Specified Tax Return Preparers Required To File Individual Income Tax Returns Using Magnetic Media, 75439-75444 [2010-30500]
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Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules
§ 190.08(a)(1)(i)(G), and by adding a new
paragraph (a)(1)(i)(F):
§ 190.08 Allocation of property and
allowance of claims.
*
*
*
*
*
(a) * * *
(1) * * *
(i) * * *
(F) To the extent not otherwise
included, securities held in a portfolio
margining account carried as a futures
account;
*
*
*
*
*
Issued in Washington, DC, on November
19, 2010, by the Commission.
David A. Stawick,
Secretary of the Commission.
Statement of Chairman Gary Gensler
Protection of Collateral of
Counterparties to Uncleared Swaps;
Treatment of Securities in a Portfolio
Margining Account in a Commodity
Broker Bankruptcy
I support the proposed rulemaking
concerning protection of collateral of
counterparties to uncleared swaps. The
proposal includes important protections for
end-users when entering into bilateral or
customized swaps. The proposal follows the
Congressional direction that end-users must
have a choice to have any initial margin that
they post with a swap dealer to be kept in
a segregated account and with a third party
custodian. The proposed rules would protect
market participants while promoting the
financial integrity of the marketplace. The
proposal also includes necessary
housekeeping details with regard to the
Bankruptcy code.
[FR Doc. 2010–29831 Filed 12–2–10; 8:45 am]
BILLING CODE 6351–01–P
individual income tax returns using
magnetic media pursuant to section
6011(e)(3) of the Internal Revenue Code
(Code). The proposed regulations reflect
changes to the law made by the Worker,
Homeownership, and Business
Assistance Act of 2009. The proposed
regulations affect specified tax return
preparers who prepare and file
individual income tax returns, as
defined in section 6011(e)(3)(C). For
calendar year 2011, the proposed
regulations define a specified tax return
preparer as a tax return preparer who
reasonably expects to file (or if the
preparer is a member of a firm, the
firm’s members in the aggregate
reasonably expect to file) 100 or more
individual income tax returns during
the year, while beginning January 1,
2012 a specified tax return preparer is
a tax return preparer who reasonably
expects to file (or if the preparer is a
member of a firm, the firm’s members in
the aggregate reasonably expect to file)
11 or more individual income tax
returns in a calendar year. The proposed
regulations are unrelated to and are not
intended to address the requirements for
obtaining a preparer tax identification
number (PTIN) under section 6109. See
the final regulations under section 6109
published in the Federal Register (75
FR 60309–01). This document also
provides a notice of a public hearing on
these proposed regulations.
DATES: Written or electronic comments
must be received by January 3, 2011.
Outlines of topics to be discussed at the
public hearing scheduled for January 7,
2011 must be received by January 3,
2011.
Send submissions to:
CC:PA:LPD:PR (REG–100194–10), room
5205, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to CC:PA:LPD:PR (REG–100194–
10), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC 20224, or sent
electronically via the Federal
eRulemaking Portal at https://
www.regulations.gov (IRS—REG–
100194–10). The public hearing will be
held in the auditorium, Internal
Revenue Building, 1111 Constitution
Avenue, NW., Washington, DC 20224.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Keith L. Brau, (202) 622–4940;
concerning submissions of comments,
the hearing, and/or to be placed on the
building access list to attend the
hearing, Oluwafunmilayo Taylor of the
ADDRESSES:
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG–100194–10]
RIN 1545–BJ52
Specified Tax Return Preparers
Required To File Individual Income Tax
Returns Using Magnetic Media
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
emcdonald on DSK2BSOYB1PROD with PROPOSALS-1
AGENCY:
This document contains
proposed regulations relating to the
requirement for ‘‘specified tax return
preparers,’’ generally tax return
preparers who reasonably expect to file
more than 10 individual income tax
returns in a calendar year, to file
SUMMARY:
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75439
Publications and Regulations Branch at
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in this notice of proposed
rulemaking has been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the
collection of information should be sent
to the Office of Management and
Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
SE:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by
January 3, 2011. Comments are
specifically requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the Internal Revenue
Service, including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection
of information (see below) or of the
certification contained under the
heading ‘‘Special Analyses’’;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the proposed collection of information
may be minimized; and
Estimates of capital or start-up costs
and costs of operation, maintenance,
and purchases of service to provide
information.
The collection of information in this
proposed regulation is in § 301.6011–
6(a)(4)(ii). This information can be used
by tax return preparers and specified tax
return preparers, if necessary, to
demonstrate to the IRS that the related
individual income tax returns filed in
paper format were not required to be
filed electronically pursuant to section
6011(e)(3) and § 301.6011–6. The
collection of information is voluntary to
obtain a benefit. The likely respondents
are the individuals and small businesses
who prepare individual income tax
returns in exchange for compensation. It
is estimated that 5 minutes of
preparation time is needed for a tax
return preparer to explain the purpose
of the information and obtain it from the
taxpayer in the manner prescribed by
the IRS and 6 minutes for
recordkeeping, consisting of
maintaining a copy of the information
submitted for the respondent’s records.
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Estimated total annual reporting
burden: 1,222,815 hours in calendar
year 2011 and 1,689,930 hours in
calendar year 2012.
Estimated average annual burden
hours per respondent: 9.06 hours (per
firm) in calendar year 2011 and 5.42
hours (per firm) in calendar year 2012.
Estimated number of respondents or
recordkeepers: 135,000 in calendar year
2011 and 312,000 in calendar year 2012.
Estimated annual frequency of
responses per respondent: 49 in
calendar year 2011 and 29.5 in calendar
year 2012.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law.
Background
Recognizing the benefits of electronic
filing, Congress enacted section 2001(a)
of the IRS Restructuring and Reform Act
of 1998, Public Law 105–206 (112 Stat.
727), which states that a policy of
Congress is to promote paperless filing.
Electronic filing of tax returns benefits
taxpayers and the IRS by reducing errors
that are more likely to occur during the
manual preparation and processing of
paper returns. Electronic filing of tax
returns results in faster settling of
accounts and better customer service
because the time required to process
paper returns is eliminated. Electronic
filing of tax returns improves taxpayer
satisfaction and confidence in the filing
process, and may be more cost effective.
Electronic filing of tax returns enables
the IRS to review taxpayer submissions
expeditiously to reduce audit cycle time
and helps the IRS identify emerging
trends more efficiently.
Section 6011(e)(1) generally
authorizes the Secretary to prescribe
regulations providing the standards for
determining which returns must be filed
on magnetic media, including electronic
filing. Prior to passage of the Worker,
Homeownership, and Business
Assistance Act of 2009, Public Law 111–
92 (123 Stat. 2984, 2997 (2009)) (Act),
section 6011(e)(1) provided that,
without exception, the Secretary may
not require returns of any tax imposed
by subtitle A on individuals, estates,
and trusts to be other than on paper
forms supplied by the Secretary. Under
section 6011(e)(2)(A), in prescribing
regulations under section 6011(e)(1), the
Secretary shall not require any person
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(taxpayer) to file on magnetic media
(including electronically) unless the
person is required to file at least 250
returns during the calendar year.
With respect to the restriction that the
Secretary may not require returns of any
tax imposed by subtitle A on
individuals, estates, and trusts to be
filed in any format other than paper
forms supplied by the Secretary, the Act
amended section 6011(e)(1) to provide
an exception for individual income tax
returns filed by specified tax return
preparers, as set forth in new section
6011(e)(3). New section 6011(e)(3)
provides that the Secretary shall require
the filing on magnetic media of any
individual income tax returns prepared
and filed by a specified tax return
preparer. As more fully discussed
below, filing on magnetic media
includes electronic filing.
The Act’s amendment to section
6011(e) requires the Secretary to issue
regulations to implement the statute.
These proposed regulations require that
the individual income tax returns
prepared and filed by specified tax
return preparers be filed electronically.
To enhance compliance and to promote
effective and efficient administration of
the congressionally-mandated
requirement of section 6011(e)(3), the
proposed regulations provide a
transition rule for certain specified tax
return preparers.
Explanation of Provisions
1. Specified Tax Return Preparers
Required To File Individual Income Tax
Returns Using Magnetic Media
In General
With certain exclusions, discussed in
the next section, the proposed
regulations provide that any individual
income tax return prepared and filed by
a specified tax return preparer must be
filed using magnetic media, as required
under section 6011(e)(3). For purposes
of these proposed regulations, magnetic
media is defined in § 301.6011–2(a)(1),
which generally includes magnetic tape,
tape cartridge, and diskette, as well as
other media, such as electronic filing,
specifically permitted under the
applicable regulations, procedures, or
publications. Also, for purposes of these
proposed regulations and as defined
under section 6011(e)(3)(C), an
individual income tax return is any
return of income tax imposed by subtitle
A on individuals, estates, and trusts.
This includes any return of income tax
in the Form 1040 series and Form 1041
series. It also includes Form 990–T
(Exempt Organization Business Income
Tax Return) when the exempt
organization is a trust subject to tax on
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unrelated business taxable income
under section 511(b).
The electronic filing requirement in
these proposed regulations applies to
specified tax return preparers. A
specified tax return preparer is defined
as any person who is a tax return
preparer, as defined in section
7701(a)(36) and § 301.7701–15, unless
the tax return preparer reasonably
expects to file 10 or fewer individual
income tax returns in a calendar year,
and if a person who is a tax return
preparer is a member of a firm, that
person is a specified tax return preparer
unless the person’s firm members in the
aggregate reasonably expect to file 10 or
fewer individual income tax returns in
a calendar year. The proposed
regulations do not apply to individuals
described in section 7701(a)(36)(B)(i)
through (iv) and § 301.7701–15(f) who
are not defined as tax return preparers
under that Code section and regulation,
such as an individual who provides tax
assistance under a Volunteer Income
Tax Assistance (VITA) program, a
person who merely prepares a return of
the employer (or of an officer or
employee of the employer) by whom the
person is regularly and continuously
employed, or a person who prepares a
return as a fiduciary for any person.
Solely for the 2011 calendar year, a tax
return preparer will not be considered a
specified tax return preparer if the tax
return preparer reasonably expects, or
the preparer’s firm members in the
aggregate reasonably expect, to file
fewer than 100 individual income tax
returns in the 2011 calendar year.
Under section 6011(e)(3), the concept
of ‘‘file’’ or ‘‘filed’’ individual income tax
returns affects both tax return preparers
and specified tax return preparers. Tax
return preparers are affected by this
concept because a tax return preparer’s
classification as a specified tax return
preparer is based upon the number of
individual income tax returns the tax
return preparer reasonably expects to
file in a given calendar year. Specified
tax return preparers are further affected
by this concept because the electronic
filing requirement for any particular or
specific individual income tax return
depends upon whether the specified tax
return preparer files the return.
Therefore, for purposes of section
6011(e)(3) and these regulations only, an
individual income tax return is
considered to be ‘‘filed’’ by a tax return
preparer or a specified tax return
preparer if the preparer or any member,
employee, or agent of the preparer or the
preparer’s firm submits the tax return to
the IRS on the taxpayer’s behalf, either
electronically (by e-file or other
magnetic media) or in non-electronic or
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non-magnetic media (paper) form.
Submission of a tax return in paper form
includes the direct or indirect
transmission, sending, mailing, or
otherwise delivering of the paper tax
return to the IRS by the tax return
preparer or the specified tax return
preparer, or by any member, employee,
or agent of the tax return preparer or the
preparer’s firm, and may include any act
or acts of assistance that go beyond the
provision of filing or delivery
instructions to the taxpayer. For
example, this can include the preparer
or a member of the preparer’s firm
dropping the return in the mailbox for
the taxpayer. The assistance of others is
considered for purposes of determining
whether a return is filed by a tax return
preparer or specified tax return
preparer, to prevent a preparer from
avoiding these rules by merely handing
the return to an employee or someone
else in the firm to mail to the IRS.
A tax return preparer or specified tax
return preparer, or if the preparer is a
member of a firm, the preparer’s firm,
will be able to affirmatively
demonstrate, if asked, that it was a
taxpayer’s choice to file an individual
income tax return in paper format if the
preparer who prepared the return
obtains a signed statement from the
taxpayer that states the taxpayer chooses
to file the return in paper format and
that the taxpayer, and not the preparer,
will submit the paper return to the IRS.
This statement must be signed by the
taxpayer (by both spouses if a joint
return) and dated on or before the date
the taxpayer files the return. The IRS
may provide guidance through forms,
instructions or other appropriate
guidance regarding how preparers can
document taxpayer choices to file
individual income tax returns in paper
format. A Notice containing a proposed
revenue procedure outlining the
requirements and format of statements
to document when a taxpayer chooses to
file individual income tax returns in
paper format is being published in the
Internal Revenue Bulletin (IRB)
concurrently with these proposed
regulations.
In addition, the proposed regulations
provide that the definition of file or
filed does not alter or affect a taxpayer’s
obligation to file any type of tax return
required under any other provision of
law. The definition of file or filed by a
tax return preparer or a specified tax
return preparer contained in these
proposed regulations applies only for
the purposes of section 6011(e)(3) and
these regulations, and does not apply for
any other purpose under any other
provision of law, such as the statutory
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period of limitations based on the filing
of a tax return.
2. Exclusions
The proposed regulations provide the
following exclusions from the electronic
filing requirement.
A. Undue Hardship Waivers
Under the proposed regulations, the
IRS may grant a waiver of the
requirement of this rule in cases of
undue hardship. A waiver may
generally be granted to a specified tax
return preparer for an undue hardship
that can be identified in advance, before
the specified tax return preparer would
otherwise be required to file individual
income tax returns electronically.
Because this electronic filing
requirement is statutorily imposed, the
IRS will ordinarily grant undue
hardship waivers only in rare cases. An
undue hardship waiver may be granted
to a specified tax return preparer for a
series or class of individual income tax
returns or for a specified period of time.
A determination of undue hardship will
be based upon all facts and
circumstances. A specified tax return
preparer shall request an undue
hardship waiver in the manner
prescribed by the IRS in forms,
instructions, or other appropriate
guidance. A Notice containing a
proposed revenue procedure outlining
the requirements and format for undue
hardship waiver requests is being
published concurrently with these
proposed regulations.
B. Administrative Exemptions
The IRS may provide administrative
exemptions for certain classes of
specified tax return preparers or types of
individual income tax returns as the IRS
determines necessary to promote
effective and efficient tax
administration. For example, the IRS
may provide a broad administrative
exemption applicable to all tax return
preparers for a particular type of form if
the IRS does not yet provide the
capability to file the form electronically,
or for individual income tax returns
prepared by specified tax return
preparers who meet certain conditions
defined by the IRS. The IRS may also
provide an administrative exemption for
individual income tax returns that
contain or require documentation or
attachments that the IRS does not yet
provide the capability to file
electronically, for example,
documentation for the First-Time
Homebuyer Credit, section 6707A
disclosures, or required appraisals to
support charitable contributions. The
IRS may also provide a limited
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75441
administrative exemption for specified
tax return preparers who are certified
members of, and follow the teachings of,
a recognized religious group that is
conscientiously opposed to using
electronic media, which would include
filing electronically. Unlike undue
hardship waivers, specified tax return
preparers who meet the criteria of an
administrative exemption generally
need not submit a request to the IRS to
claim applicability of the administrative
exemption. The IRS may provide the
criteria and procedures, if any are
necessary, for administrative
exemptions through forms, instructions,
or other appropriate guidance.
3. Reasonably Expect To File
A. In General
The determination of whether a tax
return preparer (or if the preparer is a
member of a firm, the preparer’s firm
members in the aggregate) reasonably
expects to file 10 or fewer individual
income tax returns (or, in the case of the
2011 calendar year, fewer than 100
individual income tax returns) is made
by adding together all of the individual
income tax returns (forms in the Form
1040 series, Form 1041 series, and
Forms 990–T (when the exempt
organizations are trusts subject to tax on
unrelated business taxable income
under section 511(b)), in the aggregate)
the tax return preparer and, if the
preparer is a member of a firm, the
firm’s members, reasonably expect to
prepare and file in each calendar year.
In making this determination individual
income tax returns that are excluded
from the electronic filing requirement
due to taxpayer choice or under the
administrative exemption exclusion, as
provided in these proposed regulations,
are not to be counted. Returns excluded
under the undue hardship waiver
exclusion are to be counted, however,
because it is expected that such waivers
will generally be sought by tax return
preparers who are specified tax return
preparers and who would ordinarily
have to file these returns electronically
but for the waivers granted by the IRS
in cases of undue hardship.
B. Time for Making Determination of
Reasonable Expectations
The determination regarding
reasonable expectations is made
separately for each calendar year in
order to ascertain whether the electronic
filing requirement applies to a tax return
preparer for that year. For each calendar
year, the determination of whether a tax
return preparer and the preparer’s firm
reasonably expect to file 10 or fewer
individual income tax returns (or, in the
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case of the 2011 calendar year, fewer
than 100 individual income tax returns)
is made based on all relevant, objective,
and demonstrable facts and
circumstances prior to the time the tax
return preparer and the preparer’s firm
first file an individual income tax return
during the calendar year.
4. Additional Guidance
The proposed regulations authorize
the IRS to implement the requirements
of section 6011(e)(3) and the regulations
through additional guidance, including
by revenue procedures, notices,
publications, forms, and instructions,
including those issued electronically.
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5. Proposed Effective and Applicability
Dates
The proposed regulations are effective
and applicable on January 1, 2011. To
promote the effective and efficient
administration of the electronic filing
requirement in section 6011(e)(3), the
proposed regulations provide a
transition rule for 2011, based upon the
number of individual income tax
returns a tax return preparer files, to
permit the IRS and affected tax return
preparers sufficient time to prepare for
and implement the requirements of
section 6011(e)(3) and these proposed
regulations. Beginning January 1, 2011,
tax return preparers who reasonably
expect to file (if a member of a firm
whose firm members in the aggregate
reasonably expect to file) 100 or more
individual income tax returns in
calendar year 2011 are specified tax
return preparers who are subject to
these regulations in 2011. Beginning
January 1, 2012, tax return preparers
who reasonably expect to file (if a
member of a firm whose firm members
in the aggregate reasonably expect to
file) 11 or more individual income tax
returns in a calendar year are specified
tax return preparers who are subject to
these regulations for that calendar year.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866. Therefore, a
regulatory assessment is not required.
It is hereby certified that the
collection of information contained in
these proposed regulations would not
have a significant economic impact on
a substantial number of small entities.
Accordingly, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. This certification is based
on a determination that these proposed
regulations would impose, at most, a
minimal additional reporting or
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recordkeeping requirement. As
discussed in the Paperwork Reduction
Act section of this preamble, the
economic impact on affected small
entities is not significant.
It also has been determined that
section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these proposed regulations.
Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of
proposed rulemaking has been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small business.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to present oral comments at the hearing
must submit written or electronic
comments and an outline of the topics
to be discussed and the time to be
devoted to each topic by January 3,
2011.
A period of 10 minutes will be
allotted to each person for making
comments. An agenda showing the
scheduling of the speakers will be
prepared after the deadline for receiving
outlines has passed. Copies of the
agenda will be available free of charge
at the hearing.
Comments and Public Hearing
Drafting Information
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
written (a signed original and eight (8)
copies) or electronic comments that are
submitted timely to the IRS. The
Treasury Department and the IRS
request comments on the clarity of the
proposed rules and how they can be
made easier to understand. The
Treasury Department and the IRS also
request comments on the procedures
and criteria to be established to
document taxpayer choices to file in
paper format and to request the undue
hardship waiver, as well as
circumstances that may warrant the
granting of an administrative exemption
for the 2011 calendar year. Finally, the
Treasury Department and the IRS
request comments on the accuracy of
the certification that the regulations in
this document will not have a
significant economic impact on a
substantial number of small entities as
well as comments on the Paperwork
Reduction Act burden estimates
contained in the Special Analysis
section of this preamble. All comments
that are submitted by the public will be
available for public inspection and
copying.
A public hearing has been scheduled
for Tuesday, January 7, 2011 at 10 a.m.
in the auditorium of the Internal
Revenue Building, 1111 Constitution
Avenue, NW., Washington, DC. Due to
building security procedures, all visitors
must enter at the Constitution Avenue
entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For
information about having your name
placed on the building access list to
attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this
preamble.
The principal author of these
proposed regulations is Keith L. Brau,
Office of the Associate Chief Counsel
(Procedure and Administration).
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List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry
in numerical order to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6011–6 also issued under 26
U.S.C. 6011. * * *
Par. 2. Section 1.6011–6 is added to
read as follows:
§ 1.6011–6 Specified tax return preparers
required to file individual income tax
returns using magnetic media.
Individual income tax returns that are
required to be filed on magnetic media
by tax return preparers under
§ 301.6011–6 of this chapter must be
filed in accordance with Internal
Revenue Service regulations, revenue
procedures, revenue rulings,
publications, forms or instructions,
including those posted electronically.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for part
301 is amended by adding an entry in
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numerical order to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6011–6 also issued under 26
U.S.C. 6011. * * *
Par. 4. Section 301.6011–6 is added to
read as follows:
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§ 301.6011–6 Specified tax return
preparers required to file individual income
tax returns using magnetic media.
(a) Definitions.
(1) Magnetic media. For purposes of
this section, the term magnetic media
has the same meaning as in § 301.6011–
2(a)(1).
(2) Individual income tax return. The
term individual income tax return
means any return of tax imposed by
subtitle A on individuals, estates, and
trusts.
(3) Specified tax return preparer. The
term specified tax return preparer
means any person who is a tax return
preparer, as defined in section
7701(a)(36) and § 301.7701–15, unless
that person reasonably expects to file 10
or fewer individual income tax returns
in a calendar year. If a person who is a
tax return preparer is a member of a
firm, that person is a specified tax
return preparer unless the person’s firm
members in the aggregate reasonably
expect to file 10 or fewer individual
income tax returns in a calendar year.
Solely for the 2011 calendar year, a
person will not be considered a
specified tax return preparer if that
person reasonably expects, or if the
person is a member of a firm, the firm’s
members in the aggregate reasonably
expect, to file fewer than 100 individual
income tax returns in the 2011 calendar
year. Solely for purposes of this section,
an individual is considered a member of
a firm if the individual is an employee,
agent, member, partner, shareholder, or
other equity holder of the firm.
(4) File or Filed. (i) For purposes of
section 6011(e)(3) and these regulations
only, an individual income tax return is
considered to be ‘‘filed’’ by a tax return
preparer or a specified tax return
preparer if the preparer submits the tax
return to the IRS on the taxpayer’s
behalf, either electronically (by e-file or
other magnetic media) or in nonelectronic (paper) form. Submission of
an individual income tax return by a tax
return preparer or a specified tax return
preparer in non-electronic form
includes the direct or indirect
transmission, sending, mailing or
otherwise delivering of the paper tax
return to the IRS by the preparer, any
member, employee, or agent of the
preparer, or any member, employee, or
agent of the preparer’s firm, and
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includes any act or acts of assistance
beyond providing filing or delivery
instructions to the taxpayer.
(ii) An individual income tax return
will not be considered to be filed, as
defined in paragraph (a)(4)(i) of this
section, by a tax return preparer or
specified tax return preparer if the tax
return preparer or specified tax return
preparer who prepared the return
obtains, on or prior to the date the
return is filed, a signed (by both spouses
if a joint return) and dated written
statement from the taxpayer that states
the taxpayer chooses to file the return in
paper format, and that the taxpayer, and
not the preparer, will submit the paper
return to the IRS. The IRS may provide
guidance through forms, instructions or
other appropriate guidance regarding
how preparers can document taxpayer
choices to file individual income tax
returns in paper format.
(iii) The rules contained in this
section do not alter or affect a taxpayer’s
obligation to file returns under any
other provision of law. The definition of
file or filed by a tax return preparer or
specified tax return preparer contained
in paragraph (a)(4)(i) of this section
applies only for the purposes of section
6011(e)(3) and these regulations and
does not apply for any other purpose
under any other provision of law.
(b) Magnetic media filing requirement.
Except as provided in paragraphs
(a)(4)(ii) and (c) of this section, any
individual income tax return prepared
by a specified tax return preparer in a
calendar year must be filed on magnetic
media if the return is filed by the
specified tax return preparer.
(c) Exclusions. The following
exclusions apply to the magnetic media
filing requirement in this section:
(1) Undue hardship waiver. The IRS
may grant a waiver of the requirement
of this section in cases of undue
hardship. An undue hardship waiver
may be granted upon application by a
specified tax return preparer consistent
with instructions provided in published
guidance and as prescribed in relevant
forms and instructions. A determination
of undue hardship will be based upon
all facts and circumstances. The undue
hardship waiver provided to a specified
tax return preparer may apply to a series
or class of individual income tax returns
or for a specified period of time, subject
to the terms and conditions regarding
the method of filing prescribed in such
waiver.
(2) Administrative exemptions. The
IRS may provide administrative
exemptions from the requirement of this
section for certain classes of specified
tax return preparers, or regarding certain
types of individual income tax returns,
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75443
as the IRS determines necessary to
promote effective and efficient tax
administration. The IRS may provide
administrative exemptions and any
criteria or procedures necessary to claim
an administrative exemption through
forms, instructions, or other appropriate
guidance.
(d) Reasonably expect to file—(1) In
general. The determination of whether a
tax return preparer reasonably expects,
or if the preparer is a member of a firm,
the firm’s members in the aggregate
reasonably expect, to file 10 or fewer
individual income tax returns (or, in the
case of the 2011 calendar year, fewer
than 100 individual income tax returns)
is made by adding together all of the
individual income tax returns the tax
return preparer and, if the preparer is a
member of a firm, the firm’s members
reasonably expect to prepare and file in
the calendar year. In making this
determination, individual income tax
returns that the tax return preparer
reasonably expects will not be subject to
the magnetic media filing requirement
under paragraph (a)(4)(ii) of this section
or are excluded from the requirement
under (c)(2) of this section are not to be
counted. Returns excluded from the
magnetic media filing requirement
under paragraph (c)(1) of this section are
to be counted for purposes of making
this determination.
(2) Time for making determination of
reasonable expectations. The
determination regarding reasonable
expectations is made separately for each
calendar year in order to ascertain
whether the magnetic media filing
requirement applies to a tax return
preparer for that year. For each calendar
year, the determination of whether a tax
return preparer and the preparer’s firm
reasonably expect to file 10 or fewer
individual income tax returns (or, in the
case of the 2011 calendar year, fewer
than 100 individual income tax returns)
is made based on all relevant, objective,
and demonstrable facts and
circumstances prior to the time the tax
return preparer and the preparer’s firm
first file an individual income tax return
during the calendar year.
(e) Examples. The examples read as
follows:
Example 1. Tax Return Preparer A is an
accountant who recently graduated from
college with an accounting degree and has
opened his own practice. A has not prepared
individual income tax returns for
compensation in the past and does not plan
to focus his practice on individual income
tax return preparation. A intends instead to
focus his practice on providing specialized
accounting services to certain health care
service providers. A has no plans to, and
does not, employ or engage any other tax
return preparers. A estimates that he may be
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Federal Register / Vol. 75, No. 232 / Friday, December 3, 2010 / Proposed Rules
asked by some clients to prepare and file
their individual income tax returns for
compensation, but A expects that the number
of people who do ask him to provide this
service will be no more than seven in 2012.
In fact, A actually prepares and files six
paper Form 1040 (U.S. Individual Income
Tax Return) returns in 2012. Due to a
growing client base, and based upon his
experience in 2012, A expects that the
number of individual income tax returns he
will prepare and file in 2013 will at least
double, estimating he will prepare and file 12
Form 1040 returns in 2013. A does not
qualify as a specified tax return preparer for
2012 because A reasonably expects to file 10
or fewer (seven) in 2012. Consequently, A is
not required to electronically file the
individual income tax returns he prepares
and files in 2012. He does not qualify as a
specified tax return preparer for that year
because A reasonably expects to file 10 or
fewer returns (seven) in 2012. A’s
expectation is reasonable based on his
business projections, individual income tax
return filing history, and staffing decisions. A
is a specified tax return preparer in 2013,
however, because based on those same
factors A reasonably expects to file more than
10 individual income tax returns (12) during
that calendar year. A, therefore, must
electronically file all individual income tax
returns that A prepares and files in 2013 that
are not otherwise excluded from the
electronic filing requirement.
Example 2. Same facts as in Example 1,
except three of Tax Return Preparer A’s
clients specifically chose to have A prepare
their individual income tax returns in paper
format in 2012 with the clients mailing their
respective returns to the IRS. A expects that
these three clients will similarly choose to
have him prepare their returns in paper
format in 2013, with the clients being
responsible for mailing their returns to the
IRS. A is not required to electronically file
these three returns in 2013 because the
taxpayers chose to file their returns in paper
format, and A obtained a dated written
statement from each of those taxpayers,
indicating that they chose to file their returns
in paper format. These three individual
income tax returns are not counted in
determining how many individual income
tax returns A reasonably expects to file in
2013. Because the total number of individual
income tax returns A reasonably expects to
file in 2013 (nine) does not exceed 10, A is
not a specified tax return preparer for
calendar year 2013, and A is not required to
electronically file any individual income tax
return that he prepares and files in 2013.
Example 3. Tax Return Preparer B is a solo
general practice attorney in a small county.
Her practice includes the preparation of wills
and assisting executors in administering
estates. As part of her practice, B infrequently
prepares and files Forms 1041 (U.S. Income
Tax Return for Estates and Trusts) for
executors. In the past three years, she
prepared and filed an average of five Forms
1041 each year and never exceeded more
than seven Forms 1041 in any year. Based on
B’s prior experience and her estimate for
2012, made prior to the time she first files an
individual income tax return in 2012, she
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16:15 Dec 02, 2010
Jkt 223001
reasonably expects to prepare and file no
more than five Forms 1041 in 2012. Due to
the unforeseen deaths of several of her clients
in late 2011, B actually prepares and files 12
Forms 1041 in 2012. B does not find out
about these deaths until after she has already
filed the first Form 1041 in 2012 for another
client. B is not required to electronically file
these returns in 2012. She does not qualify
as a specified tax return preparer for calendar
year 2012 because prior to the time she filed
the first Form 1041 in 2012, she reasonably
expected to file 10 or fewer individual
income tax returns in 2012.
Example 4. Same facts as Example 3,
except, in addition to the five Forms 1041
that she expects to prepare and file in 2012,
Tax Return Preparer B also expects to prepare
and file 10 paper Forms 1040 (U.S.
Individual Income Tax Return) in 2012,
based upon the requests that she has received
from some of her clients. Because the total
number of individual income tax returns B
reasonably expects to file in 2012 (fifteen)
exceeds 10, B is a specified tax return
preparer for calendar year 2012, and B must
electronically file all individual income tax
returns that B prepares and files in 2012 that
are not otherwise excluded from the
electronic filing requirement.
Example 5. Firm X consists of two tax
return preparers, Tax Return Preparer C who
owns Firm X, and Tax Return Preparer D
who is employed by C in Firm X. Based upon
the firm’s experience over the past three
years, C and D reasonably expect to file nine
and ten individual income tax returns for
compensation, respectively, in 2012. Both C
and D must electronically file the individual
income tax returns that they prepare in 2012,
unless the returns are otherwise excluded
from the electronic filing requirement,
because they are members of the same firm
and the aggregated total of individual income
tax returns that they reasonably expect to file
in 2012 (nineteen), exceeds 10 individual
income tax returns.
(f) Additional guidance. The IRS may
implement the requirements of this
section through additional guidance,
including by revenue procedures,
notices, publications, forms and
instructions, including those issued
electronically.
(g) Proposed effective/applicability
dates. This section is proposed to be
effective and applicable on January 1,
2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2010–30500 Filed 12–1–10; 4:15 pm]
BILLING CODE 4830–01–P
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 201, 245, and 252
RIN Number 0750–AG38
Defense Federal Acquisition
Regulation Supplement; Government
Property (DFARS Case 2009–D008)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Proposed rule with request for
comments.
AGENCY:
DoD is proposing to amend
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
revise DFARS part 245, Government
Property, to reflect the recent revisions
to FAR part 45, Government Property.
DATES: Comments on the proposed rule
should be submitted in writing to the
address shown below on or before
February 1, 2011, to be considered in
the formation of the final rule.
ADDRESSES: Submit comments
identified by DFARS Case 2009–D008,
using any of the following methods:
Æ Regulations.gov: https://
www.regulations.gov.
Submit comments via the Internet.
Follow the instructions provided at the
‘‘Submit a Comment’’ screen. Please
include ‘‘DFARS Case 2009–D008’’.
Æ E-mail: dfars@osd.mil. Include
DFARS Case 2009–D008 in the subject
line of the message.
Æ Fax: 703–602–0350.
Æ Mail: Defense Acquisition
Regulations System, Attn: Ms. Mary
Overstreet, OUSD(AT&L) DPAP/DARS,
Room 3B855, 3060 Defense Pentagon,
Washington, DC 20301–3060. Please cite
DFARS Case 2009–D008.
Comments received generally will be
posted without change, including any
personal information provided. Please
check https://www.regulations.gov
approximately two to three days after
electronic submission to verify
posting—allow 30 days for posting of
comments submitted by mail.
FOR FURTHER INFORMATION CONTACT: Ms.
Mary Overstreet, 703–602–0311.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
This rule proposes to update and
reorganize DFARS subparts 245.6 and
245.7 for consistency with FAR changes
published at 72 FR 27364 on May 15,
2007, that address management of
Government property in the possession
of contractors, as well as the related
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]]>Agencies
[Federal Register Volume 75, Number 232 (Friday, December 3, 2010)]
[Proposed Rules]
[Pages 75439-75444]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30500]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG-100194-10]
RIN 1545-BJ52
Specified Tax Return Preparers Required To File Individual Income
Tax Returns Using Magnetic Media
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations relating to the
requirement for ``specified tax return preparers,'' generally tax
return preparers who reasonably expect to file more than 10 individual
income tax returns in a calendar year, to file individual income tax
returns using magnetic media pursuant to section 6011(e)(3) of the
Internal Revenue Code (Code). The proposed regulations reflect changes
to the law made by the Worker, Homeownership, and Business Assistance
Act of 2009. The proposed regulations affect specified tax return
preparers who prepare and file individual income tax returns, as
defined in section 6011(e)(3)(C). For calendar year 2011, the proposed
regulations define a specified tax return preparer as a tax return
preparer who reasonably expects to file (or if the preparer is a member
of a firm, the firm's members in the aggregate reasonably expect to
file) 100 or more individual income tax returns during the year, while
beginning January 1, 2012 a specified tax return preparer is a tax
return preparer who reasonably expects to file (or if the preparer is a
member of a firm, the firm's members in the aggregate reasonably expect
to file) 11 or more individual income tax returns in a calendar year.
The proposed regulations are unrelated to and are not intended to
address the requirements for obtaining a preparer tax identification
number (PTIN) under section 6109. See the final regulations under
section 6109 published in the Federal Register (75 FR 60309-01). This
document also provides a notice of a public hearing on these proposed
regulations.
DATES: Written or electronic comments must be received by January 3,
2011. Outlines of topics to be discussed at the public hearing
scheduled for January 7, 2011 must be received by January 3, 2011.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-100194-10), room
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
100194-10), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC 20224, or sent electronically via the
Federal eRulemaking Portal at https://www.regulations.gov (IRS--REG-
100194-10). The public hearing will be held in the auditorium, Internal
Revenue Building, 1111 Constitution Avenue, NW., Washington, DC 20224.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Keith L. Brau, (202) 622-4940; concerning submissions of comments, the
hearing, and/or to be placed on the building access list to attend the
hearing, Oluwafunmilayo Taylor of the Publications and Regulations
Branch at (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the collection of information should be
sent to the Office of Management and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with copies to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, SE:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on the collection of information should
be received by January 3, 2011. Comments are specifically requested
concerning:
Whether the proposed collection of information is necessary for the
proper performance of the Internal Revenue Service, including whether
the information will have practical utility;
The accuracy of the estimated burden associated with the proposed
collection of information (see below) or of the certification contained
under the heading ``Special Analyses'';
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchases of service to provide information.
The collection of information in this proposed regulation is in
Sec. 301.6011-6(a)(4)(ii). This information can be used by tax return
preparers and specified tax return preparers, if necessary, to
demonstrate to the IRS that the related individual income tax returns
filed in paper format were not required to be filed electronically
pursuant to section 6011(e)(3) and Sec. 301.6011-6. The collection of
information is voluntary to obtain a benefit. The likely respondents
are the individuals and small businesses who prepare individual income
tax returns in exchange for compensation. It is estimated that 5
minutes of preparation time is needed for a tax return preparer to
explain the purpose of the information and obtain it from the taxpayer
in the manner prescribed by the IRS and 6 minutes for recordkeeping,
consisting of maintaining a copy of the information submitted for the
respondent's records.
[[Page 75440]]
Estimated total annual reporting burden: 1,222,815 hours in
calendar year 2011 and 1,689,930 hours in calendar year 2012.
Estimated average annual burden hours per respondent: 9.06 hours
(per firm) in calendar year 2011 and 5.42 hours (per firm) in calendar
year 2012.
Estimated number of respondents or recordkeepers: 135,000 in
calendar year 2011 and 312,000 in calendar year 2012.
Estimated annual frequency of responses per respondent: 49 in
calendar year 2011 and 29.5 in calendar year 2012.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law.
Background
Recognizing the benefits of electronic filing, Congress enacted
section 2001(a) of the IRS Restructuring and Reform Act of 1998, Public
Law 105-206 (112 Stat. 727), which states that a policy of Congress is
to promote paperless filing. Electronic filing of tax returns benefits
taxpayers and the IRS by reducing errors that are more likely to occur
during the manual preparation and processing of paper returns.
Electronic filing of tax returns results in faster settling of accounts
and better customer service because the time required to process paper
returns is eliminated. Electronic filing of tax returns improves
taxpayer satisfaction and confidence in the filing process, and may be
more cost effective. Electronic filing of tax returns enables the IRS
to review taxpayer submissions expeditiously to reduce audit cycle time
and helps the IRS identify emerging trends more efficiently.
Section 6011(e)(1) generally authorizes the Secretary to prescribe
regulations providing the standards for determining which returns must
be filed on magnetic media, including electronic filing. Prior to
passage of the Worker, Homeownership, and Business Assistance Act of
2009, Public Law 111-92 (123 Stat. 2984, 2997 (2009)) (Act), section
6011(e)(1) provided that, without exception, the Secretary may not
require returns of any tax imposed by subtitle A on individuals,
estates, and trusts to be other than on paper forms supplied by the
Secretary. Under section 6011(e)(2)(A), in prescribing regulations
under section 6011(e)(1), the Secretary shall not require any person
(taxpayer) to file on magnetic media (including electronically) unless
the person is required to file at least 250 returns during the calendar
year.
With respect to the restriction that the Secretary may not require
returns of any tax imposed by subtitle A on individuals, estates, and
trusts to be filed in any format other than paper forms supplied by the
Secretary, the Act amended section 6011(e)(1) to provide an exception
for individual income tax returns filed by specified tax return
preparers, as set forth in new section 6011(e)(3). New section
6011(e)(3) provides that the Secretary shall require the filing on
magnetic media of any individual income tax returns prepared and filed
by a specified tax return preparer. As more fully discussed below,
filing on magnetic media includes electronic filing.
The Act's amendment to section 6011(e) requires the Secretary to
issue regulations to implement the statute. These proposed regulations
require that the individual income tax returns prepared and filed by
specified tax return preparers be filed electronically. To enhance
compliance and to promote effective and efficient administration of the
congressionally-mandated requirement of section 6011(e)(3), the
proposed regulations provide a transition rule for certain specified
tax return preparers.
Explanation of Provisions
1. Specified Tax Return Preparers Required To File Individual Income
Tax Returns Using Magnetic Media
In General
With certain exclusions, discussed in the next section, the
proposed regulations provide that any individual income tax return
prepared and filed by a specified tax return preparer must be filed
using magnetic media, as required under section 6011(e)(3). For
purposes of these proposed regulations, magnetic media is defined in
Sec. 301.6011-2(a)(1), which generally includes magnetic tape, tape
cartridge, and diskette, as well as other media, such as electronic
filing, specifically permitted under the applicable regulations,
procedures, or publications. Also, for purposes of these proposed
regulations and as defined under section 6011(e)(3)(C), an individual
income tax return is any return of income tax imposed by subtitle A on
individuals, estates, and trusts. This includes any return of income
tax in the Form 1040 series and Form 1041 series. It also includes Form
990-T (Exempt Organization Business Income Tax Return) when the exempt
organization is a trust subject to tax on unrelated business taxable
income under section 511(b).
The electronic filing requirement in these proposed regulations
applies to specified tax return preparers. A specified tax return
preparer is defined as any person who is a tax return preparer, as
defined in section 7701(a)(36) and Sec. 301.7701-15, unless the tax
return preparer reasonably expects to file 10 or fewer individual
income tax returns in a calendar year, and if a person who is a tax
return preparer is a member of a firm, that person is a specified tax
return preparer unless the person's firm members in the aggregate
reasonably expect to file 10 or fewer individual income tax returns in
a calendar year. The proposed regulations do not apply to individuals
described in section 7701(a)(36)(B)(i) through (iv) and Sec. 301.7701-
15(f) who are not defined as tax return preparers under that Code
section and regulation, such as an individual who provides tax
assistance under a Volunteer Income Tax Assistance (VITA) program, a
person who merely prepares a return of the employer (or of an officer
or employee of the employer) by whom the person is regularly and
continuously employed, or a person who prepares a return as a fiduciary
for any person. Solely for the 2011 calendar year, a tax return
preparer will not be considered a specified tax return preparer if the
tax return preparer reasonably expects, or the preparer's firm members
in the aggregate reasonably expect, to file fewer than 100 individual
income tax returns in the 2011 calendar year.
Under section 6011(e)(3), the concept of ``file'' or ``filed''
individual income tax returns affects both tax return preparers and
specified tax return preparers. Tax return preparers are affected by
this concept because a tax return preparer's classification as a
specified tax return preparer is based upon the number of individual
income tax returns the tax return preparer reasonably expects to file
in a given calendar year. Specified tax return preparers are further
affected by this concept because the electronic filing requirement for
any particular or specific individual income tax return depends upon
whether the specified tax return preparer files the return. Therefore,
for purposes of section 6011(e)(3) and these regulations only, an
individual income tax return is considered to be ``filed'' by a tax
return preparer or a specified tax return preparer if the preparer or
any member, employee, or agent of the preparer or the preparer's firm
submits the tax return to the IRS on the taxpayer's behalf, either
electronically (by e-file or other magnetic media) or in non-electronic
or
[[Page 75441]]
non-magnetic media (paper) form. Submission of a tax return in paper
form includes the direct or indirect transmission, sending, mailing, or
otherwise delivering of the paper tax return to the IRS by the tax
return preparer or the specified tax return preparer, or by any member,
employee, or agent of the tax return preparer or the preparer's firm,
and may include any act or acts of assistance that go beyond the
provision of filing or delivery instructions to the taxpayer. For
example, this can include the preparer or a member of the preparer's
firm dropping the return in the mailbox for the taxpayer. The
assistance of others is considered for purposes of determining whether
a return is filed by a tax return preparer or specified tax return
preparer, to prevent a preparer from avoiding these rules by merely
handing the return to an employee or someone else in the firm to mail
to the IRS.
A tax return preparer or specified tax return preparer, or if the
preparer is a member of a firm, the preparer's firm, will be able to
affirmatively demonstrate, if asked, that it was a taxpayer's choice to
file an individual income tax return in paper format if the preparer
who prepared the return obtains a signed statement from the taxpayer
that states the taxpayer chooses to file the return in paper format and
that the taxpayer, and not the preparer, will submit the paper return
to the IRS. This statement must be signed by the taxpayer (by both
spouses if a joint return) and dated on or before the date the taxpayer
files the return. The IRS may provide guidance through forms,
instructions or other appropriate guidance regarding how preparers can
document taxpayer choices to file individual income tax returns in
paper format. A Notice containing a proposed revenue procedure
outlining the requirements and format of statements to document when a
taxpayer chooses to file individual income tax returns in paper format
is being published in the Internal Revenue Bulletin (IRB) concurrently
with these proposed regulations.
In addition, the proposed regulations provide that the definition
of file or filed does not alter or affect a taxpayer's obligation to
file any type of tax return required under any other provision of law.
The definition of file or filed by a tax return preparer or a specified
tax return preparer contained in these proposed regulations applies
only for the purposes of section 6011(e)(3) and these regulations, and
does not apply for any other purpose under any other provision of law,
such as the statutory period of limitations based on the filing of a
tax return.
2. Exclusions
The proposed regulations provide the following exclusions from the
electronic filing requirement.
A. Undue Hardship Waivers
Under the proposed regulations, the IRS may grant a waiver of the
requirement of this rule in cases of undue hardship. A waiver may
generally be granted to a specified tax return preparer for an undue
hardship that can be identified in advance, before the specified tax
return preparer would otherwise be required to file individual income
tax returns electronically. Because this electronic filing requirement
is statutorily imposed, the IRS will ordinarily grant undue hardship
waivers only in rare cases. An undue hardship waiver may be granted to
a specified tax return preparer for a series or class of individual
income tax returns or for a specified period of time. A determination
of undue hardship will be based upon all facts and circumstances. A
specified tax return preparer shall request an undue hardship waiver in
the manner prescribed by the IRS in forms, instructions, or other
appropriate guidance. A Notice containing a proposed revenue procedure
outlining the requirements and format for undue hardship waiver
requests is being published concurrently with these proposed
regulations.
B. Administrative Exemptions
The IRS may provide administrative exemptions for certain classes
of specified tax return preparers or types of individual income tax
returns as the IRS determines necessary to promote effective and
efficient tax administration. For example, the IRS may provide a broad
administrative exemption applicable to all tax return preparers for a
particular type of form if the IRS does not yet provide the capability
to file the form electronically, or for individual income tax returns
prepared by specified tax return preparers who meet certain conditions
defined by the IRS. The IRS may also provide an administrative
exemption for individual income tax returns that contain or require
documentation or attachments that the IRS does not yet provide the
capability to file electronically, for example, documentation for the
First-Time Homebuyer Credit, section 6707A disclosures, or required
appraisals to support charitable contributions. The IRS may also
provide a limited administrative exemption for specified tax return
preparers who are certified members of, and follow the teachings of, a
recognized religious group that is conscientiously opposed to using
electronic media, which would include filing electronically. Unlike
undue hardship waivers, specified tax return preparers who meet the
criteria of an administrative exemption generally need not submit a
request to the IRS to claim applicability of the administrative
exemption. The IRS may provide the criteria and procedures, if any are
necessary, for administrative exemptions through forms, instructions,
or other appropriate guidance.
3. Reasonably Expect To File
A. In General
The determination of whether a tax return preparer (or if the
preparer is a member of a firm, the preparer's firm members in the
aggregate) reasonably expects to file 10 or fewer individual income tax
returns (or, in the case of the 2011 calendar year, fewer than 100
individual income tax returns) is made by adding together all of the
individual income tax returns (forms in the Form 1040 series, Form 1041
series, and Forms 990-T (when the exempt organizations are trusts
subject to tax on unrelated business taxable income under section
511(b)), in the aggregate) the tax return preparer and, if the preparer
is a member of a firm, the firm's members, reasonably expect to prepare
and file in each calendar year. In making this determination individual
income tax returns that are excluded from the electronic filing
requirement due to taxpayer choice or under the administrative
exemption exclusion, as provided in these proposed regulations, are not
to be counted. Returns excluded under the undue hardship waiver
exclusion are to be counted, however, because it is expected that such
waivers will generally be sought by tax return preparers who are
specified tax return preparers and who would ordinarily have to file
these returns electronically but for the waivers granted by the IRS in
cases of undue hardship.
B. Time for Making Determination of Reasonable Expectations
The determination regarding reasonable expectations is made
separately for each calendar year in order to ascertain whether the
electronic filing requirement applies to a tax return preparer for that
year. For each calendar year, the determination of whether a tax return
preparer and the preparer's firm reasonably expect to file 10 or fewer
individual income tax returns (or, in the
[[Page 75442]]
case of the 2011 calendar year, fewer than 100 individual income tax
returns) is made based on all relevant, objective, and demonstrable
facts and circumstances prior to the time the tax return preparer and
the preparer's firm first file an individual income tax return during
the calendar year.
4. Additional Guidance
The proposed regulations authorize the IRS to implement the
requirements of section 6011(e)(3) and the regulations through
additional guidance, including by revenue procedures, notices,
publications, forms, and instructions, including those issued
electronically.
5. Proposed Effective and Applicability Dates
The proposed regulations are effective and applicable on January 1,
2011. To promote the effective and efficient administration of the
electronic filing requirement in section 6011(e)(3), the proposed
regulations provide a transition rule for 2011, based upon the number
of individual income tax returns a tax return preparer files, to permit
the IRS and affected tax return preparers sufficient time to prepare
for and implement the requirements of section 6011(e)(3) and these
proposed regulations. Beginning January 1, 2011, tax return preparers
who reasonably expect to file (if a member of a firm whose firm members
in the aggregate reasonably expect to file) 100 or more individual
income tax returns in calendar year 2011 are specified tax return
preparers who are subject to these regulations in 2011. Beginning
January 1, 2012, tax return preparers who reasonably expect to file (if
a member of a firm whose firm members in the aggregate reasonably
expect to file) 11 or more individual income tax returns in a calendar
year are specified tax return preparers who are subject to these
regulations for that calendar year.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required.
It is hereby certified that the collection of information contained
in these proposed regulations would not have a significant economic
impact on a substantial number of small entities. Accordingly, a
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5
U.S.C. chapter 6) is not required. This certification is based on a
determination that these proposed regulations would impose, at most, a
minimal additional reporting or recordkeeping requirement. As discussed
in the Paperwork Reduction Act section of this preamble, the economic
impact on affected small entities is not significant.
It also has been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these proposed regulations. Pursuant to section 7805(f) of the Internal
Revenue Code, this notice of proposed rulemaking has been submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on small business.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. The Treasury Department and the IRS request comments on the
clarity of the proposed rules and how they can be made easier to
understand. The Treasury Department and the IRS also request comments
on the procedures and criteria to be established to document taxpayer
choices to file in paper format and to request the undue hardship
waiver, as well as circumstances that may warrant the granting of an
administrative exemption for the 2011 calendar year. Finally, the
Treasury Department and the IRS request comments on the accuracy of the
certification that the regulations in this document will not have a
significant economic impact on a substantial number of small entities
as well as comments on the Paperwork Reduction Act burden estimates
contained in the Special Analysis section of this preamble. All
comments that are submitted by the public will be available for public
inspection and copying.
A public hearing has been scheduled for Tuesday, January 7, 2011 at
10 a.m. in the auditorium of the Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC. Due to building security
procedures, all visitors must enter at the Constitution Avenue
entrance. In addition, all visitors must present photo identification
to enter the building. Because of access restrictions, visitors will
not be admitted beyond the immediate entrance area more than 30 minutes
before the hearing starts. For information about having your name
placed on the building access list to attend the hearing, see the FOR
FURTHER INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit written or
electronic comments and an outline of the topics to be discussed and
the time to be devoted to each topic by January 3, 2011.
A period of 10 minutes will be allotted to each person for making
comments. An agenda showing the scheduling of the speakers will be
prepared after the deadline for receiving outlines has passed. Copies
of the agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these proposed regulations is Keith L.
Brau, Office of the Associate Chief Counsel (Procedure and
Administration).
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as
follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6011-6 also issued under 26 U.S.C. 6011. * * *
Par. 2. Section 1.6011-6 is added to read as follows:
Sec. 1.6011-6 Specified tax return preparers required to file
individual income tax returns using magnetic media.
Individual income tax returns that are required to be filed on
magnetic media by tax return preparers under Sec. 301.6011-6 of this
chapter must be filed in accordance with Internal Revenue Service
regulations, revenue procedures, revenue rulings, publications, forms
or instructions, including those posted electronically.
PART 301--PROCEDURE AND ADMINISTRATION
Par. 3. The authority citation for part 301 is amended by adding an
entry in
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numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6011-6 also issued under 26 U.S.C. 6011. * * *
Par. 4. Section 301.6011-6 is added to read as follows:
Sec. 301.6011-6 Specified tax return preparers required to file
individual income tax returns using magnetic media.
(a) Definitions.
(1) Magnetic media. For purposes of this section, the term magnetic
media has the same meaning as in Sec. 301.6011-2(a)(1).
(2) Individual income tax return. The term individual income tax
return means any return of tax imposed by subtitle A on individuals,
estates, and trusts.
(3) Specified tax return preparer. The term specified tax return
preparer means any person who is a tax return preparer, as defined in
section 7701(a)(36) and Sec. 301.7701-15, unless that person
reasonably expects to file 10 or fewer individual income tax returns in
a calendar year. If a person who is a tax return preparer is a member
of a firm, that person is a specified tax return preparer unless the
person's firm members in the aggregate reasonably expect to file 10 or
fewer individual income tax returns in a calendar year. Solely for the
2011 calendar year, a person will not be considered a specified tax
return preparer if that person reasonably expects, or if the person is
a member of a firm, the firm's members in the aggregate reasonably
expect, to file fewer than 100 individual income tax returns in the
2011 calendar year. Solely for purposes of this section, an individual
is considered a member of a firm if the individual is an employee,
agent, member, partner, shareholder, or other equity holder of the
firm.
(4) File or Filed. (i) For purposes of section 6011(e)(3) and these
regulations only, an individual income tax return is considered to be
``filed'' by a tax return preparer or a specified tax return preparer
if the preparer submits the tax return to the IRS on the taxpayer's
behalf, either electronically (by e-file or other magnetic media) or in
non-electronic (paper) form. Submission of an individual income tax
return by a tax return preparer or a specified tax return preparer in
non-electronic form includes the direct or indirect transmission,
sending, mailing or otherwise delivering of the paper tax return to the
IRS by the preparer, any member, employee, or agent of the preparer, or
any member, employee, or agent of the preparer's firm, and includes any
act or acts of assistance beyond providing filing or delivery
instructions to the taxpayer.
(ii) An individual income tax return will not be considered to be
filed, as defined in paragraph (a)(4)(i) of this section, by a tax
return preparer or specified tax return preparer if the tax return
preparer or specified tax return preparer who prepared the return
obtains, on or prior to the date the return is filed, a signed (by both
spouses if a joint return) and dated written statement from the
taxpayer that states the taxpayer chooses to file the return in paper
format, and that the taxpayer, and not the preparer, will submit the
paper return to the IRS. The IRS may provide guidance through forms,
instructions or other appropriate guidance regarding how preparers can
document taxpayer choices to file individual income tax returns in
paper format.
(iii) The rules contained in this section do not alter or affect a
taxpayer's obligation to file returns under any other provision of law.
The definition of file or filed by a tax return preparer or specified
tax return preparer contained in paragraph (a)(4)(i) of this section
applies only for the purposes of section 6011(e)(3) and these
regulations and does not apply for any other purpose under any other
provision of law.
(b) Magnetic media filing requirement. Except as provided in
paragraphs (a)(4)(ii) and (c) of this section, any individual income
tax return prepared by a specified tax return preparer in a calendar
year must be filed on magnetic media if the return is filed by the
specified tax return preparer.
(c) Exclusions. The following exclusions apply to the magnetic
media filing requirement in this section:
(1) Undue hardship waiver. The IRS may grant a waiver of the
requirement of this section in cases of undue hardship. An undue
hardship waiver may be granted upon application by a specified tax
return preparer consistent with instructions provided in published
guidance and as prescribed in relevant forms and instructions. A
determination of undue hardship will be based upon all facts and
circumstances. The undue hardship waiver provided to a specified tax
return preparer may apply to a series or class of individual income tax
returns or for a specified period of time, subject to the terms and
conditions regarding the method of filing prescribed in such waiver.
(2) Administrative exemptions. The IRS may provide administrative
exemptions from the requirement of this section for certain classes of
specified tax return preparers, or regarding certain types of
individual income tax returns, as the IRS determines necessary to
promote effective and efficient tax administration. The IRS may provide
administrative exemptions and any criteria or procedures necessary to
claim an administrative exemption through forms, instructions, or other
appropriate guidance.
(d) Reasonably expect to file--(1) In general. The determination of
whether a tax return preparer reasonably expects, or if the preparer is
a member of a firm, the firm's members in the aggregate reasonably
expect, to file 10 or fewer individual income tax returns (or, in the
case of the 2011 calendar year, fewer than 100 individual income tax
returns) is made by adding together all of the individual income tax
returns the tax return preparer and, if the preparer is a member of a
firm, the firm's members reasonably expect to prepare and file in the
calendar year. In making this determination, individual income tax
returns that the tax return preparer reasonably expects will not be
subject to the magnetic media filing requirement under paragraph
(a)(4)(ii) of this section or are excluded from the requirement under
(c)(2) of this section are not to be counted. Returns excluded from the
magnetic media filing requirement under paragraph (c)(1) of this
section are to be counted for purposes of making this determination.
(2) Time for making determination of reasonable expectations. The
determination regarding reasonable expectations is made separately for
each calendar year in order to ascertain whether the magnetic media
filing requirement applies to a tax return preparer for that year. For
each calendar year, the determination of whether a tax return preparer
and the preparer's firm reasonably expect to file 10 or fewer
individual income tax returns (or, in the case of the 2011 calendar
year, fewer than 100 individual income tax returns) is made based on
all relevant, objective, and demonstrable facts and circumstances prior
to the time the tax return preparer and the preparer's firm first file
an individual income tax return during the calendar year.
(e) Examples. The examples read as follows:
Example 1. Tax Return Preparer A is an accountant who recently
graduated from college with an accounting degree and has opened his
own practice. A has not prepared individual income tax returns for
compensation in the past and does not plan to focus his practice on
individual income tax return preparation. A intends instead to focus
his practice on providing specialized accounting services to certain
health care service providers. A has no plans to, and does not,
employ or engage any other tax return preparers. A estimates that he
may be
[[Page 75444]]
asked by some clients to prepare and file their individual income
tax returns for compensation, but A expects that the number of
people who do ask him to provide this service will be no more than
seven in 2012. In fact, A actually prepares and files six paper Form
1040 (U.S. Individual Income Tax Return) returns in 2012. Due to a
growing client base, and based upon his experience in 2012, A
expects that the number of individual income tax returns he will
prepare and file in 2013 will at least double, estimating he will
prepare and file 12 Form 1040 returns in 2013. A does not qualify as
a specified tax return preparer for 2012 because A reasonably
expects to file 10 or fewer (seven) in 2012. Consequently, A is not
required to electronically file the individual income tax returns he
prepares and files in 2012. He does not qualify as a specified tax
return preparer for that year because A reasonably expects to file
10 or fewer returns (seven) in 2012. A's expectation is reasonable
based on his business projections, individual income tax return
filing history, and staffing decisions. A is a specified tax return
preparer in 2013, however, because based on those same factors A
reasonably expects to file more than 10 individual income tax
returns (12) during that calendar year. A, therefore, must
electronically file all individual income tax returns that A
prepares and files in 2013 that are not otherwise excluded from the
electronic filing requirement.
Example 2. Same facts as in Example 1, except three of Tax
Return Preparer A's clients specifically chose to have A prepare
their individual income tax returns in paper format in 2012 with the
clients mailing their respective returns to the IRS. A expects that
these three clients will similarly choose to have him prepare their
returns in paper format in 2013, with the clients being responsible
for mailing their returns to the IRS. A is not required to
electronically file these three returns in 2013 because the
taxpayers chose to file their returns in paper format, and A
obtained a dated written statement from each of those taxpayers,
indicating that they chose to file their returns in paper format.
These three individual income tax returns are not counted in
determining how many individual income tax returns A reasonably
expects to file in 2013. Because the total number of individual
income tax returns A reasonably expects to file in 2013 (nine) does
not exceed 10, A is not a specified tax return preparer for calendar
year 2013, and A is not required to electronically file any
individual income tax return that he prepares and files in 2013.
Example 3. Tax Return Preparer B is a solo general practice
attorney in a small county. Her practice includes the preparation of
wills and assisting executors in administering estates. As part of
her practice, B infrequently prepares and files Forms 1041 (U.S.
Income Tax Return for Estates and Trusts) for executors. In the past
three years, she prepared and filed an average of five Forms 1041
each year and never exceeded more than seven Forms 1041 in any year.
Based on B's prior experience and her estimate for 2012, made prior
to the time she first files an individual income tax return in 2012,
she reasonably expects to prepare and file no more than five Forms
1041 in 2012. Due to the unforeseen deaths of several of her clients
in late 2011, B actually prepares and files 12 Forms 1041 in 2012. B
does not find out about these deaths until after she has already
filed the first Form 1041 in 2012 for another client. B is not
required to electronically file these returns in 2012. She does not
qualify as a specified tax return preparer for calendar year 2012
because prior to the time she filed the first Form 1041 in 2012, she
reasonably expected to file 10 or fewer individual income tax
returns in 2012.
Example 4. Same facts as Example 3, except, in addition to the
five Forms 1041 that she expects to prepare and file in 2012, Tax
Return Preparer B also expects to prepare and file 10 paper Forms
1040 (U.S. Individual Income Tax Return) in 2012, based upon the
requests that she has received from some of her clients. Because the
total number of individual income tax returns B reasonably expects
to file in 2012 (fifteen) exceeds 10, B is a specified tax return
preparer for calendar year 2012, and B must electronically file all
individual income tax returns that B prepares and files in 2012 that
are not otherwise excluded from the electronic filing requirement.
Example 5. Firm X consists of two tax return preparers, Tax
Return Preparer C who owns Firm X, and Tax Return Preparer D who is
employed by C in Firm X. Based upon the firm's experience over the
past three years, C and D reasonably expect to file nine and ten
individual income tax returns for compensation, respectively, in
2012. Both C and D must electronically file the individual income
tax returns that they prepare in 2012, unless the returns are
otherwise excluded from the electronic filing requirement, because
they are members of the same firm and the aggregated total of
individual income tax returns that they reasonably expect to file in
2012 (nineteen), exceeds 10 individual income tax returns.
(f) Additional guidance. The IRS may implement the requirements of
this section through additional guidance, including by revenue
procedures, notices, publications, forms and instructions, including
those issued electronically.
(g) Proposed effective/applicability dates. This section is
proposed to be effective and applicable on January 1, 2011.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2010-30500 Filed 12-1-10; 4:15 pm]
BILLING CODE 4830-01-P
