The House Ways and Means Committee has passed a bill that contains a provision advocated by the American Institute of CPAs equalizing the tax return reporting standards.
The Energy and Tax Extenders Act of 2008, introduced by committee chairman Charles Rangel, D-N.Y., mainly also extends a group of tax credits that expired last year or are scheduled to expire at the end of this year, including incentives for renewable energy (see Rangel Introduces Tax Extension Bill).
Tucked inside the bill is language that would conform the penalty standards for tax return preparers with the same standards for taxpayers. The provision was originally included in H.R. 4318, introduced by Joe Crowley, D-N.Y., and Jim Ramstad, R-Minn., late last year (see House Introduces Bill to Modify Preparer Penalty). That bill was incorporated into the latest bill, H.R. 6049, which passed the commitee by a vote of 25 to 12.
For undisclosed positions, the penalty standard for return preparers is reduced to substantial authority. For disclosed positions, a return preparer generally must have a reasonable basis for the position. For positions involving tax shelters and certain reportable transactions, a return preparer must have a reasonable belief that the position would more likely than not be sustained on the merits. The proposal is estimated to cost $22 million over 10 years.
“We greatly appreciate House Ways and Means Committee Chairman Charles Rangel’s commitment to pass the provision,” said AICPA CEO Barry Melancon (pictured) in a statement. “It is a top priority for the AICPA and CPAs across the country.”
AICPA vice president for taxation Tom Ochsenschlager pointed out that the provision will correct a flawed law passed in May 2007 that raised the tax return reporting standards for tax return preparers to a level higher than that required of taxpayers. The unequal thresholds create the potential for conflicts of interest between preparers and their clients, and could affect the nature of taxpayers’ representation.
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