[Federal Register Volume 65, Number 138 (Tuesday, July 18, 2000)]
[Rules and Regulations]
[Pages 44436-44437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18117]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8893]
RIN 1545-AW52


Retention of Income Tax Return Preparers' Signatures

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations that provide income 
tax return preparers with two alternative means of meeting the 
requirement that a preparer retain the copy of the return or claim 
manually signed by the preparer. The regulations are necessary to 
inform preparers about the two alternatives and to provide them with 
the guidance needed to comply with the alternatives.

DATES: Effective Date: These regulations are effective July 18, 2000.
    Applicability Date: For dates of applicability, see Sec. 1.6695-
1(g) of these regulations.

FOR FURTHER INFORMATION CONTACT: Beverly A. Baughman (202) 622-4940 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) relating to the penalty for failure to sign an income tax 
return under section 6695(b) of the Internal Revenue Code.
    On December 31, 1998, final and temporary regulations (TD 8803, 
1999-12 I.R.B. 15) under section 6695 were published in the Federal 
Register (63 FR 72182). A notice of proposed rulemaking (REG-106386-98, 
1999-12 I.R.B. 31) cross-referencing the temporary regulations was 
published in the Federal Register (63 FR 72218) on the same date. 
Although written or electronic comments and requests for a public 
hearing were solicited, no comments were received and no public hearing 
was requested or held. The proposed regulations under section 6695 are 
adopted by this Treasury decision and the corresponding temporary 
regulations are removed.
    Section 6695(b) provides that any person who is an income tax 
return preparer with respect to a return or claim for refund, who is 
required by regulations prescribed by the Secretary to sign the return 
or claim, and who fails to comply with those regulations, must pay a 
penalty of $50 for such failure, unless it is shown that the failure is 
due to reasonable cause and not willful neglect. The maximum penalty 
imposed with respect to documents filed during a calendar year will not 
exceed $25,000.
    Section 7701(a)(36)(A) provides that, in general, the term income 
tax return preparer means any person who prepares for compensation, or 
who employs one or more persons to prepare for compensation, any return 
of tax or claim for refund imposed by subtitle A. For purposes of the 
preceding sentence, the preparation of a substantial portion of a 
return or claim is treated as if it were the preparation of such return 
or claim.
    Section 1.6695-1(b)(1) generally provides that an income tax return 
preparer, with respect to a return or claim for refund, must manually 
sign the return or claim (which may be a photocopy) in the appropriate 
space provided on the return or claim after it is completed and before 
it is presented to the taxpayer (or nontaxable entity) for signature.

Explanation of Provisions

    The final regulations provide that the employer of the preparer or 
the partnership in which the preparer is a partner, or the preparer (if 
not employed or engaged by a preparer and not a partner of a 
partnership which is a preparer), must retain the manually signed copy 
of the return or claim. In the alternative, the person required to 
retain the manually signed copy of the return or claim may either 
retain a photocopy of that manually signed copy or use an electronic 
storage system meeting the requirements of section 4 of Rev. Proc. 97-
22 (1997-1 C.B. 652), or procedures subsequently prescribed by the 
Commissioner, to store and produce a copy of the return or claim 
manually signed by the preparer.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 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, and because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking that preceded these regulations was 
submitted to the Chief Counsel for

[[Page 44437]]

Advocacy of the Small Business Administration for comment on its impact 
on small business.

Drafting Information

    The principal author of these regulations is Beverly A. Baughman of 
the 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.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by 
removing the entry for section 1.6695-1T and by revising the entry for 
section 1.6695-1 to read in part as follows:

    Authority: 26 U.S.C. 7805 *  *  *

    Section 1.6695-1 also issued under 26 U.S.C. 6060(b) and 6695(b). *  
*  *


    Par. 2. Section 1.6695-1 is amended by:
    1. Revising paragraph (b)(4)(i).
    2. Adding paragraph (g).
    3. Removing the authority citation immediately following the end of 
the section.
    The revision and addition read as follows:


Sec. 1.6695-1  Other assessable penalties with respect to the 
preparation of income tax returns for other persons.

* * * * *
    (b) *  *  *
    (4)(i) The manual signature requirement of paragraphs (b)(1) and 
(2) of this section may be satisfied by a photocopy of a copy of the 
return or claim for refund which copy is manually signed by the 
preparer after completion of its preparation. After a copy of the 
return or claim for refund is signed by the preparer and before it is 
photocopied, no person other than the preparer may alter any entries on 
the copy other than to correct arithmetical errors discernible on the 
return or claim for refund. The employer of the preparer or the 
partnership in which the preparer is a partner, or the preparer (if not 
employed or engaged by a preparer and not a partner of a partnership 
which is a preparer), must retain the manually signed copy of the 
return or claim for refund. In the alternative, for a return or claim 
for refund presented to a taxpayer for signature after December 31, 
1998, and for returns or claims for refund retained on or before that 
date, the person required to retain the manually signed copy of the 
return or claim for refund may choose to retain a photocopy of the 
manually signed copy of the return or claim for refund, or use an 
electronic storage system to store and produce a copy of the manually 
signed return or claim for refund. For purposes of this paragraph 
(b)(4)(i), an electronic storage system must meet the electronic 
storage system requirements prescribed in section 4 of Rev. Proc. 97-22 
(1997-1 C.B. 652) (see Sec. 601.601(d)(2) of this chapter) or other 
procedures prescribed by the Commissioner. A record of any arithmetical 
errors corrected must be retained and made available upon request by 
the person required to retain the manually signed copy of the return or 
claim for refund.
* * * * *
    (g) Effective date. This section applies to income tax returns and 
claims for refund presented to a taxpayer for signature after December 
31, 1998, and for returns or claims for refund retained on or before 
that date.


Sec. 1.6695-1T    [Removed]

    Par. 3. Section 1.6695-1T is removed.

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: June 30, 2000.
Jonathan Talisman,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 00-18117 Filed 7-17-00; 8:45 am]
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