CR 230 Disclimer?

[taxfun]

How are you handling written responses to various client inquiries? Are you concerned about the recent CR 230 issues? We are planning on including the following disclaimer on written communications:

DISCLAIMER

Any tax advice and or commentary in this communication is not intended or written by XXXXXXXXXX CPA’s to be used, and cannot be used, by a client or any other person or entity for the purpose of avoiding penalties that may be imposed on any taxpayer. This notice is required by IRS Regulation 10.35(b)(4)(ii) (Circular 230).

What are your thought and comments.

[Armando Beaujolais]

My take on the new Circular 230 rules on written advice is that the IRS and Justice Department are looking for a new hammer to use against practitioners who help promote tax scams. I'll be surprised if penalties are imposed for anything resembling negligence, but you still have to protect yourself.

There's been a lot of recent prosecution of tax scams, and they go after the practitioners who are involved. Up til now their biggest hammer has been a court order that requires the practitioner to divulge the names and social security numbers of all their clients. I think it's an effort to put the tax practitioners out of business as much as to identify bad returns. The new rules provide additional sanctions againts tax professionals who facilitate tax scams.

[Lion]

Circ 230

But, they have me nervous about being a brand, new EA. Worried to put anything in writing, yet clients often need an email or a fax from me. By the way, am I supposed to disclose my EA everytime I sign my name? Gotta reread Circular 230.

[TMI Moderator]

Check out "Updates," then "New Rules for Giving Written Tax Advice." That has some wording you can use for written advice. It's a short statement, and the wording makes it pretty clear what it's about. I don't think it will cause any problems with the clients.

[Scarecrow]

Non-advice

"This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer for following the advice."

Even though we gave you this advice for the purpose of you not really using it, you can still pay us a small donation for the time it took us to write this unusable advice. Please make out your check payable to your friendly tax non-advisor. Anything else we cannot help you with mam?

[Lion]

Non-advice

Exactly. Now we'll all have to sound like lawyers. All these cover our butt statements are so weaselly (sp?). Did you see "The Best Little Whorehouse in Texas"? It had a great scene with politicians doing the old softshoe, tap dancing or softshoe dancing around while talking (singing) but not really saying anything at all.

[Unregistered]

taxfun

All joking aside, how are you going to handle the new requirements if Crc 230? We don't think it is a joke as you and your firm could be disbarred if something is mishandled. We don't like the legalistic language either, but we don't believe that we can simply ignore the problem.

Even though we are not involved in tax shelter-like issues, we often provide written advice on tax and accounting matters. Don't you have a similar problem? If so, how are you going to handle it?

[Armando Beaujolais]

You have to laugh or you'll cry

Hopefully there will be some further explanation coming down the pike explaning more restrictive circumstances in which the wording must be used.

It's no different than the stupid Privacy Policy that must be presented every time someone writes the word "information."

"We collect nonpublic information...blah...blah...blah."

Yes, of course, I read that disclaimer ever time I see it in communications from financial institutions ---- not. But I expect my clients to read it, learn it, live it, love it.

They throw this stupid legaleze out there which quickly becomes obsolete and meaningless. Fine, I can see why mowers have to tell you not to stick your hand under the mower deck while the blade is spinning. But this legal stuff just gets worse and worse. Nobody reads it because it's so stupid and pervasive it quickly blends into the woodwork, sort of like repressing an unpleasant memory.

I know why it happens. The people who write these regulations are the same kind of people who would deal with their chipmunk problem by dropping a daisy cutter bomb into their back yard. Yup. No more chipmunks. It's just overkill, that's all.

[Scarecrow]

How can you not joke?

All joking aside, how are you going to handle the new requirements if Crc 230? We don't think it is a joke as you and your firm could be disbarred if something is mishandled. We don't like the legalistic language either, but we don't believe that we can simply ignore the problem.

Even though we are not involved in tax shelter-like issues, we often provide written advice on tax and accounting matters. Don't you have a similar problem? If so, how are you going to handle it?

I'm going to just do it.

It is the same mentality as why I have to ignore 25 pages of warnings before I get to the part in the instructions that tell me how to set the time on a new $4.99 watch I just purchased from K Mart.

Every tax return, every bookkeeping engagement, every written advice - plaster warning labels everywhere to protect against lawsuits. Nobody pays attention to the warning label on a lawn mower telling you to pull the spark plug before sticking your hand in there to dislodge built up grass clippings. I think our clients will be smart enough to understand when they get the same garbage from us.

[Lion]

Warning labels

I know I was flip. It was just out of frustration. I follow regulations. During tax season, I contract with H&R Block Premium to prepare the more complex returns and business returns; so I'll comply with whatever their legal department composes and HRB requires. I've already been in contact with world headquarters in Kansas City letting them know that I respond in kind to many emails and faxes and urging them to get us an appropriate statement to append to written responses to clients ASAP. In my own business (personalized financial management for small businesses), I've found myself picking up the telephone more often instead of emailing or faxing my clients back. I have a variety of sample statements printed out from various sources, such as the good people on this board, and am fashioning one for myself to use on everything. I almost added a statement to my daughter's birthday card this afternoon.

[S T]

Disclaimers

Oh I am so tired of having to do disclaimers for anything! One more! Pretty soon my 1 page letters are going to become 3 page letters by the time I add all of the disclaimer notices. I agree with all of the above postings, and this truly is another "CYA" just like all the Privacy Notices that we receive everyday in the mail! I am tired of those as well!

So one more to burden our clients with so we can be in compliance, and one more item that we need to remember to follow, instead of trying to interpret and apply tax law.

Can we charge the client for adding the disclaimer?

Sandy

[Scarecrow]

fee for a fee

Can we charge the client for adding the disclaimer?

Yes you can, but then that will require another warning label that says: “This fee in no way places any value on, or changes the fact that the original written advise was worthless in every way possible…” or something along those lines. Of course that warning label will require another fee and subsequent non-value warning label, and so on. Each added fee is proportionately reduced by the non-value of not having to think up new meaningless words for each subsequent warning, until the proportionate added value is less than 1% of the original warning label. Mathematically that carries itself out to 7.35 average warnings per written advice, rounded up (not down) to 8 max. I think IRS is thinking of issuing regs to simplify this process with some new safe harbors and optional standard fee rates based on tables, adjusted each year in a Rev Proc for the Cola and Pepsi inflation factors that are released each August.

[John of PA]

Orginize through state societies

This tax advice disclosure issue, I'am afrraid, needs to be discussed by our smaller (and more practical) state and local accounting societies (such as state NSA chapters or any society with a PAC). We must present our recomendation on what type of exemptions and waivers we would like to see for the small pratitioner. Perhaps some of this administrative burden can be lifted. Through the legislators, pressure can be put on IRS to address areas of the new rule that overburden the small pratitioner. This is the only way I know of to do something about this. We will hear much about this as time goes on. PPC just put out a nice Tax Action Memo explaining the new requirement (TAM 1101 dated June 28, 2005).

[DTS]

Disclaimer

Just as a precaution, yesteday I added this to all of my written material a client will receive. Thanks for including this in the update section.

Dennis

[Gretel]

Teleseminar

Last week I attended a teleseminar with the IRS in regards to the new 230 regulations. A number of very concerned EA's and CPA's asked questions from the day to day scenario. They again and again were told that this is not what the IRS would pay close attention to.

When asked what exactly is the concern of the IRS no answer was given. I got very upset to leave all the burden on us and no useful advise given. I hate this increading burden on all of us and go into more and more effort to protect ourselves.

I am seriously debating if I just don't pay any attention to this new requirement. I am tired of protecting myself.