Retention of Income Tax Return Preparers' Signatures
DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 1 [TD 8893] RIN 1545-AW52
TITLE: Retention of Income Tax Return Preparers� Signatures
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final regulations that provide
income tax return preparers with two alternative means of meeting
the requirement that a preparer retain the copy of the return or
claim manually signed by the preparer. The regulations are
necessary to inform preparers about the two alternatives and to
provide them with the guidance needed to comply with the
alternatives.
DATES: Effective Date: These regulations are effective July 18,
2000.
Applicability Date: For dates of applicability, see
�1.6695-1(g) of these regulations.
FOR FURTHER INFORMATION CONTACT: Beverly A. Baughman (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.
On December 31, 1998, final and temporary regulations (TD
8803, 1999-12 I.R.B. 15) under section 6695 were published in the
Federal Register (63 FR 72182). A notice of proposed rulemaking
(REG-106386-98, 1999-12 I.R.B. 31) cross-referencing the
temporary regulations was published in the Federal Register (63
FR 72218) on the same date. Although written or electronic
comments and requests for a public hearing were solicited, no
comments were received and no public hearing was requested or
held. The proposed regulations under section 6695 are adopted by
this Treasury decision and the corresponding temporary
regulations are removed.
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) 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.
Explanation of Provisions
The final regulations provide that 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. In the alternative,
the person required to retain the manually signed copy of the
return or claim may either retain a photocopy of that manually
signed copy 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 Executive Order
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, the notice of
proposed rulemaking that preceded these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Beverly A.
Baughman of the 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 removing the entry for section 1.6695-1T and by revising the
entry for section 1.6695-1 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6695-1 also issued under 26 U.S.C. 6060(b) and
6695(b). * * *
Par. 2. Section 1.6695-1 is amended by:
1. Revising paragraph (b)(4)(i).
2. Adding paragraph (g).
3. Removing the authority citation immediately following
the end of the section.
The revision and addition read as follows:
�1.6695-1 Other assessable penalties with respect to the
preparation of income tax returns for other persons.
* * * * *
(b) * * *
(4)(i) The manual signature requirement of paragraphs (b)(1)
and (2) of this section 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 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 �601.601(d)(2) of this chapter) or other procedures
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.
* * * * *
(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 that date.
Section 1.6695-1T [Removed]
Par. 3. Section 1.6695-1T is removed.
Robert E. Wenzel
Deputy Commissioner of Internal Revenue
Approved: 6/30/00
Jonathan Talisman
Deputy Assistant Secretary of the Treasury
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