Circular 230 Changes Affecting Employee Benefits

Transcription

1 Circular 230 Changes Affecting Employee Benefits Charles F. Plenge Haynes and Boone, LLP October 22, 2011 Who May Practice Attorneys Certified Public Accountants (CPAs) Enrolled Agents (EAs) Enrolled Actuaries (EAcs) Enrolled Retirement Plan Agents (ERPAs) Registered Tax Return Preparers 2 1

2 Practice-Defined (10.2) All matters connected with a presentation to the IRS relating to a taxpayer s rights, privileges or liability under laws and regulations administered by the IRS Preparing or filing documents, corresponding and communicating with the IRS, rendering written advice, and representing a client at conferences, hearings and meetings Traditional Circular 230 practitioners: Practice = tax return preparation 3 Other individuals (10.8(c)) Anyone who prepares (or assists in preparing) all or a substantial portion of a document pertaining to a taxpayer s tax liability for submission to the IRS is: Subject to Subparts B (duties and restrictions) and C (sanctions) irrespective of license or PTIN status Excludes typing, reproduction or other mechanical assistance 4 2

3 Diligence as to Accuracy (10.22) Must exercise due diligence in: Preparing, approving and filing tax returns, documents, affidavits etc. relating to IRS matters Determining correctness of oral/written representation made to the client or to Treasury personnel Reliance on another s work product? With reasonable care. 5 Due Diligence - Written Advice Rendering written advice(10.2): Revised in 2007 per the American Jobs Creation Act of 2004 With respect to any transaction, plan or arrangement having a potential for tax avoidance or evasion covered opinions other written advice 10.51(a)(13) written or oral advice 6 3

4 Due Diligence Standards for Tax Returns (10.34(a)) May not sign a tax return or advise a position on a tax return, willfully, recklessly, or through gross incompetence if: Lacks a reasonable basis Is an unreasonable position (6694(a)(2)) Willful attempt to understate liability (6694(b)(2)(A)) Reckless, intentional disregard of rules and regulations (6694(b)(2)(B)) Patterns of conduct matter 7 Standards for Documents and Other Papers (10.34(b)) May not advise taking a position on a document, etc. that are frivolous May not advise submissions: To delay or impede tax administration That are frivolous Containing or omitting information that demonstrates an intentional disregard of rules and regulations 8 4

5 Penalties and Client Reliance (10.34(c) & (d)) Must advise client of potential penalties and their avoidance through disclosure (10.34(c)) Reliance on client information in good faith, without verification, is ok, but Cannot ignore implications of other information furnished Cannot ignore actual knowledge Must make reasonable inquiries for incorrect, inconsistent information (10.34(d)) No willful blindness No don t ask, don t tell 9 Procedures to Ensure Compliance (10.36(b)) Firms must have procedures in place to ensure compliance with Circular 230 s rules regarding Covered Opinions Preparation of tax returns and other documents 10 5

6 Sanctions for Violating Circular 230 (10.50) In addition to losing the right to practice before the IRS, monetary penalties may be imposed on any practitioner who Is shown to be incompetent or disreputable Willfully, recklessly or through gross incompetence fails to comply with Circular 230 If the violating practitioner is in a firm, a penalty may be imposed on the firm, if it knew or should have known of the violating conduct 11 Who Needs PTIN? PTIN Requirements (10.8(a)): Anyone who for compensation prepares or assists with the preparation of all or substantially all of a tax return or claim for refund must have a preparer tax identification number (PTIN) Includes all practitioners covered by 230 other than enrolled actuaries and ERPAs UNLESS No PTIN required if prepare less than substantially all of the return or claim for refund 12 6

7 Who Needs PTIN? (cont d) Return preparers may obtain PTINs without testing or mandatory CPE, if (Notice ): supervised by any practitioner other than a registered tax return preparer; supervising practitioner signs the return or claim for refund; is employed by the recognized firm of the practitioner who signs the return or claim; and passes, when available, the requisite tax compliance and suitability checks. Supervised return preparers may not sign or represent before the IRS 13 Who Needs PTIN? (cont d) Forms not requiring a PTIN (Notice ) 5300, 5307, 5310, 8717, 5500 series SS-4, Forms currently requiring a PTIN, BUT (ESOP) 5330 (Excise Tax) 14 7