[Federal Register Volume 76, Number 61 (Wednesday, March 30, 2011)]
[Rules and Regulations]
[Pages 17521-17530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7571]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[TD 9518]
RIN 1545-BJ52
Specified Tax Return Preparers Required To File Individual Income
Tax Returns Using Magnetic Media
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations on the requirement
for ``specified tax return preparers'' to file individual income tax
returns using magnetic media pursuant to section 6011(e)(3) of the
Internal Revenue Code (Code). The final regulations reflect changes
made to the law by the Worker, Homeownership, and Business Assistance
Act of 2009. These regulations provide guidance to specified tax return
preparers who prepare and file individual income tax returns. Unless an
exception in these regulations applies, a tax return preparer who meets
the definition of a ``specified tax return preparer'' must
electronically file Federal income tax returns that the preparer
prepares and files for individuals, trusts, and estates. These
regulations provide a two-year transition period for certain specified
tax return preparers.
DATES: Effective Date: These regulations are effective March 30, 2011.
Applicability Dates: In accordance with sections 7805(b)(1)(B) and
(b)(2) and section 6011(e)(3), these regulations are applicable to
individual income tax returns filed after December 31, 2010. See Sec.
301.6011-7(g).
FOR FURTHER INFORMATION CONTACT: Keith L. Brau, (202) 622-4940 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been 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 1545-2201. The collection of information
in these final regulations is in Sec. 301.6011-7(a)(4)(ii). This
taxpayer choice statement information will be used by tax return
preparers and specified tax return preparers to demonstrate to the IRS
that the related individual income tax returns filed in paper format
were not required to be filed electronically pursuant to section
6011(e)(3), Sec. 1.6011-7, and Sec. 301.6011-7. The collection of
information is voluntary to obtain a benefit.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains final amendments to the Regulations on
Income Taxes (26 CFR part 1) and the Regulations on Procedure and
Administration (26 CFR part 301) under section 6011(e) of the Code
relating to the requirement for specified tax return preparers to file
individual income tax returns using magnetic media (electronically).
Section 17 of the Worker, Homeownership, and Business Assistance Act of
2009 (Pub. L. 111-92 (123 Stat. 2984, 2996)) amended section 6011(e)(1)
and added new section 6011(e)(3) as an exception to the restriction in
section 6011(e)(1) that the Secretary may not require returns of any
tax imposed by subtitle A on individuals, estates, and trusts to be
filed in any format other than paper forms supplied by the Secretary.
New section 6011(e)(3) provides that the Secretary shall require the
filing on magnetic media of any individual income tax returns prepared
and filed by a specified tax return preparer. Section 6011(e)(3)(B)
defines a specified tax return preparer as, with respect to any
calendar year, any tax return preparer unless such preparer reasonably
expects to file 10 or fewer individual income tax returns during such
calendar year. Section 6011(e)(3) does not define the term ``filed.''
Under section 6011(e)(3)(C), an individual income tax return is any
[[Page 17522]]
return of the tax imposed by subtitle A on individuals, estates, and
trusts. This includes any return of income tax in the Form 1040 series
and Form 1041 series. It also includes Form 990-T (Exempt Organization
Business Income Tax Return) when the exempt organization is a trust
subject to tax on unrelated business taxable income under section
511(b). At this time, certain individual income tax returns such as
Form 990-T, Form 1040-NR (U.S. Nonresident Alien Income Tax Return),
Form 1041-QFT (U.S. Income Tax Return for Qualified Funeral Trusts),
and all amended individual income tax returns, such as Form 1040X
(Amended U.S. Individual Income Tax Return), cannot be filed
electronically and, therefore, currently are exempt from the electronic
filing requirement. See Sec. 301.6011-7(c)(2) and Notice 2011-26.
A notice of proposed rulemaking (REG-100194-10) was published in
the Federal Register (75 FR 75439) on December 3, 2010. That document
proposed to amend the regulations under section 6011(e) by adding new
Sec. Sec. 1.6011-6 and 301.6011-6. These sections would provide
guidance on the electronic filing requirement contained in section
6011(e)(3), including, but not limited to, the following: (1)
Clarifying the definition of a specified tax return preparer as any
person who is a tax return preparer, as defined in section 7701(a)(36)
and Sec. 301.7701-15, unless the tax return preparer reasonably
expects to file 10 or fewer individual income tax returns in a calendar
year, and if a person who is a tax return preparer is a member of a
firm, that person would be a specified tax return preparer unless the
person's firm members in the aggregate reasonably expect to file 10 or
fewer individual income tax returns in a calendar year; (2) providing a
definition of the term file based on whether the tax return preparer or
specified tax return preparer submits the individual income tax return
to the IRS; (3) recognizing a taxpayer's ability to choose to file an
individual income tax return in paper format and providing that a tax
return preparer or a specified tax return preparer is not considered to
have filed an individual income tax return if the preparer obtains a
signed writing from the taxpayer attesting that the taxpayer chooses to
file the individual income tax return in paper format and the taxpayer,
and not the preparer, will file (submit) the individual income tax
return to the IRS; (4) providing exclusions from the electronic filing
requirement for individual income tax returns filed in paper format
pursuant to an undue hardship waiver or administrative exemption; (5)
giving examples of the application of the proposed rules; and (6)
providing a two-year transition rule for the implementation of section
6011(e)(3). For calendar year 2011, the proposed regulations would
define a specified tax return preparer as a tax return preparer who
reasonably expects to file (or if the tax return preparer is a member
of a firm, the firm's members in the aggregate reasonably expect to
file) 100 or more individual income tax returns during the year, while
beginning January 1, 2012, a specified tax return preparer would be a
tax return preparer who reasonably expects to file (or if the tax
return preparer is a member of a firm, the firm's members in the
aggregate reasonably expect to file) 11 or more individual income tax
returns in a calendar year.
Concurrently with publication of the proposed regulations, the IRS
released Notice 2010-85, see IR-2010-116 (December 1, 2010) and 2010-51
IRB 877 (December 20, 2010), which contained a proposed revenue
procedure that would provide guidance to tax return preparers regarding
the format and content of undue hardship waiver requests and taxpayer
choice statements.
Written comments were received by the Treasury Department and the
IRS in response to the notice of proposed rulemaking and concurrent
notice. A public hearing was held on January 7, 2011. Commentators
appeared at the public hearing and commented on the notice of proposed
rulemaking and Notice 2010-85. All comments were considered and are
available for public inspection at http://www.regulations.gov or upon
request. This preamble addresses all substantive comments received by
the Treasury Department and the IRS. After consideration of the written
comments and the comments provided at the public hearing, the proposed
regulations under section 6011(e)(3) are adopted as revised by this
Treasury decision. The revisions are discussed in this preamble. In
addition, although not discussed in the preamble, a few minor, non-
substantive changes were made to the text of the final regulations to
conform the language used throughout the regulations. Further, the
``1.6011-6'' and ``301.6011-6'' numbering used in the proposed
regulations have been changed to ``1.6011-7'' and ``301.6011-7'' in
these final regulations because ''301.6011-6'' was used in another
proposed regulation, proposed Sec. 301.6011-6 (Statement of series and
series organizations), which is unrelated to these regulations.
Concurrent with the publication of these regulations, the IRS is
publishing a revenue procedure providing guidance to tax return
preparers regarding the format and content of undue hardship waiver
requests and taxpayer choice statements under Sec. 301.6011-7(c)(1)
and Sec. 301.6011-7(a)(4)(ii), a notice containing administrative
exemptions to the electronic filing requirement under Sec. 301.6011-
7(c)(2), and a transition notice regarding the mailing of individual
income tax returns by specified tax return preparers during the 2011
calendar year.
Summary of Comments
Fifty-three written comments were received in response to the
notice of proposed rulemaking and Notice 2010-85, and two commentators
spoke at the public hearing.
1. Definition of a Specified Tax Return Preparer
The proposed regulations do not apply to individuals described in
section 7701(a)(36)(B)(i) through (iv) and Sec. 301.7701-15(f) who are
not defined as tax return preparers under that Code section and
regulation, such as an individual who provides tax assistance under a
Volunteer Income Tax Assistance (VITA) program or a person who prepares
a return as a fiduciary. One commentator stated that section 6011(e)(3)
made no distinction with respect to whether the tax return preparer is
compensated and requested that the final regulations delete the phrase
``as defined in section 7701(a)(36) and Sec. 301.7701-15'' so that the
rules would apply to any tax return preparer who prepares and files the
requisite number of individual income tax returns. The final
regulations do not adopt this recommendation. Section 7701(a) provides
that ``[w]hen used in this title, where not otherwise directly
expressed or manifestly incompatible with the intent thereof,'' the
definition of ``tax return preparer'' is that which is provided by that
Code section. Section 6011(e)(3) does not define ``tax return
preparer,'' nor is the definition provided by section 7701(a)(36)
``manifestly incompatible with the intent'' of section 6011(e)(3).
These final regulations therefore adopt the definition set forth in
section 7701(a)(36) and its corresponding regulations. See Sec.
301.6011-7(a)(3).
One commentator suggested that the definition of specified tax
return preparer should be applied solely on a firm basis, not on an
individual basis, and the individual income tax returns a
[[Page 17523]]
tax return preparer prepares independently for the preparer's own
business should not be aggregated with any individual income tax
returns that the same person prepares as an employee for a firm. For
example, if a tax return preparer prepares and files 60 individual
income tax returns (that is, fewer than 100 in 2011) while working as
an employee of a firm, and independently prepares and files 60
individual income tax returns as a sole proprietor, the commentator
believes the tax return preparer should not be subject to the
electronic filing requirement for the latter returns. The Treasury
Department and the IRS do not adopt this approach in the final
regulations. The suggested approach would not be consistent with the
statute. Congress placed the electronic filing responsibility of
section 6011(e)(3) on each individual tax return preparer who
reasonably expects to prepare and file more than 10 individual income
tax returns in a calendar year.
Other commentators stated that the reasonable expectation for
filing individual income tax returns in a calendar year should be
determined solely at the individual tax return preparer level and not
take into consideration the individual income tax returns prepared and
filed by other tax return preparers in the firm. Under the proposed
regulations, in the above example, the individual income tax returns
that the other members of the firm expect to prepare and file would be
aggregated with the 60 individual income tax returns that the above-
mentioned person expects to prepare and file as an employee of the
firm. Firm aggregation rules were included in the proposed regulations
to limit avoidance of the statutory requirement, for example, by a firm
purposely arranging its workload to prevent one or more of its tax
return preparers from becoming a specified tax return preparer under
section 6011(e)(3). As a result, the Treasury Department and the IRS do
not adopt the commentators' recommendation and have maintained the
proposed firm aggregation rules in the final regulations. See Sec.
301.6011-7(a)(3) and Sec. 301.6011-7(d).
Instead of determining the reasonable filing expectation based on
the individual income tax returns reasonably expected to be filed in
the calendar year, another commentator recommended that the reasonable
filing expectation be determined based solely on the number of
individual income tax returns filed in the immediately preceding year.
This comment is not adopted. Section 6011(e)(3)(B), and not the
regulations, establishes the reasonable expectation standard. Further,
the Treasury Department and the IRS have concluded that the number of
individual income tax returns filed in the immediately preceding year
may be a relevant factor but should not be the only factor in making a
reasonable expectation determination for a calendar year.
2. Definition of File
a. Mailing Paper Returns for Taxpayer-Clients
Several commentators opposed the requirement that individual income
tax returns prepared and filed by a specified tax return preparer be
filed electronically. These commentators stated that they sometimes
mail to the IRS the paper tax returns that they prepare for their
clients as a service for their clients, often for those who are
elderly, incapacitated, on travel, or in other situations in which it
would not be practical or convenient to have the client mail the return
to the IRS. For some of these clients, the individual income tax return
may be unusually large in size or a filing due date may be imminent.
For similar reasons, other commentators objected to the requirement in
proposed Sec. 301.6011-6(a)(4)(ii) that a taxpayer, not the specified
tax return preparer, must submit the paper individual income tax return
to the IRS when the taxpayer chooses to file in paper format. They
recommended that this requirement be eliminated, or, if the clients
choose to have their individual income tax returns prepared in paper
format and sign a statement documenting that choice, the specified tax
return preparers should be able to mail those returns if the clients
request this additional service from them.
Congress established the requirement that any individual income tax
return prepared by a tax return preparer be filed on magnetic media
(electronically) if such individual income tax return is filed by the
tax return preparer and the preparer is a specified tax return preparer
for the calendar year during which the individual income tax return is
filed. The language that Congress used in the statute, in particular
section 6011(e)(3)(A)(i) and (B), specifically refers to the act of
``filing'' the individual income tax return by the tax return preparer
or specified tax return preparer. The statute did not, however, define
the term ``file.'' The Treasury Department and the IRS believe that,
with respect to paper returns, a definition of the term file based on
the act of the tax return preparer or specified tax return preparer (or
a member of the preparer's firm) submitting the individual income tax
return is reasonable and necessary to give effect to the electronic
filing requirement enacted by Congress. Otherwise, the requirement
would have no meaning or consequence. As a result, the Treasury
Department and the IRS do not adopt the commentators' recommendations
that the mailing restrictions be eliminated. Consistent with section
6011(e)(3), the final regulations provide that tax return preparers
qualify as specified tax return preparers if they (or their firm)
reasonably expect to file, that is, submit to the IRS, the specified
number of individual income tax returns, and even if the tax return
preparers file more than the specified number of individual income tax
returns and therefore qualify as specified tax return preparers, these
preparers need not electronically file an individual tax return if they
(or their firm) do not file the return, that is, submit it to the IRS,
as defined in the regulations. See Sec. 301.6011-7(a)(4).
The Treasury Department and the IRS recognize that the mailing
restriction may create unforeseen or unavoidable difficulties for
immediate compliance, particularly in situations in which specified tax
return preparers have customarily mailed individual income tax returns
to the IRS as part of the specified tax return preparer's general
business practice, or in which they mail a client's paper individual
income tax return to the IRS on the client's behalf due to special
circumstances, for example, the disability, incapacitation or infirmity
of the client. Under these final regulations the IRS has the authority
to issue additional guidance in the form of announcements, notices, or
FAQs to address issues related to the filing of a taxpayer's individual
income tax return under section 6011(e)(3) that will promote fair and
efficient tax administration. In response to the public comments and
concurrent with the publication of these regulations, the IRS is also
publishing a transition notice regarding the mailing of individual
income tax returns by specified tax return preparers during the 2011
calendar year. Solely for calendar year 2011, a specified tax return
preparer who prepares individual income tax returns may mail any such
return in paper format to the IRS, at the request of the taxpayer,
subject to the conditions specified in Notice 2011-27. The specified
tax return preparer must obtain a signed and dated statement from the
taxpayer containing the taxpayer's choice to have the individual income
tax return filed in paper format,
[[Page 17524]]
and the taxpayer's unambiguous request to have the specified tax return
preparer mail the individual income tax return to the IRS. See Notice
2011-27 for details.
b. Acts of Assistance Beyond Providing Filing or Delivery Instructions
to Taxpayers
The definition of file in the proposed regulations would include
the submission by the tax return preparer or specified tax return
preparer of an individual income tax return, either electronically (e-
filed) or in paper format. Submission in non-electronic (paper) form
would include ``the direct or indirect transmission, sending, mailing
or otherwise delivering of the paper tax return to the IRS by the
preparer * * *and includes any act or acts of assistance beyond
providing filing or delivery instructions to the taxpayer.'' Several
commentators expressed confusion as to which acts of assistance would
amount to filing by the tax return preparer. For example, if a tax
return preparer provides the client with an addressed envelope or
proper postage to make sure the postage is correct, but the client
physically mails the individual income tax return, would that be
considered filing by the tax return preparer? In response to these
commentators' concerns, the phrases ``direct or indirect'' and ``and
includes any act or acts of assistance beyond providing filing or
delivery instructions to the taxpayer'' were deleted from the final
regulations. Acts such as providing filing or delivery instructions, an
addressed envelope, postage estimates, stamps, or similar acts designed
to assist the taxpayer in the taxpayer's efforts to correctly mail or
otherwise deliver an individual income tax return to the IRS do not
constitute filing by the tax return preparer or specified tax return
preparer as long as the taxpayer actually mails or otherwise delivers
the paper individual income tax return to the IRS.
3. Taxpayer Choice Statements To File in Paper Format
The proposed regulations contain a provision that would provide
taxpayers, who have their individual income tax returns prepared by a
tax return preparer, the choice to have those returns filed in paper
format. In particular, proposed Sec. 301.6011-6(a)(4)(ii) states that
an individual income tax return would not be considered to be filed by
a tax return preparer or specified tax return preparer if the preparer
obtained, on or prior to the date the individual income tax return is
filed, a signed and dated written statement from the taxpayer, stating
the taxpayer chooses to file the individual income tax return in paper
format, and that the taxpayer, and not the preparer, would submit the
paper individual income tax return to the IRS. Further, this statement
would have to be signed by both spouses if it was a joint return.
a. Taxpayer Choice Statement Form
The Treasury Department and the IRS received several comments
supporting a taxpayer's choice to file an individual income tax return
in paper format. Some commentators, however, questioned the need for
the taxpayer choice statement, especially for tax return preparers who
never mail individual income tax returns to the IRS on behalf of their
clients, but instead give the returns to their clients to mail to the
IRS. According to these comments, under the proposed regulations, the
electronic filing requirement would apply only to specified tax return
preparers, that is, those who file the requisite number of individual
income tax returns. In their view, if the tax return preparer never
files individual income tax returns on behalf of clients, or files ten
or fewer (fewer than 100 in 2011), the tax return preparer would not
meet the definition of a ``specified tax return preparer,'' and should
not have to obtain a taxpayer choice statement from these clients.
The burden of compliance with the electronic filing requirement is
on the tax return preparer and specified tax return preparer. Neither
the fact that the IRS receives a taxpayer's paper individual income tax
return in the mail nor the fact that the tax return preparer's or
specified tax return preparer's general business practice is to not
mail paper individual income tax returns for clients necessarily
establishes that the preparer did not file a particular individual
income tax return with the IRS. See Revenue Procedure 2011-25. Based on
the above, the Treasury Department and the IRS adopt proposed Sec.
301.6011-6(a)(4)(ii) in the final regulations, except for the
modification described in paragraph 3.b of this preamble. If the tax
return preparer or specified tax return preparer obtains a signed
statement in compliance with the requirements established in Revenue
Procedure 2011-25, the signed statement will demonstrate compliance
with the electronic filing requirement should the IRS question a
preparer about the filing of a particular individual income tax return
in paper format.
b. Only One Spouse Is Required To Sign the Taxpayer Choice Statement
for a Joint Return
Several commentators recommended that only one spouse, instead of
both spouses, should be required to sign the taxpayer choice statement
related to a joint individual income tax return. They expressed
concerns that the two-signature requirement might not be practical in
some cases, for example, when one spouse is unable to sign due to a
health condition, or not available because of distance due to a
temporary absence from the spouse's customary residence. Although the
Treasury Department and the IRS continue to encourage tax return
preparers to obtain both spouses' signatures on the taxpayer choice
statement as a best practice, the commentators' recommendation that one
spouse's signature will suffice for a joint return is adopted in the
final regulations.
c. Suggested Alternatives to Signed Taxpayer Choice Statement
The proposed regulations requested comments on how the burden of
complying with the proposed taxpayer choice statement could be
minimized. The comments received several suggested alternatives: (1)
The IRS create a form similar to the ``opt-out'' forms used by some
states that have an electronic filing requirement; (2) the IRS create a
check-box on individual income tax returns in lieu of a separate
writing obtained from the taxpayer; (3) the IRS accept IRS Form 8948
(Preparer Explanation for Not Filing Electronically) if the check-box
for taxpayer choice to file in paper format is checked; or (4) the IRS
allow a contemporaneous email (unsigned) from the taxpayer to the
preparer, containing the recommended language.
The Treasury Department and the IRS have considered these
suggestions in finalizing the revenue procedure on taxpayer choice
statements and do not adopt them at this time. See Revenue Procedure
2011-25. Regarding the recommendations that the IRS create a new form
or add a check-box to the individual income tax return forms affected
by section 6011(e)(3), it is unclear how the provision of an additional
form would be any more beneficial, easier to implement, or time or cost
effective than the taxpayer choice statement provided because that
statement is short and easy and inexpensive to reproduce. Regarding use
of the Form 8948, because this form is completed by a specified tax
return preparer and is not signed by the taxpayer, checking a box on
Form 8948 is insufficient proof of a taxpayer's choice to file in paper
format. Finally, an email message from the taxpayer is insufficient
proof of a taxpayer's choice to file an individual income tax return in
paper format. If sent as a scanned
[[Page 17525]]
attachment to an email, however, a copy of a hand-signed statement in
compliance with the final regulations and related guidance will
suffice. See Rev. Proc. 2011-25. The Treasury Department and the IRS
have concluded that the taxpayer's hand-written signature is necessary
to establish that the taxpayer chose to file in paper format and should
be required on all taxpayer choice statements. See Sec. 301.6011-
7(a)(4)(ii).
4. Undue Hardship Waivers
The proposed regulations contain a provision which would provide an
exclusion from the electronic filing requirement in cases of undue
hardship. The Treasury Department and the IRS received several comments
supporting this provision and the relief that it would provide. The
final regulations adopt this exclusion, recognizing that there may be
facts and circumstances in which the electronic filing requirement
would create an undue hardship on the specified tax return preparer.
Specified tax return preparers may request an undue hardship waiver
from the IRS in the time and manner as set forth in the regulations and
other published guidance.
One commentator recommended that taxpayers should be able to submit
a hardship waiver request to the IRS. This recommendation was not
adopted. The electronic filing requirement of section 6011(e)(3) and
the final regulations is imposed on a specified tax return preparer,
not on a preparer's taxpayer-client. Since the burden of compliance
rests with the specified tax return preparer, the preparer should be
the person responsible for submission of undue hardship waiver
requests.
As mentioned above, the Treasury Department and the IRS published
Notice 2010-85 and received comments on the proposed undue hardship
waiver procedures. All comments were considered and some adopted in the
revenue procedure published concurrently with these final regulations.
See Rev. Proc. 2011-25.
5. Administrative Exemptions
The proposed regulations contain a provision that would provide an
exclusion from the electronic filing requirement pursuant to
administrative exemptions established by the IRS in additional
guidance. The Treasury Department and the IRS received several comments
in support of this provision, suggesting several possible
administrative exemptions. The final regulations adopt this provision.
The Treasury Department and the IRS considered the comments and
included many of the suggested administrative exemptions in Notice
2011-26, which provides administrative exemptions to the electronic
filing requirement and is being issued contemporaneously with these
final regulations.
Among the suggested administrative exemptions, Notice 2011-26
includes exemptions for (1) Certain specified tax return preparers who
are members of certain religious groups, certain foreign preparers
without social security numbers, or specified tax return preparers who
are currently ineligible for the IRS e-file program due to an IRS e-
file sanction; (2) individual income tax returns that are not
electronically filed due to technological difficulties, including a
return that a specified tax return preparer was unable to e-file
because the return was rejected, a return prepared by a tax return
preparer or specified tax return preparer whose e-file software package
does not support one or more forms or schedules that are part of the
return, or a return prepared by a tax return preparer or specified tax
return preparer who experiences a short-term inability to
electronically file the return or returns due to some other verifiable
and documented technological problem; and (3) individual income tax
returns currently not accepted electronically (for example, Forms 1040-
NR and 990-T) or any documentation or attachments not accepted
electronically, such as documentation for section 6707A disclosures or
required appraisals to support charitable contributions. Some
individual income tax returns, however, can be filed electronically and
the attachments mailed to the IRS using a transmittal Form 8453 (U.S.
Individual Income Tax Transmittal for an IRS e-file Return) or Form
8453-F (U.S. Estate or Trust Income Tax Declaration and Signature for
Electronic Filing). The associated return must be filed electronically
if prepared and filed by a specified tax return preparer and otherwise
capable of being e-filed, and the attachments mailed to the IRS using a
transmittal Form 8453. See the instructions to Form 8453 and the
instructions to Form 8453-F.
6. Transition Period
To enhance compliance and to promote effective and efficient
administration of the electronic filing requirement of section
6011(e)(3), the proposed regulations would provide a transition rule
that would phase in the new electronic filing requirement for specified
tax return preparers over a two-year period--100 or more returns in
2011 and 11 or more returns starting in 2012. Solely for the 2011
calendar year, a tax return preparer would not be considered a
specified tax return preparer if the tax return preparer reasonably
expects, or the preparer's firm members in the aggregate reasonably
expect, to file fewer than 100 individual income tax returns in the
2011 calendar year.
Several commentators supported the concept of a transition rule.
For various reasons, primarily the issuance of these final regulations
and other guidance at the beginning of the 2011 filing season, some
commentators urged that the effective date of the electronic filing
requirement be delayed until January 2012. Due to similar concerns,
another commentator recommended that the transition period be expanded
by lengthening the period to three years and increasing the filing
threshold for calendar year 2011 from 100 to 200 individual income tax
returns. This commentator pointed out that some states used 200 returns
for their state return electronic filing requirement at least for the
initial filing season. Either approach would allow tax return preparers
more time to become familiar with these final regulations and to give
those subject to the new rules more time to make the necessary
preparations and arrangements to comply with the rules.
The final regulations adopt the transition period proposed in the
proposed regulations--100 or more individual income tax returns in
2011, and 11 or more individual income tax returns in 2012 and
thereafter. This approach maintains the congressionally-mandated
effective date applicable to all individual income tax returns filed
after December 31, 2010, while providing both tax return preparers and
the IRS with the ability to effectively and efficiently transition to
the mandatory electronic filing of individual income tax returns. In
addition, tax return preparers who have not already entered the IRS e-
file system and who have always prepared their clients' individual
income tax returns in paper format are unlikely to be adversely
affected by the difference between 100 and 200 returns. Since the final
regulations (like the proposed regulations) do not count the paper
individual income tax returns filed by taxpayers who sign a taxpayer
choice statement to file in paper format, these tax return preparers
may not meet the definition of ``specified tax return preparer'' if the
tax return preparers either reasonably expect their clients to continue
to file their individual income tax returns in paper format or obtain
this statement from their clients.
It is also noted that throughout 2010 the IRS performed extensive
educational
[[Page 17526]]
outreach across the country, informing the tax return preparer
community of the anticipated 100-return transition rule for 2011. This
educational outreach included, among other things, a discussion of the
administrative exemptions that the IRS anticipated would be included in
final guidance.
7. Electronic Filing Burden
Some commentators stated that the electronic filing requirement is
burdensome, including imposing additional costs on tax return preparers
and their clients, and questioned the accuracy of the hour burden
estimates set forth in the Paperwork Reduction Act section of the
proposed regulations. The proposed regulations, however, did not
provide an estimate of the burden related to the electronic filing of
individual income tax returns, but rather the burden, measured in
hours, to obtain the recommended statements from taxpayer-clients to
document their choice to file individual income tax returns in paper
format and submit the returns to the IRS themselves. See Sec.
301.6011-7(a)(4)(ii). Any burden associated with the congressionally-
mandated electronic filing requirement of section 6011(e)(3) was not at
issue in or established by the proposed regulations, but is a direct
result of that statutory requirement. One commentator remarked that
there should not be an electronic filing mandate if the government does
not reimburse the tax return preparer for any additional cost of
electronic filing. The Congress, however, established the requirement,
which does not include a reimbursement requirement.
In its comments, the Small Business Administration Office of
Advocacy (SBA) stated that the proposed regulations, if finalized,
would impact small business tax return preparers by ``increasing the
scope of specified tax return preparers.'' Specifically, the SBA stated
that, because the proposed regulations would require specified tax
return preparers to electronically file individual income tax returns
and would define a specified tax return preparer as a tax return
preparer who reasonably expects to file more than 10 individual income
tax returns in a calendar year, the proposed regulations would increase
the scope of specified tax return preparers. For the same reasons, the
SBA stated that the proposed regulations contain a significant
collection of information and have the potential to have a significant
economic impact on a substantial number of small entities if the
proposed regulations are adopted as final regulations. The SBA stated
that the certification in the proposed regulations that a Regulatory
Flexibility Analysis under the Regulatory Flexibility Act, 5. U.S.C.
chapter 6 (RFA), was not required was not supported by a factual basis.
The SBA recommended that the IRS publish for public comment either a
supplemental RFA assessment or an Initial Regulatory Flexibility
Analysis.
The Treasury Department and the IRS disagree with the SBA's
conclusions and do not adopt its recommendation. As discussed in the
preamble of the proposed regulations, the 10-return threshold for
determining whether a tax return preparer is a specified tax return
preparer is a statutory condition under section 6011(e)(3). The
Congress by statute, and not the proposed regulations, established the
electronic filing requirement, including the 10-return threshold for
specified tax return preparers. As a result, a Regulatory Flexibility
Analysis under the RFA is not required regarding the electronic filing
requirement and its burden. The Treasury Department and the IRS have
certified in the proposed regulations (and again in these final
regulations) that the only collection of information contained in the
regulations (the taxpayer choice statement) would not have a
significant impact on a substantial number of small entities.
In its comments the SBA stated:
Prior to passage of the Worker, Homeownership, and Business
Assistance Act of 2009 (the Act), the IRS was prohibited from
requiring filers of individual income tax returns to file
electronically unless the person was required to file at least 250
returns during the calendar year. The Act authorized the IRS to
issue this NPRM to increase the scope of specified tax return
preparers.
Page 2, SBA Office of Advocacy Letter of December 20, 2010.
Prior to the Act, the IRS was prohibited from requiring that income
tax returns for individuals, estates, and trusts be other than on paper
forms regardless of the number of returns filed, as specifically
provided by the last sentence of section 6011(e)(1). The referenced
250-return rule, contained in section 6011(e)(2), is only applicable to
non-individual taxpayer filers, for example, corporations and
partnerships. Following passage of the Act, there are now two separate
rules that can affect individual taxpayers. The first rule is still
provided by section 6011(e)(1), which prohibits the IRS from requiring
income tax returns of individuals, estates, and trusts be on anything
other than paper forms if the individual taxpayer prepares and files
the taxpayer's income tax return. The second rule is the newly enacted
rule, contained in section 6011(e)(3), that applies when an individual
taxpayer uses the services of a tax return preparer to prepare the
taxpayer's income tax return. The 250-return rule similarly is not
applicable to either of these rules.
In addition, the requirements and restrictions contained in section
6011(e)(2) only apply to ``regulations [prescribed] under paragraph
[6011(e)](1),'' while the proposed and final regulations involved here
are being prescribed pursuant to section 6011(e)(3) and the specific
requirement detailed in section 6011(e)(3)(A) (``The Secretary shall
require tha[t] any individual income tax return prepared by a tax
return preparer be filed on magnetic media if[hellip]''). There is no
``increase'' in the scope of specified tax return preparers provided by
the regulations. Prior to the Act and section 6011(e)(3), specified tax
return preparers did not exist. The taxpayer choice statement
provision, together with the provision for administrative exemptions,
may work to reduce the number of specified tax return preparers because
individual income tax returns affected by these provisions are not
counted in determining whether a tax return preparer files more than 10
(100 or more in 2011) individual income tax returns in a calendar year.
Further, these provisions, as well as the undue hardship waiver
provision, will benefit tax return preparers in their efforts to comply
with the electronic filing requirement placed upon them by section
6011(e)(3). Furthermore, even if a tax return preparer is a specified
tax return preparer, under both the proposed and final regulations a
preparer would not have to electronically file an individual income tax
return that a taxpayer chooses to have prepared in paper format and
which the taxpayer will file with the IRS, providing a further
compliance benefit to all tax return preparers subject to section
6011(e)(3).
The collection of information analysis in the proposed regulations
was limited to the sole collection of information contained in the
proposed regulations; that is, the taxpayer choice statements. The
proposed regulations, in the preamble, stated:
This information [taxpayer choice statement] can be used by tax
return preparers and specified tax return preparers, if necessary,
to demonstrate to the IRS that the related individual income tax
returns filed in paper format were not required to be filed
electronically pursuant to section 6011(e)(3) and Sec. 301.6011-6.
The collection of information is voluntary to obtain a benefit.
[[Page 17527]]
As discussed in this preamble, the electronic filing requirement
applicable to specified tax return preparers is congressionally
mandated and flows directly from the statute, that is, section
6011(e)(3); therefore, a Regulatory Flexibility Analysis under the RFA
is not required. The Treasury Department and the IRS have adequately
and appropriately certified in the proposed regulations that the
taxpayer choice statement would not have a significant impact on a
substantial number of small entities. This collection of information
has been reviewed and approved by OMB.
As previously mentioned, the certification in the proposed
regulations was sufficient. This certification certified that the
collection of information contained in the proposed regulations, the
collection related to the taxpayer choice statement, would not have a
significant economic impact on a substantial number of small entities
and referred to the Paperwork Reduction Act section in the preamble to
the proposed regulations for further information as to why economic
impact on affected small entities was not significant. That section
identified the small entities likely affected, estimated the number of
affected firms, and discussed the time and nature of preparation and
recordkeeping. Although the certification in the proposed regulations
did not reduce the paperwork burden items to monetary costs, the
proposed regulations solicited ``Estimates of capital or start-up costs
and costs of operation, maintenance, and purchases of service to
provide information.'' No such estimates were received during the
public comment period.
Section 605(b) of the RFA requires that the certification appear in
either the proposed or final rule. Although not required, these final
regulations include another certification that a Regulatory Flexibility
Analysis under the RFA is not required. See the Special Analyses
section.
8. Filing Perfection Period
One commentator recommended a 10-day perfection period for
individual income tax returns. Because of issues that could arise with
technology, the IRS e-file systems allow perfection of the e-file
submission if the initial submission was made on or before the return
due date, the submitter received a ``rejection'' of the return from the
IRS, and the submitter resolved the issue to successfully e-file the
return to the IRS within a prescribed period. The current perfection
period for individual returns is five days. The Treasury Department and
the IRS do not adopt this recommendation in these final regulations
because this type of provision is more appropriate for inclusion in
administrative procedures.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations.
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'' which will ``describe the impact of the proposed
rule on small entities.'' 5 U.S.C. 603(a). Section 605 of the RFA
allows an Agency to certify a rule, in lieu of preparing an analysis,
if the proposed rulemaking is not expected to have a significant
economic impact on a substantial number of small entities.
The collection of information in these final regulations is in
Sec. 301.6011-7(a)(4)(ii) (taxpayer choice statement). This
information will be used by tax return preparers and specified tax
return preparers to demonstrate to the IRS that the related individual
income tax returns filed in paper format were not required to be filed
electronically pursuant to section 6011(e)(3) and these final
regulations, thus reducing the burden on tax return preparers and
specified tax return preparers. This collection of information is
voluntary to obtain a benefit, that is, conclusive proof of a
taxpayer's choice to file an individual income tax return in paper
format, which will be used by tax return preparers and specified tax
return preparers to demonstrate to the IRS that the individual income
tax return filed in paper format was not required to be filed
electronically.
The final regulations affect self-employed specified tax return
preparers and small businesses that employ specified tax return
preparers who prepare individual income tax returns in exchange for
compensation. Section 601(3) of the RFA defines a small business as
having the same meaning as ``small business concern'' under section 3
of the Small Business Act, 15 U.S.C. 632. The IRS estimates that
135,000 firms in 2011 and 312,000 in 2012 qualifying as small
businesses will obtain taxpayer choice statements from taxpayers who
choose to have their individual income tax returns prepared in paper
format and will submit the paper returns to the IRS. (These estimates
are based on Tax Year 2007 figures, including firms that filed all of
their individual income tax returns on paper and those firms that
electronically filed individual income tax returns for that tax year.)
Therefore, the Treasury Department and the IRS have determined that
this Treasury decision will have an impact on a substantial number of
small businesses.
The IRS has also determined, however, that the impact on entities
affected by these final regulations will not be significant. The
recordkeeping burden associated with obtaining and keeping
documentation of a taxpayer choice to file in paper format is minimal.
It is estimated that five minutes of preparation time is needed for a
preparer to explain the purpose of the information and obtain the
taxpayer choice statement from the taxpayer in the manner prescribed by
the IRS, and six minutes for maintaining a copy in the preparer's
records. A tax return preparer generally will not be submitting this
documentation to the IRS. Based on the estimated numbers of firms
(135,000 in 2011 and 312,000 in 2012) and estimates for the number of
individual income tax returns that taxpayers chose to file (6,669,900
in 2011 and 9,217,800 in 2012), the estimated hours per firm is 9.06 in
2011 and 5.42 in 2012; with an average number of 1.2 preparers per
firm, the estimated hours per preparer is 7.55 in 2011 and 4.51 in
2012.
Additionally, the Treasury Department and the IRS note that section
6011(e)(3) and these regulations only prescribe the method of filing
individual income tax returns that are already required to be filed.
Further, these regulations are implementing the electronic filing
requirement imposed by statute on specified tax return preparers, as
defined in section 6011(e)(3)(B). The taxpayer choice statement reduces
any burden associated with the electronic filing requirement because
paper individual income tax returns for which the tax return preparer
obtains a taxpayer choice statement from the taxpayer are not counted
in determining whether a tax return preparer files more than 10 (100 or
more in 2011) individual income tax returns in a calendar year. There
are no capital or start-up costs, such as the purchase of tax software,
associated with the taxpayer choice statement; tax return preparers do
not have to buy tax software to obtain a signed statement from their
clients. Finally, the IRS has provided procedures for specified tax
return preparers to request a waiver of
[[Page 17528]]
the electronic filing requirement in cases of undue hardship.
Therefore, specified tax return preparers who receive an approved
hardship waiver would not have to obtain taxpayer choice statements for
any individual income tax returns that are covered under the waiver.
Accordingly, the Treasury Department and the IRS hereby certify
that the collection of information contained in these regulations will
not have a significant economic impact on a substantial number of small
entities. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act is not required. Pursuant to section 7805(f)
of the Code, the notice of proposed rulemaking preceding these final
regulations was submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
businesses.
Drafting Information
The principal author of these final regulations is Keith L. Brau,
Office of the Associate Chief Counsel (Procedure and Administration).
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6011-6 also issued under 26 U.S.C. 6011(a). * * *
Section 1.6011-7 also issued under 26 U.S.C. 6011(e). * * *
0
Par. 2. Section 1.6011-6 is added and reserved to read as follows:
Sec. 1.6011-6 [Reserved]
0
Par. 3. Section 1.6011-7 is added to read as follows:
Sec. 1.6011-7 Specified tax return preparers required to file
individual income tax returns using magnetic media.
Individual income tax returns that are required to be filed on
magnetic media by tax return preparers under section 6011(e)(3) and
Sec. 301.6011-7 of this chapter must be filed in accordance with
Internal Revenue Service regulations, revenue procedures, revenue
rulings, publications, forms or instructions, including those posted
electronically.
PART 301--PROCEDURE AND ADMINISTRATION
0
Par. 4. The authority citation for part 301 is amended by adding an
entries in numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6011-6 also issued under 26 U.S.C. 6011(a). * * *
Section 301.6011-7 also issued under 26 U.S.C. 6011(e). * * *
0
Par. 5. Section 301.6011-6 is added and reserved to read as follows:
Sec. 301.6011-6 Statement of series and series organizations
[Reserved]
0
Par. 6. Section 301.6011-7 is added to read as follows:
Sec. 301.6011-7 Specified tax return preparers required to file
individual income tax returns using magnetic media.
(a) Definitions.
(1) Magnetic media. For purposes of this section, the term magnetic
media has the same meaning as in Sec. 301.6011-2(a)(1).
(2) Individual income tax return. The term individual income tax
return means any return of tax imposed by subtitle A on individuals,
estates, and trusts.
(3) Specified tax return preparer. The term specified tax return
preparer means any person who is a tax return preparer, as defined in
section 7701(a)(36) and Sec. 301.7701-15, unless that person
reasonably expects to file 10 or fewer individual income tax returns in
a calendar year. If a person who is a tax return preparer is a member
of a firm, that person is a specified tax return preparer unless the
person's firm members in the aggregate reasonably expect to file 10 or
fewer individual income tax returns in a calendar year. Solely for the
2011 calendar year, a person will not be considered a specified tax
return preparer if that person reasonably expects, or if the person is
a member of a firm, the firm's members in the aggregate reasonably
expect, to file fewer than 100 individual income tax returns in the
2011 calendar year. Solely for purposes of this section, a person is
considered a member of a firm if the person is an employee, agent,
member, partner, shareholder, or other equity holder of the firm.
(4) File or Filed. (i) For purposes of section 6011(e)(3) and these
regulations only, an individual income tax return is considered to be
``filed'' by a tax return preparer or a specified tax return preparer
if the preparer submits the individual income tax return to the IRS on
the taxpayer's behalf, either electronically (by e-file or other
magnetic media) or in non-electronic (paper) form. Submission of an
individual income tax return by a tax return preparer or a specified
tax return preparer in non-electronic form includes the transmission,
sending, mailing or otherwise delivering of the paper individual income
tax return to the IRS by the preparer, any member, employee, or agent
of the preparer, or any member, employee, or agent of the preparer's
firm.
(ii) An individual income tax return will not be considered to be
filed, as defined in paragraph (a)(4)(i) of this section, by a tax
return preparer or specified tax return preparer if the tax return
preparer or specified tax return preparer who prepared the return
obtains, on or prior to the date the individual income tax return is
filed, a hand-signed and dated statement from the taxpayer (by either
spouse if a joint return) that states the taxpayer chooses to file the
individual income tax return in paper format, and that the taxpayer,
and not the preparer, will submit the paper individual income tax
return to the IRS. The IRS may provide guidance through forms,
instructions or other appropriate guidance regarding how tax return
preparers and specified tax return preparers can document a taxpayer's
choice to file an individual income tax return in paper format.
(iii) The rules contained in this section do not alter or affect a
taxpayer's obligation to file returns under any other provision of law.
The definition of file or filed by a tax return preparer or specified
tax return preparer contained in paragraph (a)(4)(i) of this section
applies only for the purposes of section 6011(e)(3) and these
regulations and does not apply for any other purpose under any other
provision of law.
(b) Magnetic media filing requirement. Except as provided in
paragraphs (a)(4)(ii) and (c) of this section, any individual income
tax return prepared by a specified tax return preparer in a calendar
year must be filed on magnetic media if the return is filed by the
specified tax return preparer.
(c) Exclusions. The following exclusions apply to the magnetic
media filing requirement in this section:
(1) Undue hardship waiver. The IRS may grant a waiver of the
requirement of this section in cases of undue
[[Page 17529]]
hardship. An undue hardship waiver may be granted upon application by a
specified tax return preparer consistent with instructions provided in
published guidance and as prescribed in relevant forms and
instructions. A determination of undue hardship will be based upon all
facts and circumstances. The undue hardship waiver provided to a
specified tax return preparer may apply to a series or class of
individual income tax returns or for a specified period of time,
subject to the terms and conditions regarding the method of filing
prescribed in such waiver.
(2) Administrative exemptions. The IRS may provide administrative
exemptions from the requirement of this section for certain classes of
specified tax return preparers, or regarding certain types of
individual income tax returns, as the IRS determines necessary to
promote effective and efficient tax administration. The IRS may provide
administrative exemptions and any criteria or procedures necessary to
claim an administrative exemption through forms, instructions, or other
appropriate guidance.
(d) Reasonably expect to file--(1) In general. The determination of
whether a tax return preparer reasonably expects, or if the preparer is
a member of a firm, the firm's members in the aggregate reasonably
expect, to file 10 or fewer individual income tax returns (or, in the
case of the 2011 calendar year, fewer than 100 individual income tax
returns) is made by adding together all of the individual income tax
returns the tax return preparer and, if the preparer is a member of a
firm, the firm's members reasonably expect to prepare and file in the
calendar year. In making this determination, individual income tax
returns that the tax return preparer reasonably expects will not be
subject to the magnetic media filing requirement under paragraph
(a)(4)(ii) of this section or are excluded from the requirement under
(c)(2) of this section are not to be counted. Individual income tax
returns excluded from the magnetic media filing requirement under
paragraph (c)(1) of this section are to be counted for purposes of
making this determination.
(2) Time for making determination of reasonable expectations. The
determination regarding reasonable expectations is made separately for
each calendar year in order to ascertain whether the magnetic media
filing requirement applies to a tax return preparer for that year. For
each calendar year, the determination of whether a tax return preparer
and the preparer's firm reasonably expect to file 10 or fewer
individual income tax returns (or, in the case of the 2011 calendar
year, fewer than 100 individual income tax returns) is made based on
all relevant, objective, and demonstrable facts and circumstances prior
to the time the tax return preparer and the preparer's firm first file
an individual income tax return during the calendar year.
(e) Examples. The following examples illustrate the rules of
paragraphs (a) through (d) of this section.
Example 1. Tax Return Preparer A is an accountant who recently
graduated from college with an accounting degree and has opened his
own practice. A has not prepared individual income tax returns for
compensation in the past and does not plan to focus his practice on
individual income tax return preparation. A intends instead to focus
his practice on providing specialized accounting services to certain
health care service providers. A has no plans to, and does not,
employ or engage any other tax return preparers. A estimates that he
may be asked by some clients to prepare and file their individual
income tax returns for compensation, but A expects that the number
of people who do ask him to provide this service will be no more
than seven in 2012. In fact, A actually prepares and files six paper
Forms 1040 (U.S. Individual Income Tax Return) in 2012. Due to a
growing client base, and based upon his experience in 2012, A
expects that the number of individual income tax returns he will
prepare and file in 2013 will at least double, estimating he will
prepare and file 12 Form 1040 returns in 2013. A does not qualify as
a specified tax return preparer for 2012 because A reasonably
expects to file 10 or fewer returns (seven) in 2012. Consequently, A
is not required to electronically file the individual income tax
returns he prepares and files in 2012. A's expectation is reasonable
based on his business projections, individual income tax return
filing history, and staffing decisions. A is a specified tax return
preparer in 2013, however, because based on those same factors A
reasonably expects to file more than 10 individual income tax
returns (12) during that calendar year. A, therefore, must
electronically file all individual income tax returns that A
prepares and files in 2013 that are not otherwise excluded from the
electronic filing requirement.
Example 2. Same facts as in Example 1, except three of Tax
Return Preparer A's clients specifically chose to have A prepare
their individual income tax returns in paper format in 2012 with the
clients mailing their respective returns to the IRS. A expects that
these three clients will similarly choose to have him prepare their
returns in paper format in 2013, with the clients being responsible
for mailing their returns to the IRS. A is not required to
electronically file these three returns in 2013 because the
taxpayers chose to file their returns in paper format. A obtained a
hand-signed and dated statement from each of those taxpayers,
indicating that they chose to file their returns in paper format.
These three individual income tax returns are not counted in
determining how many individual income tax returns A reasonably
expects to file in 2013. Because the total number of individual
income tax returns A reasonably expects to file in 2013 (nine) does
not exceed 10, A is not a specified tax return preparer for calendar
year 2013, and A is not required to electronically file any
individual income tax return that he prepares and files in 2013.
Example 3. Tax Return Preparer B is a solo general practice
attorney in a small county. Her practice includes the preparation of
wills and assisting executors in administering estates. As part of
her practice, B infrequently prepares and files Forms 1041 (U.S.
Income Tax Return for Estates and Trusts) for executors. In the past
three years, she prepared and filed an average of five Forms 1041
each year and never exceeded more than seven Forms 1041 in any year.
Based on B's prior experience and her estimate for 2012, made prior
to the time she first files an individual income tax return in 2012,
she reasonably expects to prepare and file no more than five Forms
1041 in 2012. Due to the unforeseen deaths of several of her clients
in late 2011, B actually prepares and files 12 Forms 1041 in 2012. B
does not find out about these deaths until after she has already
filed the first Form 1041 in 2012 for another client. B is not
required to electronically file these returns in 2012. She does not
qualify as a specified tax return preparer for calendar year 2012
because prior to the time she filed the first Form 1041 in 2012, she
reasonably expected to file 10 or fewer individual income tax
returns in 2012.
Example 4. Same facts as Example 3, except, in addition to the
five Forms 1041 that she expects to prepare and file in 2012, Tax
Return Preparer B also expects to prepare and file 10 paper Forms
1040 (U.S. Individual Income Tax Return) in 2012, based upon the
requests that she has received from some of her clients. Because the
total number of individual income tax returns B reasonably expects
to file in 2012 (fifteen) exceeds 10, B is a specified tax return
preparer for calendar year 2012, and B must electronically file all
individual income tax returns that B prepares and files in 2012 that
are not otherwise excluded from the electronic filing requirement.
Example 5. Firm X consists of two tax return preparers, Tax
Return Preparer C who owns Firm X, and Tax Return Preparer D who is
employed by C in Firm X. Based upon the firm's experience over the
past three years, C and D reasonably expect to file nine and ten
individual income tax returns for compensation, respectively, in
2012. Both C and D must electronically file the individual income
tax returns that they prepare in 2012, unless the returns are
otherwise excluded from the electronic filing requirement, because
they are members of the same firm and the aggregated total of
individual income tax returns that they reasonably expect to file in
2012 (nineteen), exceeds 10 individual income tax returns.
(f) Additional guidance. The IRS may implement the requirements of
this section through additional guidance, including by revenue
procedures, notices, publications, forms and instructions, including
those issued electronically.
(g) Effective/applicability date. This section is effective on
March 30, 2011,
[[Page 17530]]
and applicable to individual income tax returns filed after December
31, 2010.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: March 25, 2011.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-7571 Filed 3-28-11; 4:15 pm]
BILLING CODE 4830-01-P