On December 31, 2007, the Service issued in Communication 2008-13 guidelines on which tax advisors can rely until the final rules are published. These preliminary guidelines have alleviated some important concerns of practitioners and have been generally welcomed by practitioner groups as an appropriate balance between the roles of tax advisors and the needs of effective tax administration. Sub Prop. Regs. Sections 1.6694-3(c)(2) or (3) if a position that violates a rule or regulation has a reasonable basis and is reasonably disclosed, or if a position that contradicts a decision or income announcement published in the Internal Revenue Bulletin is made and the tax return preparer reasonably believes that the position is most likely due to its merits under the Prop. The regulations would be maintained. Paragraph 1.6694-2(b) does not treat the applicant as having recklessly or intentionally ignored a rule or regulation. Suppose it is a 10-year municipal bond with a face value of 100 years that is coming due. The de minimis discount is 100 face value x 0.0025 x 5 years = 1.25. There are de minimis rules for determining what constitutes an “essential part” for unsigned creators.7 If the problem is gross income or deduction, or if an amount on which the credit basis is calculated is less than $10,000, the impact is not considered significant.

If the amounts in question are less than $400,000 and also less than 20% of gross income, as indicated in the declaration (AGI for individuals), the impact is not considered significant. If multiple schedules, entries, or other parts are involved, all schedules, entries, or other parts 8 must be aggregated. The draft regulation does not contain a definition of the term “board”, so the definition of non-signatory remains vague. As the ABA reiterated in its comments on the 2008-2013 Communication, the definition of non-signatory creator should only include services that relate directly to the reporting of an item on a tax return and not services directly related to tax planning or tax controversies. This de minimis determination is now in Prop. Regs. Paragraph 301.7701-15(b)(3)(ii) and has been increased to less than $10,000 or less than $400,000 in accordance with the recommendations of the CALA and to less than 20% of gross income as indicated in the statement or claim for reimbursement. Tax advisors should consider their potential penalty when providing tax services to their clients. If all else fails, always take extra precautions to make sure you`re covered as a creator. If customers get too complicated or make you restless, be sure to leave. The Small Business Tax and Employment Opportunities Act 2007 amended the provisions relating to the preliminary ruling in Article 6694.

In January 2008, the IRS issued Communication 2008-13, which provides guidance on the application of the new penal rules for preparers. Building on the guidance of Communication 2008-13, the IRS issued proposed regulations under Section 6694 in June 2008. Another way of looking at it is that the market discount of 100 – 95 = 5 is higher than the de minimis amount of 1.25. Therefore, the profit from the sale of the bond is income, not capital gains. Support. Paragraph 301.7701-15(f) lists persons who are not tax preparers. The list includes: In general, additional factual information relating to emissions or elements relating to any of the items listed in the revenue procedure is not required, provided that the reporting forms and attachments are completed in a clear manner and in accordance with the related instructions. Exceptions to this rule are certain items relating to Schedules M-1, the reconciliation of earnings (loss) per pound to earnings per return, and M-3, the reconciliation of net income (loss) for companies with total assets of $10 million or more. If the item that was treated as prepared by the non-signatory preparer, who is now considered the “tax preparer” of the item, falls within the thresholds of the 20% mimimis rule, neither the non-signer nor the undersigned preparer will be subject to a penalty with respect to the position. As can be seen below, it appears that the business is only subject to a penalty in cases where a registrant is subject to a penalty within the business and certain other conditions are met.

Alternatively, the unsigned preparer may be able to reduce the risk of sanction by applying the 5% de minimis rule. The proposed rules establish disclosure methods for both signatory and non-signatory preparers, allowing preparers to avoid creator liability. In addition, the proposed regulation provides guidance for the calculation of the amount of the penalty in accordance with the new standards of § 6694. They then subtract the 1.25 from the nominal value to get the de minimis threshold amount, which in this example is 98.75 = 100 – 1.25. This is the lowest price at which the bond can be purchased for the IRS to treat the discount as a capital gain. The code divides the “creator” into two categories: singing and not signing. .