The IRS Advisory Council has released a report criticizing the IRS’s revised schedule for reporting uncertain tax positions and its plans to regulate non-signing tax preparers.
The IRS released a revised Schedule UTP in September after hearing earlier criticisms of its plans for requiring companies to report on their uncertain tax positions.
“The subgroup does not agree with this change in IRS position or the issuance of this schedule,” said the newly released annual report by the IRS Advisory Council. “In addition, the subgroup believes that there are significant challenges to overcome to make sure that examination teams utilize the information contained on this new schedule in a reasonable manner.”
The 32-member council includes representatives from the taxpaying public, the tax professional community and small and large businesses. Accountants, lawyers, enrolled agents, and academics are on the council.
After reviewing a draft of the final schedule, a subgroup of the council wondered why the IRS released it in the first place. “We question how this form can help the IRS in overall administration, since it applies to only a minority of [Large Business & International] taxpayers,” they wrote. “In addition, the subgroup believes that the form is unnecessary for taxpayers that are participating in the Compliance Assurance Process (CAP), since those taxpayers have already pledged a substantial amount of transparency with respect to their tax positions.” They instead encouraged expansion of the CAP program.
Other parts of the report criticize the IRS’s plans to require non-signing tax preparers to be subject to new registration, continuing education and testing requirements, which are also opposed by the American Institute of CPAs. The group noted that the IRS’s own initial Return Preparer Report had recommended that the requirement to register and obtain a Preparer Tax Identification Number, or PTIN, be applied only to “signing preparers,” at least initially.
“A requirement applicable to signing preparers is clear and easy to apply because there is only one signing preparer per tax return,” they wrote. “Registration of the signing preparer makes sense because the signing preparer is the one with ‘primary responsibility for the overall substantive accuracy.’”
However, they noted that when the IRS issued its final regulations, non-signing preparers were also included in the regime, even though the definition of whether they had prepared “substantially all” of a return was vague. The advisory council also wondered how the registration of non-signing tax preparers would help the IRS with its objective of identifying tax return preparers more accurately and improve its ability to associate problematic tax returns and refund claims with the responsible tax return preparer.
“It is difficult to see how registration of a non-signing preparer will meet these objectives when the IRS will only have visibility to the PTIN of the signing preparer because only the signing preparer’s PTIN is transmitted with the return,” they wrote.
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