38 Fraley Street
Kane, PA 16735
Fax (814) 837-2267
Phone( (814) 837-9150
CIRCULAR 230 DISCLAIMER
Articles and commentary included herein do not constitute an opinion and are not intended or written to be used, and they cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.
The IRS has issued new rules that will affect how we, tax professionals, communicate with you, our client. The ruling, Circular 230, which took effect June 20, 2005 apply whenever a practitioner provides written advice, including e-mails, faxes, and letters, on tax issues. While the rules are motivated by the government's well-founded concern with abusive tax shelters, they will apply to advice given on many common and accepted transactions.
The rules grew out of the government's decision to attack the mechanisms used by tax shelter promoters to sell abusive tax shelters. The new rules address the practice of promoters who may have been obtaining “boiler-plate” opinions for tax shelters. Taxpayers engaging in abusive transactions have used these types of opinions to escape tax penalties of 20 percent or more, in additional to the additional taxes and interest that may have been owed on any deficiency, by claiming they "reasonably" and "in good faith" relied on the tax opinion for their belief that the transaction was permissible.Based on the new IRS rules, clients cannot rely on a tax opinion for protection from penalties unless the practitioner provides a comprehensive opinion that considers and discusses:
relevant facts and applicable law,
The new rules apply to tax advice for transactions that have a "significant purpose" of tax avoidance. This standard is vague and uncertain, in large part because the IRS did not want to create any loopholes. Consequently, the new rules may sweep in many routine, non-abusive transactions. The penalties to practitioners can be severe for providing written advice that does not meet these requirements, including disbarment from practice before the IRS.
Often times, however, we communicate in writing with our client regarding tax matters in a less formal manner than that contemplated by a “comprehensive opinion.” These less formal communications are often appropriate when, for example, we are simply summarizing verbal conversations we have had on an issue or we have not been engaged to exhaustively research an issue. In many cases our clients do not want to incur the professional fees associated with a formal comprehensive opinion.The IRS rules allow us to continue to provide written communications that are not in the form of comprehensive opinions if we include a certain legend (which language is provided by the IRS) within those written communications. Accordingly, effective immediately, we will routinely include the following language in all written communications that are not comprehensive opinions:
FEDERAL TAX NOTICE:
Accuracy of Information
Your privacy is important to us, and maintaining your trust and confidence is one of our highest priorities. We respect your right to keep personal information confidential and understand your desire to avoid unwanted solicitations. CPAs, like all providers of personal financial services, are now required by law to inform their clients of their policies regarding privacy of client information. CPAs have been and continue to be bound by professional standards of confidentiality that are even more stringent than those required by law. Therefore, we have always protected your right to privacy.
We collect nonpublic personal information about you that is provided to us by you or obtained by us with your authorization. For instance, we collect certain biographical information needed to prepare tax returns and financial plans.
For current and former clients, we do not disclose any nonpublic personal information obtained in the course of our practice except as required or permitted by law. Permitted disclosures include, for instance, providing information to our employees, and in limited situations, to unrelated third parties who need to know that information to assist us in providing services to you. In all such situations, we stress the confidential nature of information being shared. We do not, under any circumstances, outsource tax preparation services to a third party.We retain current and former client records relating to our services for a period of time after the date that services are provided. Our records retention policy is necessary to allow us to comply with our professional guidelines. Additionally, we have found this practice enables us to better serve your future professional needs. In order to guard your nonpublic personal information, we maintain physical, electronic, and procedural safeguards that comply with our professional standards.