocated to each person for making
comments.
An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these regulations is Matthew S. Cooper of
the Office of the Associate Chief Counsel (Procedure and
Administration).
List of Subjects in 31 CFR Part 10
Accountants, Administrative practice and procedure, Lawyers,
Reporting and recordkeeping requirements, Taxes.
Withdrawal of Notice of Proposed Rulemaking
Accordingly, under the authority of 31 U.S.C. 330, the notice of
proposed rulemaking (REG-138637-07) that was published in the Federal
Register on September 26, 2007 (72 FR 54621) is withdrawn.
Proposed Amendments to the Regulations
Accordingly, 31 CFR part 10 is proposed to be amended to read as
follows:
PART 10--PRACTICE BEFORE THE INTERNAL REVENUE SERVICE
Paragraph 1. The authority citation for 31 CFR part 10 is revised
to read as follows:
Authority: Sec. 3, 23 Stat. 258, secs. 2-12, 60 Stat. 237 et
seq.; 5 U.S.C. 301, 500, 551-559; 31 U.S.C. 321; 31 U.S.C. 330;
Reorg. Plan No. 26 of 1950, 15 FR 4935, 64 Stat. 1280, 3 CFR, 1949-
1953 Comp., p. 1017.
Par. 2. Section 10.0 is revised to read as follows:
Sec. 10.0 Scope of part.
This part contains rules governing the recognition of attorneys,
certified public accountants, enrolled agents, enrolled retirement plan
agents, registered tax return preparers, and other persons representing
taxpayers before the Internal Revenue Service. Subpart A of this part
sets forth rules relating to the authority to practice before the
Internal Revenue Service; Subpart B of this part prescribes the duties
and restrictions relating to such practice; Subpart C of this part
prescribes the sanctions for violating the regulations; Subpart D of
this part contains the rules applicable to disciplinary proceedings;
and Subpart E of this part contains general provisions relating to the
availability of official records.
Par. 3. Section 10.2 is amended by revising paragraphs (a)(4),
(a)(5), and (b) and adding paragraph (a)(8) to read as follows:
Sec. 10.2 Definitions.
(a) * * *
(4) Practice before the Internal Revenue Service comprehends all
matters connected with a presentation to the Internal Revenue Service
or any of its officers or employees relating to a taxpayer's rights,
privileges, or liabilities under laws or regulations administered by
the Internal Revenue Service. Such presentations include, but are not
limited to, preparing documents; filing documents; corresponding and
communicating with the Internal Revenue Service; rendering written
advice with respect to any entity, transaction, plan or arrangement, or
other plan or arrangement having a potential for tax avoidance or
evasion; and representing a client at conferences, hearings, and
meetings.
(5) Practitioner means any individual described in paragraphs (a),
(b), (c), (d), (e), or (f) of Sec. 10.3.
* * * * *
(8) Tax return preparer means any individual within the meaning of
section 7701(a)(36) and 26 CFR 301.7701-15.
(b) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 4. Section 10.3 is amended by:
1. Redesignating paragraphs (f), (g), (h), and (i) as paragraphs
(g), (h), (i), and (j), respectively.
2. Adding new paragraph (f).
3. Revising paragraphs (d)(3) and (e)(3), and newly designated
paragraph (j).
The revisions and additions read as follows:
Sec. 10.3 Who may practice.
* * * * *
(d) * * *
(3) An individual who practices before the Internal Revenue Service
pursuant to paragraph (d)(1) of this section is subject to the
provisions of this part in the same manner as attorneys, certified
public accountants, enrolled agents, enrolled retirement plan agents,
and registered tax return preparers.
(e) * * *
(3) An individual who practices before the Internal Revenue Service
pursuant to paragraph (e)(1) of this section is subject to the
provisions of this part in the same manner as attorneys, certified
public accountants, enrolled agents, enrolled actuaries, and registered
tax return preparers.
(f) Registered tax return preparers. (1) Any individual who is
designated as a registered tax return preparer pursuant to Sec.
10.4(c) of this part who is not currently under suspension or
disbarment from practice before the Internal Revenue Service may
practice before the Internal Revenue Service.
(2) Practice as a registered tax return preparer is limited to
preparing tax returns, claims for refund, and other documents for
submission to the Internal Revenue Service. A registered tax return
preparer may prepare, or assist in preparing, all or substantially all
of a tax return or claim for refund for which the registered tax return
preparer has passed the requisite written examination. A registered tax
return preparer also may sign tax returns, claims for refund, or other
documents for which the registered tax return preparer has passed the
requisite written examination. The Internal Revenue Service will
prescribe by forms, instructions, or other appropriate guidance the tax
returns and claims for refund, including the schedules and forms, that
a registered tax return preparer may prepare or sign based on the
written examination that the registered tax return preparer has
successfully completed. A registered tax return preparer may represent
taxpayers before revenue agents, customer service representatives, or
similar officers and employees of the Internal Revenue Service during
an examination if the registered tax return preparer signed the tax
return or claim for refund for the taxable year or period under
examination. Unless otherwise prescribed by regulation or notice, this
right does not permit such individual to represent the taxpayer,
regardless of the circumstances requiring representation, before
appeals officers, revenue officers, Counsel or similar officers or
employees
[[Page 51728]]
of the Internal Revenue Service or the Treasury Department. A
registered tax return preparer's authorization to practice under this
part also does not include the authority to provide tax advice to a
client or another person except as necessary to prepare a tax return,
claim for refund, or other document intended to be submitted to the
Internal Revenue Service.
(3) An individual who practices before the Internal Revenue Service
pursuant to paragraph (f)(1) of this section is subject to the
provisions of this part in the same manner as attorneys, certified
public accountants, enrolled agents, enrolled retirement plan agents,
and enrolled actuaries.
* * * * *
(j) Effective/applicability date. This section is generally
applicable 60 days after the date that final regulations are published
in the Federal Register.
Par. 5. Section 10.4 is revised to read as follows:
Sec. 10.4 Eligibility to become an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer.
(a) Enrollment as an enrolled agent upon examination. The Director
of the Office of Professional Responsibility may grant enrollment as an
enrolled agent to an applicant who demonstrates special competence in
tax matters by written examination administered by, or administered
under the oversight of, the Director of the Office of Professional
Responsibility and who has not engaged in any conduct that would
justify the suspension or disbarment of any practitioner under the
provisions of this part on the date the application is submitted.
(b) Enrollment as a retirement plan agent upon examination. The
Director of the Office of Professional Responsibility may grant
enrollment as an enrolled retirement plan agent to an applicant who
demonstrates special competence in qualified retirement plan matters by
written examination administered by, or administered under the
oversight of, the Director of the Office of Professional Responsibility
and who has not engaged in any conduct that would justify the
suspension or disbarment of any practitioner under the provisions of
this part.
(c) Designation as a registered tax return preparer. The Director
of the Office of Professional Responsibility may designate an
individual as a registered tax return preparer provided an applicant
demonstrates competence in Federal tax return preparation matters by
written examination administered by, or administered under the
oversight of, the Internal Revenue Service, possesses a current or
otherwise valid PTIN or other prescribed identifying number, and has
not engaged in any conduct that would justify the suspension or
disbarment of any practitioner under the provisions of this part on the
date the application is submitted.
(d) Enrollment of former Internal Revenue Service employees. The
Director of the Office of Professional Responsibility may grant
enrollment as an enrolled agent or enrolled retirement plan agent to an
applicant who, by virtue of past service and technical experience in
the Internal Revenue Service, has qualified for such enrollment and who
has not engaged in any conduct that would justify the suspension or
disbarment of any practitioner under the provisions of this part, under
the following circumstances--
(1) The former employee applies for enrollment to the Director of
the Office of Professional Responsibility on a form supplied by the
Director of the Office of Professional Responsibility and supplies the
information requested on the form and such other information regarding
the experience and training of the applicant as may be relevant.
(2) An appropriate office of the Internal Revenue Service, at the
request of the Director of the Office of Professional Responsibility,
will provide the Director of the Office of Professional Responsibility
with a detailed report of the nature and rating of the applicant's work
while employed by the Internal Revenue Service and a recommendation
whether such employment qualifies the applicant technically or
otherwise for the desired authorization.
(3) Enrollment as an enrolled agent based on an applicant's former
employment with the Internal Revenue Service may be of unlimited scope
or it may be limited to permit the presentation of matters only of the
particular specialty or only before the particular unit or division of
the Internal Revenue Service for which the applicant's former
employment has qualified the applicant. Enrollment as an enrolled
retirement plan agent based on an applicant's former employment with
the Internal Revenue Service will be limited to permit the presentation
of matters only with respect to qualified retirement plan matters.
(4) Application for enrollment as an enrolled agent or enrolled
retirement plan agent based on an applicant's former employment with
the Internal Revenue Service must be made within three years from the
date of separation from such employment.
(5) An applicant for enrollment as an enrolled agent who is
requesting such enrollment based on former employment with the Internal
Revenue Service must have had a minimum of five years continuous
employment with the Internal Revenue Service during which the applicant
must have been regularly engaged in applying and interpreting the
provisions of the Internal Revenue Code and the regulations relating to
income, estate, gift, employment, or excise taxes.
(6) An applicant for enrollment as an enrolled retirement plan
agent who is requesting such enrollment based on former employment with
the Internal Revenue Service must have had a minimum of five years
continuous employment with the Internal Revenue Service during which
the applicant must have been regularly engaged in applying and
interpreting the provisions of the Internal Revenue Code and the
regulations relating to qualified retirement plan matters.
(7) For the purposes of paragraphs (d)(5) and (d)(6) of this
section, an aggregate of 10 or more years of employment in positions
involving the application and interpretation of the provisions of the
Internal Revenue Code, at least three of which occurred within the five
years preceding the date of application, is the equivalent of five
years continuous employment.
(e) Natural persons. Enrollment or authorization to practice may be
granted only to natural persons.
(f) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 6. Section 10.5 is revised to read as follows:
Sec. 10.5 Application to become an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer.
(a) Form; address. An applicant to become an enrolled agent,
enrolled retirement plan agent, or registered tax return preparer must
apply as required by forms or procedures established and published by
the Internal Revenue Service, including proper execution of required
forms under oath or affirmation. The address on the application will be
the address under which a successful applicant is enrolled or
registered and is the address to which all correspondence concerning
enrollment or registration will be sent.
(b) Fee. A reasonable nonrefundable fee will be charged for each
application filed with the Director of the Office of
[[Page 51729]]
Professional Responsibility. See 26 CFR part 300.
(c) Additional information; examination. The Director of the Office
of Professional Responsibility, as a condition to consideration of an
application, may require the applicant to file additional information
and to submit to any written or oral examination under oath or
otherwise. The Director of the Office of Professional Responsibility
will, on written request filed by the applicant, afford such applicant
the opportunity to be heard with respect to his or her application for
enrollment.
(d) Compliance and suitability checks. (1) As a condition to
consideration of an application, the Internal Revenue Service may
conduct a Federal tax compliance check and suitability check. The tax
compliance check will be limited to an inquiry regarding whether an
applicant has filed all required individual or business tax returns and
whether the applicant has failed to pay, or make proper arrangement
with the Internal Revenue Service for payment of, any Federal tax
debts. The suitability check will be limited to an inquiry regarding
whether an applicant has engaged in any conduct that would justify
suspension or disbarment of any practitioner under the provisions of
this part on the date the application is submitted, including whether
the applicant has engaged in disreputable conduct as defined in Sec.
10.51. The application will be denied only if the results of the
compliance or suitability check are sufficient to establish that the
practitioner engaged in conduct subject to sanctions under Sec. 10.51
and Sec. 10.52.
(2) If the applicant does not pass the tax compliance or
suitability check, the applicant will not be issued an enrollment or
registration card or certificate pursuant to Sec. 10.6(b) of this
part, and will be provided information regarding the denial of the
application and the rules on appealing the denial. An applicant who is
initially denied enrollment or registration for failure to pass a tax
compliance check may reapply after the initial denial if the applicant
becomes current with respect to the applicant's tax liabilities.
(e) Temporary recognition. On receipt of a properly executed
application, the Director of the Office of Professional Responsibility
may grant the applicant temporary recognition to practice pending a
determination as to whether status as an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer should be
granted. Temporary recognition will be granted only in unusual
circumstances and it will not be granted, in any circumstance, if the
application is not regular on its face, if the information stated in
the application, if true, is not sufficient to warrant granting the
application to practice, or if there is any information before the
Director of the Office of Professional Responsibility indicating that
the statements in the application are untrue or that the applicant
would not otherwise qualify to become an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer. Issuance of
temporary recognition does not constitute either a designation or a
finding of eligibility as an enrolled agent, enrolled retirement plan
agent, or registered tax return preparer, and the temporary recognition
may be withdrawn at any time by the Director of the Office of
Professional Responsibility.
(f) Appeal from denial of application. The Director of the Office
of Professional Responsibility must inform the applicant in writing as
to the reason(s) for any denial of an application. The applicant may,
within 30 days after receipt of the notice of denial of the
application, file a written appeal of the denial with the Secretary of
the Treasury or delegate. A decision on the appeal will be rendered by
the Secretary, or delegate, as soon as practicable.
(g) Effective/applicability date. This section is applicable to
applications received 60 days after the date that final regulations are
published in the Federal Register.
Par. 7. Section 10.6 is revised to read as follows:
Sec. 10.6 Term and renewal of status as an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer.
(a) Term. Each individual authorized to practice before the
Internal Revenue Service as an enrolled agent, enrolled retirement plan
agent, or registered tax return preparer will be accorded active
enrollment or registration status subject to renewal of enrollment or
registration as provided in this part.
(b) Enrollment or registration card or certificate. The Director of
the Office of Professional Responsibility will issue an enrollment or
registration card or certificate to each individual whose application
to practice before the Internal Revenue Service is approved. Each card
or certificate will be valid for the period stated on the card or
certificate. An enrolled agent or registered tax return preparer may
not practice before the Internal Revenue Service if the card or
certificate is not current or otherwise valid. The card or certificate
is in addition to any certificate that may be issued to each attorney,
certified public accountant, enrolled agent, or registered tax return
preparer who obtains a preparer tax identification number.
(c) Change of address. An enrolled agent, enrolled retirement plan
agent, or registered tax return preparer must send notification of any
change of address to the address specified by the Director of the
Office of Professional Responsibility within 60 days of the change of
address. This notification must include the enrolled agent's, enrolled
retirement plan agent's, or registered tax return preparer's name,
prior address, new address, tax identification number(s) (including
preparer tax identification number), and the date the change of address
became effective. Unless this notification is sent, the address for
purposes of any correspondence from the Director of the Office of
Professional Responsibility shall be the address as reflected on the
practitioner's most recent application for enrollment or registration,
or application for renewal of enrollment or registration.
(d) Renewal--(1) In general. Designation as an enrolled agent,
enrolled retirement plan agent, or registered tax return preparer must
be renewed periodically to maintain active status to practice before
the Internal Revenue Service. Failure to receive notification from the
Director of the Office of Professional Responsibility of the renewal
requirement will not be justification for the individual's failure to
satisfy this requirement.
(2) Renewal period for enrolled agents. (i) All individuals
enrolled to practice before the Internal Revenue Service who have a
social security number or tax identification number that ends with the
numbers 0, 1, 2, or 3, except for those individuals who received their
initial enrollment after November 1, 2003, must apply for renewal
between November 1, 2003, and January 31, 2004. The renewal will be
effective April 1, 2004.
(ii) All individuals enrolled to practice before the Internal
Revenue Service who have a social security number or tax identification
number that ends with the numbers 4, 5, or 6, except for those
individuals who received their initial enrollment after November 1,
2004, must apply for renewal between November 1, 2004, and January 31,
2005. The renewal will be effective April 1, 2005.
(iii) All individuals enrolled to practice before the Internal
Revenue Service who have a social security number or tax identification
number that ends with the numbers 7, 8, or 9, except for those
individuals who received their initial enrollment after
[[Page 51730]]
November 1, 2005, must apply for renewal between November 1, 2005, and
January 31, 2006. The renewal will be effective April 1, 2006.
(iv) Thereafter, applications for renewal as an enrolled agent will
be required between November 1 and January 31 of every subsequent third
year as specified in paragraph (d)(2)(i), (d)(2)(ii), or (d)(2)(iii) of
this section according to the last number of the individual's social
security number or tax identification number. Those individuals who
receive initial enrollment as an enrolled agent after November 1 and
before April 2 of the applicable renewal period will not be required to
renew their enrollment before the first full renewal period following
the receipt of their initial enrollment.
(3) Renewal period for enrolled retirement plan agents.
Applications for renewal as an enrolled retirement plan agent will be
required of all enrolled retirement plan agents between April 1 and
June 30 of every third year period subsequent to their initial
enrollment.
(4) Renewal period for registered tax return preparers.
Applications for renewal as a registered tax return preparer will be
required of all registered tax return preparers as prescribed in forms,
instructions, or other appropriate guidance.
(5) Notification of renewal. After review and approval, the
Director of the Office of Professional Responsibility will notify the
individual of the renewal and will issue the individual a card or
certificate evidencing current status as an enrolled agent, enrolled
retirement plan agent, or registered tax return preparer.
(6) Fee. A reasonable nonrefundable fee will be charged for each
application for renewal filed with the Director of the Office of
Professional Responsibility. See 26 CFR part 300.
(7) Forms. Forms required for renewal may be obtained by sending a
written request to the Director of the Office of Professional
Responsibility, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington, DC 20224 or from such other source as the Internal
Revenue Service will publish in the Internal Revenue Bulletin (see 26
CFR 601.601(d)(2)(ii)(b)) and on the Internal Revenue Service Web page
(www.irs.gov).
(e) Condition for renewal: continuing education. In order to
qualify for renewal as an enrolled agent, enrolled retirement plan
agent, or registered tax return preparer, an individual must certify,
in the manner prescribed by the Internal Revenue Service, that the
individual has satisfied the required continuing education
requirements.
(1) Definitions. For purposes of this section--
(i) Enrollment year means January 1 to December 31 of each year of
an enrollment cycle.
(ii) Enrollment cycle means the three successive enrollment years
preceding the effective date of renewal.
(iii) Registration year means each 12-month period the registered
tax return preparer is authorized to practice before the Internal
Revenue Service.
(iv) The effective date of renewal is the first day of the fourth
month following the close of the period for renewal described in
paragraph (d) of this section.
(2) For renewed enrollment as an enrolled agent or enrolled
retirement plan agent--(i) Requirements for enrollment cycle. A minimum
of 72 hours of continuing education credit, including six hours of
ethics or professional conduct, must be completed during each
enrollment cycle.
(ii) Requirements for enrollment year. A minimum of 16 hours of
continuing education credit, including two hours of ethics or
professional conduct, must be completed during each enrollment year of
an enrollment cycle.
(iii) Enrollment during enrollment cycle--(A) In general. Subject
to paragraph (e)(2)(iii)(B) of this section, an individual who receives
initial enrollment during an enrollment cycle must complete two hours
of qualifying continuing education credit for each month enrolled
during the enrollment cycle. Enrollment for any part of a month is
considered enrollment for the entire month.
(B) Ethics. An individual who receives initial enrollment during an
enrollment cycle must complete two hours of ethics or professional
conduct for each enrollment year during the enrollment cycle.
Enrollment for any part of an enrollment year is considered enrollment
for the entire year.
(3) Requirements for renewal as a registered tax return preparer. A
minimum of 15 hours of continuing education credit, including two hours
of ethics or professional conduct, three hours of Federal tax law
updates, and 10 hours of Federal tax law topics, must be completed
during each registration year.
(f) Qualifying continuing education--(1) General--(i) Enrolled
agents. To qualify for continuing education credit for an enrolled
agent, a course of learning must--
(A) Be a qualifying continuing education program designed to
enhance professional knowledge in Federal taxation or Federal tax
related matters (programs comprised of current subject matter in
Federal taxation or Federal tax related matters, including accounting,
tax return preparation software, taxation, or ethics); and
(B) Be a qualifying continuing education program consistent with
the Internal Revenue Code and effective tax administration.
(ii) Enrolled retirement plan agents. To qualify for continuing
education credit for an enrolled retirement plan agent, a course of
learning must--
(A) Be a qualifying continuing education program designed to
enhance professional knowledge in qualified retirement plan matters;
and
(B) Be a qualifying continuing education program consistent with
the Internal Revenue Code and effective tax administration.
(iii) Registered tax return preparers. To qualify for continuing
education credit for a registered tax return preparer, a course of
learning must--
(A) Be a qualifying continuing education program designed to
enhance professional knowledge in Federal taxation or Federal tax
related matters (programs comprised of current subject matter in
Federal taxation or Federal tax related matters, including accounting,
tax return preparation software, taxation, or ethics); and
(B) Be a qualifying continuing education program consistent with
the Internal Revenue Code and effective tax administration.
(2) Qualifying programs--(i) Formal programs. A formal program
qualifies as a continuing education program if it--
(A) Requires attendance and provides each attendee with a
certificate of attendance;
(B) Requires that the program be conducted by a qualified
instructor, discussion leader, or speaker (in other words, a person
whose background, training, education, and experience is appropriate
for instructing or leading a discussion on the subject matter of the
particular program);
(C) Provides or requires a written outline, textbook, or suitable
electronic educational materials; and
(D) Is approved as a qualified continuing education program by the
Director of the Office of Professional Responsibility pursuant to Sec.
10.9.
(ii) Correspondence or individual study programs (including taped
programs). Qualifying continuing education programs include
correspondence or individual study programs that are conducted by
continuing education providers and completed on an individual basis by
the enrolled individual. The allowable
[[Page 51731]]
credit hours for such programs will be measured on a basis comparable
to the measurement of a seminar or course for credit in an accredited
educational institution. Such programs qualify as continuing education
programs only if they--
(A) Require registration of the participants by the continuing
education provider;
(B) Provide a means for measuring successful completion by the
participants (for example, a written examination), including the
issuance of a certificate of completion by the continuing education
provider;
(C) Provide a written outline, textbook, or suitable electronic
educational materials; and
(D) Are approved as a qualified continuing education program by the
Director of the Office of Professional Responsibility pursuant to Sec.
10.9.
(iii) Serving as an instructor, discussion leader or speaker. (A)
One hour of continuing education credit will be awarded for each
contact hour completed as an instructor, discussion leader, or speaker
at an educational program that meets the continuing education
requirements of paragraph (f) of this section.
(B) A maximum of two hours of continuing education credit will be
awarded for actual subject preparation time for each contact hour
completed as an instructor, discussion leader, or speaker at such
programs. It is the responsibility of the individual claiming such
credit to maintain records to verify preparation time.
(C) The maximum credit for instruction and preparation may not
exceed four hours annually of the continuing education requirement.
(D) An instructor, discussion leader, or speaker who makes more
than one presentation on the same subject matter during an enrollment
cycle or registration year, will receive continuing education credit
for only one such presentation for the enrollment cycle or registration
year.
(3) Periodic examination. (i) Enrolled individuals may establish
eligibility for renewal of enrollment for any enrollment cycle by--
(A) Achieving a passing score on each part of the Special
Enrollment Examination administered under this part during the three
year period prior to renewal; and
(B) Completing a minimum of 16 hours of qualifying continuing
education during the last year of an enrollment cycle.
(ii) Courses designed to help an applicant prepare for the
examination specified in Sec. 10.4 are considered basic in nature and
are not qualifying continuing education.
(g) Measurement of continuing education coursework. (1) All
continuing education programs will be measured in terms of contact
hours. The shortest recognized program will be one contact hour.
(2) A contact hour is 50 minutes of continuous participation in a
program. Credit is granted only for a full contact hour, which is 50
minutes or multiples thereof. For example, a program lasting more than
50 minutes but less than 100 minutes will count as only one contact
hour.
(3) Individual segments at continous conferences, conventions and
the like will be considered one total program. For example, two 90-
minute segments (180 minutes) at a continuous conference will count as
three contact hours.
(4) For university or college courses, each semester hour credit
will equal 15 contact hours and a quarter hour credit will equal 10
contact hours.
(h) Recordkeeping requirements. (1) Each individual applying for
renewal must retain for a period of four years following the date of
renewal the information required with regard to qualifying continuing
education credit hours. Such information includes--
(i) The name of the sponsoring organization;
(ii) The location of the program;
(iii) The title of the program, qualified program number, and
description of its content;
(iv) Written outlines, course syllibi, textbook, and/or electronic
materials provided or required for the course;
(v) The dates attended;
(vi) The credit hours claimed;
(vii) The name(s) of the instructor(s), discussion leader(s), or
speaker(s), if appropriate; and
(viii) The certificate of completion and/or signed statement of the
hours of attendance obtained from the continuing education provider.
(2) To receive continuing education credit for service completed as
an instructor, discussion leader, or speaker, the following information
must be maintained for a period of four years following the date of
renewal --
(i) The name of the sponsoring organization;
(ii) The location of the program;
(iii) The title of the program and copy of its content;
(iv) The dates of the program; and
(v) The credit hours claimed.
(i) Waivers. (1) Waiver from the continuing education requirements
for a given period may be granted by the Director of the Office of
Professional Responsibility for the following reasons--
(i) Health, which prevented compliance with the continuing
education requirements;
(ii) Extended active military duty;
(iii) Absence from the United States for an extended period of time
due to employment or other reasons, provided the individual does not
practice before the Internal Revenue Service during such absence; and
(iv) Other compelling reasons, which will be considered on a case-
by-case basis.
(2) A request for waiver must be accompanied by appropriate
documentation. The individual is required to furnish any additional
documentation or explanation deemed necessary by the Director of the
Office of Professional Responsibility. Examples of appropriate
documentation could be a medical certificate or military orders.
(3) A request for waiver must be filed no later than the last day
of the renewal application period.
(4) If a request for waiver is not approved, the individual will be
placed in inactive status, so notified by the Director of the Office of
Professional Responsibility, and placed on a roster of inactive
enrolled agents, enrolled retirement plan agents, or registered tax
return preparers.
(5) If a request for waiver is approved, the individual will be
notified and issued a card or certificate evidencing renewal.
(6) Those who are granted waivers are required to file timely
applications for renewal of enrollment or registration.
(j) Failure to comply. (1) Compliance by an individual with the
requirements of this part is determined by the Director of the Office
of Professional Responsibility. An individual who fails to meet the
continuing education and fee requirements of eligibility for renewal
will be notified by the Director of the Office of Professional
Responsibility. The notice will state the basis for the determination
of noncompliance and will provide the individual an opportunity to
furnish the requested information in writing relating to the matter
within 60 days of the date of the notice. Such information will be
considered by the Director of the Office of Professional Responsibility
in making a final determination as to eligibility for renewal. The
Director of the Office of Professional Responsibility must inform the
individual as to the reason(s) for any denial of a renewal. The
individual may, within 30 days after receipt of the notice of denial of
renewal, file a written appeal of the denial with the Secretary or
delegate. A
[[Page 51732]]
decision on the appeal will be rendered by the Secretary, or delegate,
as soon as practicable.
(2) The Director of the Office of Professional Responsibility may
require any individual to provide copies of any records required to be
maintained under this part. The Director of the Office of Professional
Responsibility may disallow any continuing education hours claimed if
the individual fails to comply with this requirement.
(3) An individual who has not filed a timely application for
renewal, who has not made a timely response to the notice of
noncompliance with the renewal requirements, or who has not satisfied
the requirements of eligibility for renewal will be placed on a roster
of inactive enrolled individuals or inactive registered individuals.
During this time, the individual will be ineligible to practice before
the Internal Revenue Service.
(4) Individuals placed in inactive status and individuals
ineligible to practice before the Internal Revenue Service may not
state or imply that they are eligible to practice before the Internal
Revenue Service, or use the terms enrolled agent, enrolled retirement
plan agent, or registered tax return preparer, the designations ``EA''
or ``ERPA'' or other form of reference to eligibility to practice
before the Internal Revenue Service.
(5) An individual placed in inactive status may be reinstated to an
active status by filing an application for renewal and providing
evidence of the completion of all required continuing education hours
for the enrollment cycle or registration year. Continuing education
credit under this paragraph (k)(5) may not be used to satisfy the
requirements of the enrollment cycle or registration year in which the
individual has been placed back on the active roster.
(6) An individual placed in inactive status must file an
application for renewal and satisfy the requirements for renewal as set
forth in this section within three years of being placed in inactive
status. Otherwise, the name of such individual will be removed from the
inactive status roster and the individual's status as an enrolled
agent, enrolled retirement plan agent, or registered tax return
preparer will terminate. Future eligibility for active status must then
be reestablished by the individual as provided in this section.
(7) Inactive status is not available to an individual who is the
subject of a pending disciplinary matter before the Office of
Professional Responsibility.
(k) Inactive retirement status. An individual who no longer
practices before the Internal Revenue Service may request to be placed
in an inactive retirement status at any time and such individual will
be placed in an inactive retirement status. The individual will be
ineligible to practice before the Internal Revenue Service. An
individual who is placed in an inactive retirement status may be
reinstated to an active status by filing an application for renewal and
providing evidence of the completion of the required continuing
education hours for the enrollment cycle or registration year. Inactive
retirement status is not available to an individual who is ineligible
to practice before the Internal Revenue Service or who is the subject
of a disciplinary matter in the Office of Professional Responsibility.
(l) Renewal while under suspension or disbarment. An individual who
is ineligible to practice before the Internal Revenue Service by virtue
of disciplinary action by the Director of the Office of Professional
Responsibility is required to conform to the requirements for renewal
of enrollment or registration before the individual's eligibility is
restored.
(m) Verification. The Director of the Office of Professional
Responsibility may review the continuing education records of an
enrolled agent, enrolled retirement plan agent, or registered tax
return preparer in any manner deemed appropriate to determine
compliance with the requirements and standards for renewal as provided
in paragraph (f) of this section.
(n) Enrolled actuaries. The enrollment and renewal of enrollment of
actuaries authorized to practice under paragraph (d) of Sec. 10.3 are
governed by the regulations of the Joint Board for the Enrollment of
Actuaries at 20 CFR 901.1 through 901.72.
(o) Effective/applicability date. This section is applicable to
enrollment or registration effective 60 days after the date that final
regulations are published in the Federal Register.
Par. 8. Section 10.7 is amended by:
1. Revising the section heading.
2. Removing paragraphs (c)(1)(viii) and (e).
3. Redesignating paragraphs (f) and (g) as paragraphs (e) and (f).
4. Revising newly designated paragraphs (e) and (f).
The revisions read as follows:
Sec. 10.7 Representing oneself; participating in rulemaking; limited
practice; and special appearances.
* * * * *
(e) Fiduciaries. For purposes of this part, a fiduciary (for
example, a trustee, receiver, guardian, personal representative,
administrator, or executor) is considered to be the taxpayer and not a
representative of the taxpayer.
(f) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 9. Section 10.8 is revised to read as follows: Sec. 10.8
Return preparation and application of rules to other individuals.
(a) Preparing tax returns and furnishing information. Any
individual may prepare or assist with the preparation of a tax return
or claim for refund (provided the individual prepares less than
substantially all of the tax return or claim for refund), appear as a
witness for the taxpayer before the Internal Revenue Service, or
furnish information at the request of the Internal Revenue Service or
any of its officers or employees.
(b) Application of rules to other individuals. Any individual who
for compensation prepares, or assists in the preparation of, all or a
substantial portion of a document pertaining to any taxpayer's tax
liability for submission to the Internal Revenue Service is subject to
the duties and restrictions relating to practice in subpart B, as well
as subject to the sanctions for violation of the regulations in subpart
C. Unless otherwise a practitioner, however, an individual may not
prepare, or assist in the preparation of, all or substantially all of a
tax return or claim for refund, or sign tax returns and claims for
refund. For purposes of this paragraph, an individual described in 26
CFR 301.7701-15(f) is not treated as having prepared all or a
substantial portion of the document by reason of such assistance.
(c) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 10. Section 10.9 is added to subpart A to read as follows:
Sec. 10.9 Continuing education programs.
(a) Continuing education providers--(1) In general. Continuing
education providers are those responsible for presenting continuing
education programs. A continuing education provider must--
(i) Be an accredited educational institution;
(ii) Be recognized for continuing education purposes by the
licensing body of any State, territory, or possession of the United
States, including a Commonwealth, or the District of Columbia; or
(iii) Be recognized by the Director of the Office of Professional
Responsibility
[[Page 51733]]
as one who offers a qualified continuing education program.
(2) Qualification of continuing education program. A continuing
education provider must obtain the approval of the Director of the
Office of Professional Responsibility for each program to be qualified
as a qualified continuing education program in the time and manner
required by forms or procedures established and published by the
Internal Revenue Service.
(3) Requirements for qualified continuing education program. A
continuing education provider must ensure the qualified continuing
education program complies with all the following requirements--
(i) Programs must be developed by individual(s) qualified in the
subject matter;
(ii) Program subject matter must be current;
(iii) Instructors, discussion leaders, and speakers must be
qualified with respect to program content;
(iv) Programs must include some means for evaluation by the
Director of the Office of Professional Responsibility of technical
content and presentation;
(v) Certificates of completion bearing a current qualified
continuing education program number issued by the Director of the
Office of Professional Responsibility must be provided to the
participants who successfully complete the program; and
(vi) Records must be maintained by the continuing education
provider to verify the participants who attended and completed the
program for a period of four years following completion of the program.
In the case of continuous conferences, conventions, and the like,
records must be maintained to verify completion of the program and
attendance by each participant at each segment of the program.
(4) Fees. Reasonable nonrefundable fees may be charged for each
qualification of a qualified continuing education program. See 26 CFR
part 300.
(b) Failure to comply. Compliance by a continuing education
provider with the requirements of this part is determined by the
Director of the Office of Professional Responsibility. A continuing
education provider who fails to meet the requirements of this part will
be notified by the Director of the Office of Professional
Responsibility. The notice will state the basis for the determination
of noncompliance and will provide the continuing education provider an
opportunity to furnish the requested information in writing relating to
the matter within 60 days of the date of the notice. Such information
will be considered by the Director of the Office of Professional
Responsibility in making a determination as to the qualification of a
program as a qualified continuing education program. The Director of
the Office of Professional Responsibility must inform the continuing
education provider as to the reason(s) for any denial of a program as a
qualified continuing education program. The continuing education
provider may, within 30 days after receipt of the notice of denial,
file a written appeal with the Secretary or delegate. A decision on the
appeal will be rendered by the Secretary or delegate, as soon as
practicable.
(c) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 11. Section 10.30 is amended by revising paragraphs (a)(1) and
(e) to read as follows:
Sec. 10.30 Solicitation.
(a) Advertising and solicitation restrictions. (1) A practitioner
may not, with respect to any Internal Revenue Service matter, in any
way use or participate in the use of any form or public communication
or private solicitation containing a false, fraudulent, or coercive
statement or claim; or a misleading or deceptive statement or claim.
Enrolled agents, enrolled retirement plan agents, or registered tax
return preparers, in describing their professional designation, may not
utilize the term ``certified'' or imply an employer/employee
relationship with the Internal Revenue Service. Examples of acceptable
descriptions for enrolled agents are ``enrolled to represent taxpayers
before the Internal Revenue Service,'' ``enrolled to practice before
the Internal Revenue Service,'' and ``admitted to practice before the
Internal Revenue Service.'' Similarly, examples of acceptable
descriptions for enrolled retirement plan agents are ``enrolled to
represent taxpayers before the Internal Revenue Service as a retirement
plan agent'' and ``enrolled to practice before the Internal Revenue
Service as a retirement plan agent.'' An example of an acceptable
description for registered tax return preparers is ``designated as a
registered tax return preparer with the Internal Revenue Service.''
* * * * *
(e) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 12. Section 10.34 is amended by:
1. Adding paragraph (a).
2. Redesignating paragraph (f) as paragraph (e).
3. Revising newly designated paragraph (e).
The revisions read as follows:
Sec. 10.34 Standards with respect to tax returns and documents,
affidavits and other papers.
(a) Tax returns. (1) A practitioner may not willfully, recklessly,
or through gross incompetence--
(i) Sign a tax return or claim for refund that the practitioner
knows or reasonably should know contains a position that--
(A) Lacks a reasonable basis;
(B) Is an unreasonable position as described in section 6694(a)(2)
of the Internal Revenue Code (Code) (including the related regulations
and other published guidance); or
(C) Is a willful attempt by the practitioner to understate the
liability for tax or a reckless or intentional disregard of rules or
regulations by the practitioner as described in section 6694(b)(2) of
the Code (including the related regulations and other published
guidance).
(ii) Advise a client to take a position on a tax return or claim
for refund, or prepare a portion of a tax return or claim for refund
containing a position, that--
(A) Lacks a reasonable basis;
(B) Is an unreasonable position as described in section 6694(a)(2)
of the Code (including the related regulations and other published
guidance); or
(C) Is a willful attempt by the practitioner to understate the
liability for tax or a reckless or intentional disregard of rules or
regulations by the practitioner as described in section 6694(b)(2) of
the Code (including the related regulations and other published
guidance).
(2) A pattern of conduct is a factor that will be taken into
account in determining whether a practitioner acted willfully,
recklessly, or through gross incompetence.
* * * * *
(e) Effective/applicability date. Paragraph (a) of this section is
applicable for returns or claims for refund filed, or advice provided,
60 days after the date that final regulations are published in the
Federal Register. Paragraphs (b) through (d) of this section are
applicable to tax returns, documents, affidavits, and other papers
filed on or after September 26, 2007.
Par. 13. Section 10.36 is amended by:
1. Redesignating paragraph (b) as paragraph (c).
2. Adding new paragraph (b).
3. Revising newly designated paragraph (c).
[[Page 51734]]
The addition and revisions read as follows:
Sec. 10.36 Procedures to ensure compliance.
* * * * *
(b) Requirements for tax returns and other documents. Any
practitioner who has (or practitioners who have or share) principal
authority and responsibility for overseeing a firm's practice of
preparing tax returns, claims for refunds, or other documents for
submission to the Internal Revenue Service must take reasonable steps
to ensure that the firm has adequate procedures in effect for all
members, associates, and employees for purposes of complying with
Circular 230. Any practitioner who has (or practitioners who have or
share) this principal authority will be subject to discipline for
failing to comply with the requirements of this paragraph if--
(1) The practitioner through willfulness, recklessness, or gross
incompetence does not take reasonable steps to ensure that the firm has
adequate procedures to comply with Circular 230, and one or more
individuals who are members of, associated with, or employed by, the
firm are, or have, engaged in a pattern or practice, in connection with
their practice with the firm, of failing to comply with Circular 230;
or
(2) The practitioner knows or should know that one or more
individuals who are members of, associated with, or employed by, the
firm are, or have, engaged in a pattern or practice, in connection with
their practice with the firm, who does not comply with Circular 230,
and the practitioner, through willfulness, recklessness, or gross
incompetence fails to take prompt action to correct the noncompliance.
(c) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 14. Section 10.51 is amended by adding paragraphs (a)(16),
(a)(17), and (a)(18) and revising paragraph (b) to read as follows:
Sec. 10.51 Incompetence and disreputable conduct.
(a) * * *
(16) Willfully failing to file on magnetic or other electronic
media a tax return prepared by the practitioner when the practitioner
is required to do so by the Federal tax laws unless the failure is due
to reasonable cause and not due to willful neglect.
(17) Willfully preparing all or substantially all of, or signing, a
tax return or claim for refund when the practitioner does not possess a
current or otherwise valid preparer tax identification number or other
prescribed identifying number.
(18) Willfully representing a taxpayer before an officer or
employee of the Internal Revenue Service unless the practitioner is
authorized to do so pursuant to this part.
(b) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Par. 15. Section 10.90 is amended by:
1. Revising paragraph (a).
2. Redesignating the second paragraph (b) as paragraph (c).
3. Revising newly designated paragraph (c).
The revisions read as follows:
Sec. 10.90 Records.
(a) Roster. The Director of the Office of Professional
Responsibility will maintain, and may make available for public
inspection in the time and manner prescribed by the Secretary, or
delegate, rosters of --
(1) Individuals (and employers, firms, or other entities, if
applicable) censured, suspended, or disbarred from practice before the
Internal Revenue Service or upon whom a monetary penalty was imposed.
(2) Enrolled agents, including individuals--
(i) Granted active enrollment to practice;
(ii) Whose enrollment has been placed in inactive status for
failure to meet the requirements for renewal of enrollment;
(iii) Whose enrollment has been placed in inactive retirement
status; and
(iv) Whose offer of consent to resign from enrollment has been
accepted by the Director of the Office of Professional Responsibility
under Sec. 10.61.
(3) Enrolled retirement plan agents, including individuals--
(i) Granted active enrollment to practice;
(ii) Whose enrollment has been placed in inactive status for
failure to meet the requirements for renewal of enrollment;
(iii) Whose enrollment has been placed in inactive retirement
status; and
(iv) Whose offer of consent to resign from enrollment has been
accepted by the Director of the Office of Professional Responsibility
under Sec. 10.61.
(4) Registered tax return preparers, including individuals--
(i) Authorized to prepare all or substantially all of a tax return
or claim for refund;
(ii) Who have been placed in inactive status for failure to meet
the requirements for renewal;
(iii) Who have been placed in inactive retirement status; and
(iv) Whose offer of consent to resign from their status as a
registered tax return preparer has been accepted by the Director of the
Office of Professional Responsibility under Sec. 10.61.
(5) Disqualified appraisers.
(6) Programs granted status as a qualified continuing education
program.
* * * * *
(c) Effective/applicability date. This section is applicable 60
days after the date that final regulations are published in the Federal
Register.
Christopher Wagner,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. 2010-20850 Filed 8-19-10; 11:15 am]
BILLING CODE 4830-01-P