[Federal Register Volume 63, Number 244 (Monday, December 21, 1998)]
[Proposed Rules]
[Pages 70357-70359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33344]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-120168-97]
RIN 1545-AW73
Preparer Due Diligence Requirements for Determining Earned Income
Credit Eligibility
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking by cross-reference to temporary
regulations and notice of public hearing.
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SUMMARY: In the Rules and Regulations section of this issue of the
Federal Register, the IRS is issuing temporary regulations relating to
the due diligence requirements in determining eligibility for the
earned income credit for paid preparers of federal income tax returns
or claims for refund. The text of those regulations also serves as the
text of these proposed regulations. This document also provides notice
of a public hearing on these proposed regulations.
DATES: Written comments must be received by March 22, 1999. Outlines of
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topics to be discussed at the public hearing scheduled for Thursday,
May 20, 1999, at 10 a.m. must be received by Thursday, April 29, 1999.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-120168-97), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-
120168-97), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC. Alternatively, taxpayers may submit
comments electronically via the Internet by selecting the ``Tax Regs''
option on the IRS Home Page, or by submitting comments directly to the
IRS Internet site at http://www.irs.ustreas.gov/prod/tax_regs/
comments.html. The public hearing will be held in room 2615 of the
Internal Revenue Building, 1111 Constitution Avenue, NW., Washington,
DC.
FOR FURTHER INFORMATION CONTACT: Concerning submissions, LaNita Van
Dyke, (202) 622-7190; concerning the regulations, Marc C. Porter, (202)
622-4940 (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 Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC 20224.
Comments on the collection of information should be received by
February 19, 1999. Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the
proper performance of the functions 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);
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, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of service to provide information.
The collection of information in this proposed regulation is in
Sec. 1.6695-2T. This information is required by the IRS to determine
preparer due diligence compliance. This information will be used to
avoid the imposition of the penalty imposed by section 6695(g) of the
Internal Revenue Code. The collection of information is mandatory. The
likely recordkeepers are individuals, business or other for profit
institutions, and small businesses or organizations.
The collection of information in Sec. 1.6695-2T is generally
satisfied by completing: (1) the required information on the Checklist
published in Notice 97-65 or the Form 8867, Paid Preparer's Earned
Income Credit Checklist; and (2) the required Worksheet information on
the Earned Income Credit Worksheet contained in the instructions to the
Form 1040. The burden for the Checklist requirement is reflected in the
burden estimate for Form 8867. The burden for the Worksheet requirement
is reflected in the burden estimate for the Earned Income Credit
Worksheet contained in the instructions to the Form 1040. Preparers may
also choose to record the information necessary to complete the
Checklist and Worksheet in their paper or electronic files (alternative
method).
The information collections in this regulation were originally
included in Notice 97-65 and have been approved by the Office of
Management and Budget under control number 1545-1570.
The collection of information for preparers who choose to record
the information required by the regulations in alternative paper or
electronic form is as follows:
Estimated total annual recordkeeping burden: 507,136 hours.
Estimated average annual burden hours per recordkeeper: 5 hours 4
minutes (40 minutes per return or claim for refund, 7.6 returns per
preparer).
Estimated number of recordkeepers: 100,000.
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 and 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. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background and Explanation of Provisions
Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register amend the Income Tax Regulations (26 CFR
part 1) relating to section 6695. The temporary regulations set forth
due diligence requirements that paid preparers of federal income tax
returns or claims for refund involving the Earned Income Credit (EIC)
must meet to avoid imposition of the penalty under section 6695(g) for
taxable years beginning after December 31, 1996. The text of those
regulations also serves as the text of these proposed regulations. The
preamble to the temporary regulations explains the amendments.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866. Therefore,
a regulatory assessment is not required. 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 regulations. Further, it is hereby
certified, pursuant to sections 603(a) and 605(b) of the Regulatory
Flexibility Act, that the collection of information in these
regulations will not have a significant economic impact on a
substantial number of small entities. This certification is based upon
the fact that the amount of time necessary to record and retain the
required information will be minimal for those income tax return
preparers that choose to use the Alternative Eligibility Record and
Alternative Computation Record. Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on their impact.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments (a signed original and
eight (8) copies) that are submitted timely to the IRS. The IRS and
Treasury specifically request comments on the
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clarity of the proposed rule and how it may be made easier to
understand. All comments will be available for public inspection and
copying.
A public hearing has been scheduled for May 20, 1999, beginning at
10 a.m. in room 2615 of the Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC. Due to building security
procedures, visitors must enter at the 10th Street entrance, located
between Constitution and Pennsylvania Avenues, NW. 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 15 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
comments and an outline of the topics to be discussed and the time to
be devoted to each topic (signed original and eight (8) copies) by
April 29, 1999. 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 regulations is Marc C. Porter, Office
of Assistant Chief Counsel (Income Tax & Accounting). However, other
personnel from the IRS and Treasury Department participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is 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 as follows:
Authority: 26 U.S.C. 7805 * * * Section 1.6695-2 also issued
under 26 U.S.C. 6695(g). * * *
Par. 2. Section 1.6695-2 is added to read as follows:
Sec. 1.6695-2 Preparer due diligence requirements for determining
earned income tax credit eligibility.
[The text of proposed Sec. 1.6695-2 is the same as the text of
Sec. 1.6695-2T published elsewhere in this issue of the Federal
Register].
David S. Mader,
Acting Deputy Commissioner of Internal Revenue.
[FR Doc. 98-33344 Filed 12-18-98; 8:45 am]
BILLING CODE 4830-01-U