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Pepperdine University School of Law

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Tuesday, September 25, 2007

IRS Proposes Revisions to Circular 230

The IRS yesterday proposed regulations (REG-138637-07) toughening the Circular 230 standards that apply to tax practitioners advising clients and preparing tax returns. The regulations state that to sign the return, a practitioner must have a "reasonable belief" that (1) the tax treatment of each position on the return would more likely than not be sustained on its merits; or (2) the position has a reasonable basis and is adequately disclosed to IRS. A practitioner may not advise a client to take a position on a tax return, or prepare the portion of a tax return on which a position is taken, unless those two conditions are met. The rules would be effective for returns filed or advice provided on or after the date that final regulations are published in the Federal Register, but no earlier than Jan. 1, 2008.

Update:  The IRS has issued final regulations (RIN 1545-BA72), effective September 26, 2007.

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