Standard Federal Tax Explanations related to §6107

FEDERAL INCOME TAX

Tax Return Preparer

Significant developments - proposed regulations: tax return preparers. -- ... 2008FED ¶36,922.002

Synopsis - document requirements. -- ... 2008FED ¶36,922.01

Proposed regulations: tax return preparers. -- ... 2008FED ¶36,922.08

Tax Return Preparer: Significant developments - proposed regulations: tax return preparers

Proposed regulations have been issued regarding amendments to the tax return preparer penalties under Code Secs. 6694 (¶39,956C) and 6695 (¶39,970), and related provisions under Code Secs. 6060 (¶36,562), 6107, 6109 (¶36,965), 6696 (¶39,980), and 7701(a)(36) (¶43,114), made by the Small Business and Work Opportunity Act of 2007 (P.L. 110-28). Also addressed are the IRS' transitional issues in implementing the Modernized e-File platform for the Form 1040 series of returns. See ¶49,807 and ¶36,922.08.

Tax Return Preparer: Synopsis - document requirements

Any person who is a tax return preparer with respect to a return or claim for refund must furnish a completed copy of the return or refund claim that he prepares to the taxpayer either before or at the same time it is presented for the taxpayer's signature (Code Sec. 6107(a)). For returns prepared after May 25, 2007, this requirement applies to tax return preparers and is not limited to income tax return preparers (Code Sec. 6107, as amended by the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28). See ¶36,922.08 for a discussion of proposed regulations.

The preparer must retain and keep available for inspection the completed copy of the return or refund claim for a three-year period ordinarily running from the close of the return period during which such return or refund claim is presented to the taxpayer for filing. In the alternative, the preparer can keep for the same period, a list of all taxpayers (and their identifying numbers and tax years) for whom he has prepared returns (Code Sec. 6107(b)).

Under Reg. §1.6107-1(c), the person who employs (or engages) one or more other income tax return preparers to prepare the return for compensation is the income tax return preparer for purposes of these requirements. In a partnership arrangement, the partnership (not the partner) is the preparer.

Return preparers can maintain an electronic paperless filing system. To facilitate and eliminate uncertainties as to a preparer's Code Sec. 6107 obligation, the IRS may inform preparers of how to comply with Code Sec. 6107 in forms, instructions and other guidance (Reg. §1.6107-2).

See Code Sec. 6695 and the explanation at ¶39,970.01, for a discussion of the return preparer penalties.

Tax Return Preparer: Proposed regulations: tax return preparers

Proposed regulations have been issued regarding amendments to the tax return preparer penalties under Code Secs. 6694 (¶39,956A) and 6695 (¶39,970), and related provisions under Code Secs. 6060 (¶36,562), 6107, 6109 (¶36,965), 6696 (¶39,980), and 7701(a)(36) (¶43,114), made by the Small Business and Work Opportunity Act of 2007 (P.L. 110-28). Changes made pursuant to P.L. 110-28 include the broadening of the scope of the tax return preparer penalties to include preparers of returns other than income tax returns, such as employment tax returns and excise tax returns. The Treasury Department and the IRS believe that a comprehensive review and overhaul of all the tax return preparer penalties and related regulatory provisions is necessary in light of the recent amendments to the tax return preparer penalty provisions. The proposed regulations constitute the first significant step in this process.

Additionally, the IRS' transitional issues in implementing the Modernized e-File platform for the Form 1040 series of returns are addressed. Reg. §1.6107-1(a) is proposed to be amended to provide that, for electronically filed Forms 1040EZ, Income Tax Return for Single Filers and Joint Filers With No Dependents, and Forms 1040A, U.S. Individual Income Tax Return, filed for the 2009, 2010 and 2011 tax years, the return information may be provided on a replica of a Form 1040, U.S. Individual Income Tax Return providing all the return information. The information with respect to other electronically filed returns may be provided on a replica of an official form that provides all the information.

The Treasury Department and the IRS intend to finalize the proposed regulations by the end of 2008. It is expected that the final regulations will apply to returns and claims for refunds filed and advice given after the date the final regulations are published in the Federal Register, but in no event sooner than December 31, 2008. A public hearing has been scheduled for August 18, 2008. Written or electronic comments must be received by August 16, 2008. Outlines of topics to be discussed at the public hearing must be received by August 4, 2008 (NPRM REG-129243-07). See ¶49,807. See, also, the discussion of Code Sec. 6695, beginning at ¶39,970, and the definition of a tax return preparer under Code Sec. 7701, beginning at ¶43,114, for more information.