On December 31, 2007, IRS announced that it plans to overhaul rules regarding tax preparer penalties and conduct. The IRS news release included the following statements:
“The plan to take a fresh look at the preparer penalty regulations will be a top priority for us in 2008,” said IRS Chief Counsel Don Korb. “We look forward to receiving comments from all interested parties on their recommendations for the final regulations. Our goal is to complete our work on the overhaul of these rules by the end of 2008,” he said.
For undisclosed positions on a tax return, the new law replaced the realistic possibility standard with a requirement that there be a reasonable belief that the tax treatment of the position would more likely than not be sustained on its merits. In cases in which the taxpayer discloses the position on the tax return, the notice implements the new law that states there must be a reasonable basis for the tax treatment of the position taken on the tax return.
Will these new rules place undue burden on tax preparers to interpret the law and take more conservative positions? Or will they help to prevent tax preparers from encouraging their clients to take questionable tax positions? Should tax preparers be put in the position of making such judgements?
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