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Thursday, February 14, 2013

Proposed Revisions to IRS Circular 230 Set New Standards for 'Reasonable' Practices

by Florence Olsen

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Under proposed “reasonableness” standards for Circular 230, employee benefit attorneys who provide written tax advice may not rely on information from benefit plan sponsors if the attorneys know or should know that the information is incorrect or incomplete, an Internal Revenue Service official said Feb. 13 during an agency-sponsored phone forum.
 
“You benefits folks really need to pay attention to this one,” Karen L. Hawkins, director of the Office of Professional Responsibility at IRS, said during a presentation on professional accountability and standards of conduct for practitioners who offer tax advice about employee benefit plans. The discussion focused on standards for written tax advice under the tax code and IRS Circular 230.
 
“Your reliance on your taxpayer information is going to be unreasonable if you know or you should know that one or more of the representations or the assumptions on which a representation is based is either incorrect or incomplete or, I would add, inconsistent with other facts that you have,” Hawkins said, referring to proposed revisions to Section 10.37 of the circular.
 
The proposed provisions, which appeared in REG-138367-06, would amend Circular 230 to apply a higher standard of review to practitioners who know or have reason to know that their tax advice will be used to recommend, market, or promote investment plans or other arrangements whose primary purpose is to avoid paying taxes.
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