NATP Wants IRS to Clarify ‘Tax Advice’ Ban

The National Association of Tax Professionals is asking the Internal Revenue Service to clarify a murky provision in the updated Circular 230 rules that seemingly prohibits registered tax preparers from providing “tax advice” to clients unless they're preparing a tax return.

In June, the IRS released the updated Circular 230 regulations, TD 9527. The regulations affect individuals who practice before the IRS and providers of continuing education programs, making the new designation of “registered tax return preparer” official. Registered tax return preparers must comply with the applicable rules in Circular 230, but the NATP found one of the provisions could potentially be at odds with the traditional role of tax preparers. Section 10.3(f)(3) of the Circular 230 regulations states that a registered tax return preparer does not have the “authority to provide tax advice to a client or another person except as necessary to prepare a tax return……intended to be submitted to the IRS.”

Seeking clarification on the provision, the NATP contacted the IRS and commented on the regulations.

Last month the NATP held a town hall meeting during its national conference in St. Louis featuring Ray Wagner, a member of the IRS Oversight Board. During the meeting, NATP members expressed their concerns to Wagner over this provision along with other IRS initiatives. Wagner promised to bring those concerns back to the IRS Oversight Board.

A few days later, during the closing banquet of the NATP conference, IRS Return Preparer Office director David Williams, who is spearheading the tax preparer regulatory program, acknowledged that the RPO “hadn’t really focused” on this provision until NATP government liaison Larry Gray and NATP CEO Kathy Stanek brought up the matter.

Williams said, according to the NATP, “We are going to be putting out some clarification around that.”

“What it essentially will be saying… this isn’t about tax planning," Williams added. "What we were essentially saying is that you cannot provide legal advice, unless you are a lawyer.”

Hearing that the provision pertains to providing legal advice and not to tax planning brought relief to many tax professionals at the banquet, and they reportedly cheered.

However, the NATP said it would continue to work with the IRS until an official clarification and possible changes in the provision are released.

“NATP prides itself on looking out for its members’ right to practice, as well as being an advocate for all tax professionals,” Stanek said in a statement.