IRS and Treasury Issue New Standards for Attorneys, Accountants and Other Tax Professionals

This announcement from Treasury today:

As part of an ongoing effort to improve ethical standards for tax professionals and to curb abusive tax avoidance transactions, the Treasury Department and the Internal Revenue Service today issued final regulations amending Treasury Department Circular 230.

Circular 230 is applicable to attorneys, accountants and other tax professionals who practice before the IRS. The revisions to Circular 230 provide standards of practice for written advice that reflect current best practices and are intended to restore and maintain public confidence in tax professionals. These revisions ensure that tax professionals do not provide inadequate advice, and increase transparency by requiring tax professionals to make disclosures if the advice is incomplete.

From the Associated Press:

A carefully crafted legal opinion from a reputable tax adviser with no financial stake in the matter can be useful in protecting investors from penalties in case the IRS later attacks. The new rules aim in part at making clear what kinds of opinion letters work, and which don’t.

Please note that the revised Circular 230 does not reflect certain amendments made by the American Jobs Creation Act of 2004 signed into law on October 22, 2004. The Circular states as follows:

On October 22, 2004, the President signed the American Jobs Creation Act of 2004, Pubic Law 108-357, (118 Stat. 1418)(the Act), which amended section 330 of title 31 of the United States Code to clarify that the Secretary may impose standards for written advice relating to a matter that is identified as having a potential for tax avoidance or evasion. The Act also authorizes the Treasury Department and the IRS to impose a monetary penalty against a practitioner who violates any provision of Circular 230. These final regulations do not reflect amendments made by the Act. The Treasury Department and the IRS expect to propose additional regulations implementing the Act’s provisions.

You can also access some Proposed Regulations here which set forth standards for State or local bond opinions and were issued in conjunction with the Circular.

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