brave new world

[George Boutwell]

Preparers will now risk a much larger hit for taking an unreasonable position, even if they didn't actually know (but "should have known") about the position.

The key word here is not UNREASONABLE, but UNDISCLOSED. Any penalties can be avoided simply by pointing it out on the return. If this is really such a big problem, the surge in disclosures would either keep the IRS auditors from doing anything else; or turn out to be just another stack of forms that no one reads.

I'm more interested in the part of the law that extends the Kiddie Tax to students up to age 24 who qualify as dependents.

[jainen]

Au contraire

>>Underground agents for the IRS<<

Au contraire, mon cherie. The clients need us now more than ever. Only someone with a strong command of the code and rulings can protect them from this arbitrary power.

[OldJack]

Preparers will now risk a much larger hit for taking an unreasonable position, even if they didn't actually know (but "should have known") about the position.

What about the unreasonable position of the IRS? Did the politicians include something for the outrageous IRS tax positions especially at the auditor level?

[Gretel]

Isn't there anything our professional organizations can do about this. This kind of puts a final stamp on tax return preparers: Underground agents for the IRS. It's outrageous.

I can see that they need to weed out bad preparers, but if you did your best there needs to be some reason. I would fight this through the courts.

[jainen]

There are a couple of nasty new penalties in the Small Business and Work Opportunity Tax Act of 2007 that Congress passed this morning. (The president is expected to sign it.)

Preparers will now risk a much larger hit for taking an unreasonable position, even if they didn't actually know (but "should have known") about the position. The standard for unreasonable is not the 1-out-of-3 that Circular 230 prescribes, but "more likely than not." And the new penalty applies to any tax return, not just income tax.

The substantial underpayment penalty also has a major upgrade. No longer is it only based on whether there is an actual tax deficiency. If the IRS doesn't like it, just filing the return itself can trigger a 20%/$5000 penalty even when you overpaid and get a refund! "Reasonable cause" is not an acceptable excuse anymore either.

Welcome to the brave new world.