[Federal Register Volume 63, Number 251 (Thursday, December 31, 1998)]
[Rules and Regulations]
[Pages 72182-72183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34360]
[[Page 72182]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 8803]
RIN 1545-AW83
Retention of Income Tax Return Preparers' Signatures
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains final and temporary regulations that
provide income tax return preparers with two alternative means of
meeting the requirement that a preparer retain the manually signed (by
the preparer) copy of the return or claim. The regulations are
necessary to inform preparers of the two alternatives and provide
preparers with the guidance needed to comply with the alternatives. The
text of the temporary regulations also serves as the text of the
proposed regulations set forth in the notice of proposed rulemaking on
this subject in the Proposed Rules section of this issue of the Federal
Register.
DATES: Effective Date: These regulations are effective December 31,
1998.
Applicability Date: For dates of applicability, see Sec. 1.6695-
1T(g) of these regulations.
FOR FURTHER INFORMATION CONTACT: Marc C. Porter (202) 622-4940 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) relating to the penalty for failure to sign an income tax
return under section 6695(b) of the Internal Revenue Code. Section
6695(b) provides that any person who is an income tax return preparer
with respect to a return or claim for refund, who is required by
regulations prescribed by the Secretary to sign the return or claim,
and who fails to comply with those regulations, must pay a penalty of
$50 for such failure, unless it is shown that the failure is due to
reasonable cause and not willful neglect. The maximum penalty imposed
with respect to documents filed during a calendar year will not exceed
$25,000.
Section 7701(a)(36)(A) provides that, in general, the term ``income
tax return preparer'' means any person who prepares for compensation,
or who employs one or more persons to prepare for compensation, any
return of tax or claim for refund imposed by subtitle A. For purposes
of the preceding sentence, the preparation of a substantial portion of
a return or claim is treated as if it were the preparation of such
return or claim.
Section 1.6695-1(b)(1) and (c) generally provides that an income
tax return preparer, with respect to a return or claim for refund, must
manually sign the return or claim (which may be a photocopy) in the
appropriate space provided on the return or claim after it is completed
and before it is presented to the taxpayer (or nontaxable entity) for
signature.
Section 1.6695-1(b)(4)(i) provides that the manual signature
requirement may be satisfied by a photocopy of a copy of the return or
claim for refund if the copy is manually signed by the income tax
return preparer after completion of its preparation. The taxpayer may
file a photocopy of this manually signed return with the IRS, see Rev.
Proc. 78-370 (1978-2 C.B. 335). The employer of the preparer or the
partnership in which the preparer is a partner, or the preparer (if not
employed or engaged by a preparer and not a partner of a partnership
which is a preparer), must retain the manually signed copy of the
return or claim.
Explanation of Provisions
The regulations provide that, if an income tax return preparer
presents for a taxpayer's signature a return or claim for refund that
has a copy of the preparer's manual signature, the preparer may either
retain a photocopy of the manually signed copy of the return or claim
for refund or use an electronic storage system meeting the requirements
of section 4 of Rev. Proc. 97-22, (1997-1 C.B. 652) or procedures
subsequently prescribed by the Commissioner, to store and produce a
copy of the return or claim manually signed by the preparer.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to these regulations, and because the regulations do not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue Code, these temporary
regulations will be submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small
business.
Drafting Information: The principal author of these regulations is
Marc C. Porter, Office of Assistant Chief Counsel (Income Tax &
Accounting). However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6695-1T also issued under 26 U.S.C. 6695(b) * * *
Par. 2. Section 1.6695-1 is amended by revising paragraph (b)(4)(i)
to read as follows:
Sec. 1.6695-1 Other assessable penalties with respect to the
preparation of income tax returns for other persons.
* * * * *
(b) * * *
(4)(i) [Reserved]. For further guidance on acceptable methods of
meeting the manual signature requirement of paragraphs (b)(1) and (2)
of this section, see Sec. 1.6695-1T(b)(4)(i).
* * * * *
Par. 3. Section 1.6695-1T is added to read as follows:
Sec. 1.6695-1T Other assessable penalties with respect to the
preparation of income tax returns for other persons (temporary).
(a) through (b)(3) [Reserved]. For further guidance, see
Sec. 1.6695-1(a) through (b)(3).
(b)(4)(i) The manual signature requirement of Sec. 1.6695-1(b)(1)
and (2) may be satisfied by a photocopy of a copy of the return or
claim for refund which copy is manually signed by the preparer after
completion of its preparation. After a copy of the return or claim for
refund is signed by the preparer and before it is photocopied, no
person other than the preparer may alter any entries on the copy other
than to correct arithmetical errors discernible on the return or claim
for refund. The employer of the preparer or the partnership in which
the preparer is a partner, or the preparer (if not employed or engaged
by a preparer and not a
[[Page 72183]]
partner of a partnership which is a preparer), must retain the manually
signed copy of the return or claim for refund. In the alternative, for
a return or claim for refund presented to a taxpayer for signature
after December 31, 1998 and for returns or claims for refund retained
on or before that date, the person required to retain the manually
signed copy of the return or claim for refund may choose to retain a
photocopy of the manually signed copy of the return or claim for
refund, or use an electronic storage system to store and produce a copy
of the manually signed return or claim for refund. For purposes of this
paragraph (b)(4)(i), an electronic storage system must meet the
electronic storage system requirements prescribed in section 4 of Rev.
Proc. 97-22 (1997-1 C.B. 652)(see Sec. 601.601(d)(2) of this chapter)
or procedures subsequently prescribed by the Commissioner. A record of
any arithmetical errors corrected must be retained and made available
upon request by the person required to retain the manually signed copy
of the return or claim for refund.
(b)(4)(ii) through (f) [Reserved]. For further guidance, see
Sec. 1.6695-1(b)(4)(ii) through (f).
(g) Effective date. This section applies to income tax returns and
claims for refund presented to a taxpayer for signature after December
31, 1998 and for returns or claims for refund retained on or before
December 31, 1998. This section expires on December 31, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved: December 17, 1998.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-34360 Filed 12-30-98; 8:45 am]
BILLING CODE 4830-01-P
