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Proposed IRS practice rules.

The Treasury Department proposed rules amending regulations governing practice before the Internal Revenue Service under Treasury Department circular 230.

The new proposals, which replace rules proposed in 1986, would more closely reflect the "realistic possibility" standards adopted by the American Institute of CPAs and the American Bar Association, as well as the preparer penalty pro-visions of Internal Revenue Code section 6694.

Under the proposals, a practitioner may not advise a client to take a position on a return (or prepare the portion of a return on which a position is taken) unless the practitioner determines there is a realistic possibility the position could be sustained on its merits or the position is not frivolous and the practitioner advises the client to disclose the position adequately.

Practitioners generally are required to advise a client of penalties reasonably likely to apply to a return position, of any opportunity to avoid the penalties by disclosure and of the requirements for adequate disclosure.

The proposed rules provide that a practitioner may be disciplined under circular 230 only if a failure to comply with the realistic possibility standard is shown to be willful, reckless or a result of gross incompetence. A practitioner will not be considered to have so acted if there was a reasonable cause for the position and the practitioner acted in good faith.

The rules also would generally prohibit contingent fees for preparing tax returns.
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Article Details
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Dec 1, 1992
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