IRS to clarify rules for tax professionals

By Dow Jones Newswires
Posted Aug. 19, 2010 at 1:57 p.m.

The Internal Revenue Service is trying to make the rules clearer for attorneys, certified public accountants and other tax professionals who practice before the agency.

The tax authority on Thursday proposed changes to the rulebooks for tax professionals,  a set of Treasury standards known as Circular 230. A goal is to better define what tax advisers can and cannot do and to establish new rules on preparing tax returns. Advisers who have been expecting the amendments hope the changes will help clear up growing confusion over a number of issues. Many in the tax profession, for example, are becoming unsure about the difference between a legitimate tax structure and one the IRS or courts may challenge.

Current rules address how confident an adviser must be that a recommended tax position is valid. A group of standards exists, ranging from the person having a “reasonable basis” of certainty to a “realistic possibility of success” to “substantial authority” to being able to show that the position is valid “more likely than not.”

There are even numbers assigned to these terms; for example, “substantial authority” means the person is 40 percent sure, while “more likely than not” means he is 51 percent certain.

Advisers and other tax professionals have until Oct. 7, 2010, to comment on the proposed regulations.

The IRS did not immediately comment.

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