81 FR 87502 - Tax Return Preparer Due Diligence Penalty Under Section 6695(g)
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 81, Issue 233 (December 5, 2016)
Internal Revenue Service
Federal Register Volume 81, Issue 233 (December 5, 2016)
| Page Range | 87502-87503 | |
| FR Document | 2016-28995 |
[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)] [Proposed Rules] [Pages 87502-87503] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-28995] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-102952-16] RIN 1545-BN43 Tax Return Preparer Due Diligence Penalty Under Section 6695(g) AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations. ----------------------------------------------------------------------- SUMMARY: In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations that will modify the existing regulations related to the penalty under section 6695(g) of the Internal Revenue Code (Code) relating to tax return preparer due diligence. The temporary regulations implement recent law changes that expand the tax return preparer due diligence penalty under section 6695(g) so that it applies to the child tax credit (CTC), additional child tax credit (ACTC), and the American Opportunity Tax Credit (AOTC), in addition to the earned income credit (EIC). The text of those regulations also serves as the text of these proposed regulations. DATES: Written or electronic comments and requests for a public hearing must be received by March 6, 2017. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-102952-16), 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- 102952-16), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG- 102952-16). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Rachel L. Gregory, 202-317-6845; concerning submissions of comments and the hearing, Regina Johnson, 202-317-6901 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information in current Sec. 1.6695-2 was previously reviewed and approved under control number 1545-1570. Control number 1545-1570 was discontinued in 2014, as the burden for the collection of information contained in Sec. 1.6695-2 is reflected in the burden on Form 8867, ``Paid Preparer's Due Diligence Checklist,'' under control number 1545-1629. Background and Explanation of Provisions Temporary regulations in the Rules and Regulations section of this issue of the Federal Register amend 26 CFR 1.6695-2 by imposing due diligence requirements on tax return preparers with respect to determining the eligibility for, or the amount of, the CTC/ACTC or AOTC, in addition to the EIC, on any return or claim for refund. The temporary regulations also amend section 1.6695-2 to reflect the changes made by section 208(c), Div. B of the Tax Increase Prevention Act of 2014, Public Law 113-295 (128 Stat. 4010, 4073 (2014)), requiring the IRS to index the penalty for inflation for returns and claims for refund filed after December 31, 2014. 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 Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory assessment is not required. Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6), it is hereby certified that these proposed rules, if adopted, would not have a significant economic impact on a substantial number of small entities. When an agency issues a notice of proposed rulemaking, the RFA requires the agency to ``prepare and make available for public comment an initial regulatory flexibility analysis'' that will ``describe the impact of the proposed rule on small entities.'' (5 U.S.C. 603(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. The proposed rules affect tax return preparers who determine the eligibility for, or the amount of, the EIC, the CTC/ACTC and/or the AOTC. The North American Industry Classification System (NAICS) code that relates to tax return preparation services (NAICS code 541213) is the appropriate code for tax return preparers subject to this notice of proposed rulemaking. Entities identified as tax return preparation services are considered small under the Small Business Administration size standards (13 CFR 121.201) if their annual revenue is less than $20.5 million. The IRS estimates that approximately 75 to 85 percent of the 505,000 persons who work at firms or are self-employed tax return preparers are operating as or employed by small entities. The IRS has therefore determined that these proposed rules will have an impact on a substantial number of small entities. The IRS has further determined, however, that the economic impact on entities affected by the proposed rules will not be significant. The current regulations under section 6695(g) already require tax return preparers to complete the Form 8867 when a return or claim for refund includes a claim of the EIC. Tax return preparers also must currently maintain records of the checklists and EIC computations, as well as a record of how and when the information used to compute the EIC was obtained by the tax return preparer. [[Page 87503]] The information needed to document eligibility for the CTC/ACTC and the AOTC largely duplicates the information needed to compute the EIC and complete other parts of the return or claim for refund. Even if certain preparers are required to maintain the checklists and complete Form 8867 for the first time, the IRS estimates that the total time required should be minimal for these tax return preparers. Further, the IRS does not expect that the requirements in these proposed regulations would necessitate the purchase of additional software or equipment in order to meet the additional information retention requirements. Based on these facts, the IRS hereby certifies that the collection of information contained in this notice of proposed rulemaking will not have a significant economic impact on a substantial number of small entities. Accordingly, a Regulatory Flexibility Analysis is not required. 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 the impact on small business. Comments and Requests for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are timely submitted to the IRS as prescribed in this preamble under the Addresses heading. The IRS and Treasury Department request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register. Drafting Information The principal author of this regulation is Rachel L. Gregory, Office of the Associate Chief Counsel (Procedure & Administration). 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 0 Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 2. Section 1.6695-2 is amended by revising the section heading and paragraphs (a), (b)(1)(i) introductory text, (b)(1)(ii), (b)(2), (b)(3)(i) and (ii), (b)(4)(i)(B) and (C), (c)(3), and (e) to read as follows: Sec. 1.6695-2 Tax return preparer due diligence requirements for certain credits. (a) [The text of the proposed amendment to Sec. 1.6695-2(a) is the same as the text of Sec. 1.6695-2T(a) published elsewhere in this issue of the Federal Register]. (b) * * * (1) * * * (i) [The text of the proposed amendment to Sec. 1.6695-2(b)(1)(i) is the same as the text of Sec. 1.6695-2T(b)(1)(i) published elsewhere in this issue of the Federal Register]. * * * * * (ii) [The text of the proposed amendment to Sec. 1.6695- 2(b)(1)(ii) is the same as the text of Sec. 1.6695-2T(b)(1)(ii) published elsewhere in this issue of the Federal Register]. (2) [The text of the proposed amendment to Sec. 1.6695-2(b)(2) is the same as the text of Sec. 1.6695-2T(b)(2) published elsewhere in this issue of the Federal Register]. (3) * * * (i) [The text of the proposed amendment to Sec. 1.6695-2(b)(3)(i) is the same as the text of Sec. 1.6695-2T(b)(3)(i) published elsewhere in this issue of the Federal Register]. (ii) [The text of the proposed amendment to Sec. 1.6695- 2(b)(3)(ii) is the same as the text of Sec. 1.6695-2T(b)(3)(ii) published elsewhere in this issue of the Federal Register]. (4) * * * (i) * * * (B) [The text of the proposed amendment to Sec. 1.6695- 2(b)(4)(i)(B) is the same as the text of Sec. 1.6695-2T(b)(4)(i)(B) published elsewhere in this issue of the Federal Register]. (C) [The text of the proposed amendment to Sec. 1.6695- 2T(b)(4)(i)(C) is the same as the text of Sec. 1.6695-2T(b)(4)(i)(C) published elsewhere in this issue of the Federal Register]. * * * * * (c) * * * (3) [The text of the proposed amendment to Sec. 1.6695-2T(c)(3) is the same as the text of Sec. 1.6695-2T(c)(3) published elsewhere in this issue of the Federal Register]. * * * * * (e) Applicability date. The rules of this section apply to tax returns and claims for refunds prepared on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register with respect to tax years beginning after December 31, 2015. John M. Dalrymple, Deputy Commissioner for Services and Enforcement. [FR Doc. 2016-28995 Filed 12-2-16; 8:45 am] BILLING CODE 4830-01-P
![87502 Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Proposed Rules
decedent’s inventory would require section 6695(g) so that it applies to the The text of those regulations also
action by OHA. See 43 CFR 30.127. child tax credit (CTC), additional child serves as the text of these proposed
3. Clarifying OHA’s authority to order tax credit (ACTC), and the American regulations. The preamble to the
distribution of trust funds. Opportunity Tax Credit (AOTC), in temporary regulations explains the
The current regulation at 43 CFR addition to the earned income credit amendments.
30.254 governs how a judge distributes (EIC). The text of those regulations also
a decedent’s trust or restricted property Special Analyses
serves as the text of these proposed
when the decedent died without a valid regulations. Certain IRS regulations, including this
will and has no heirs. The rule one, are exempt from the requirements
establishes different distributions based DATES: Written or electronic comments of Executive Order 12866, as
on whether 25 U.S.C. 2206(a) applies, and requests for a public hearing must supplemented and reaffirmed by
but does not identify trust personalty as be received by March 6, 2017. Executive Order 13563. Therefore, a
a stand-alone category of trust property ADDRESSES: Send submissions to: regulatory assessment is not required.
for distribution (where there are no land CC:PA:LPD:PR (REG–102952–16), Room Pursuant to the Regulatory Flexibility
interests in the decedent’s estate or 5205, Internal Revenue Service, P.O. Act (RFA) (5 U.S.C. chapter 6), it is
within the jurisdiction of any tribe). Box 7604, Ben Franklin Station, hereby certified that these proposed
Revision under consideration: Washington, DC 20044. Submissions rules, if adopted, would not have a
• A modification to this regulation may be hand-delivered Monday through significant economic impact on a
would provide clear authority for OHA Friday between the hours of 8 a.m. and substantial number of small entities.
to order distribution of trust funds when 4 p.m. to: CC:PA:LPD:PR (REG–102952– When an agency issues a notice of
there are either no land interests in a 16), Courier’s Desk, Internal Revenue proposed rulemaking, the RFA requires
decedent’s estate or no land interests Service, 1111 Constitution Avenue NW., the agency to ‘‘prepare and make
within the jurisdiction of any tribe. Washington, DC 20224, or sent available for public comment an initial
Additionally, where the estate contains electronically via the Federal regulatory flexibility analysis’’ that will
trust personalty associated with one eRulemaking Portal at http:// ‘‘describe the impact of the proposed
tribe but interests in trust lands www.regulations.gov (IRS REG–102952– rule on small entities.’’ (5 U.S.C. 603(a)).
associated with another, OHA would 16). Section 605 of the RFA provides an
order the trust personalty distributed to exception to this requirement if the
FOR FURTHER INFORMATION CONTACT:
the tribe with sufficient nexus to the agency certifies that the proposed
Concerning the proposed regulations,
funds, as determined by the judge, and rulemaking will not have a significant
Rachel L. Gregory, 202–317–6845; economic impact on a substantial
the land distributed to the tribe with concerning submissions of comments
jurisdiction over those interests. number of small entities.
and the hearing, Regina Johnson, 202– The proposed rules affect tax return
Dated: November 18, 2016. 317–6901 (not toll-free numbers). preparers who determine the eligibility
Lawrence S. Roberts, SUPPLEMENTARY INFORMATION: for, or the amount of, the EIC, the CTC/
Principal Deputy Assistant Secretary—Indian ACTC and/or the AOTC. The North
Affairs. Paperwork Reduction Act
American Industry Classification
[FR Doc. 2016–28751 Filed 12–2–16; 8:45 am] The collection of information in System (NAICS) code that relates to tax
BILLING CODE 4337–15–P current § 1.6695–2 was previously return preparation services (NAICS code
reviewed and approved under control 541213) is the appropriate code for tax
number 1545–1570. Control number return preparers subject to this notice of
DEPARTMENT OF THE TREASURY 1545–1570 was discontinued in 2014, as proposed rulemaking. Entities identified
the burden for the collection of as tax return preparation services are
Internal Revenue Service information contained in § 1.6695–2 is considered small under the Small
reflected in the burden on Form 8867, Business Administration size standards
26 CFR Part 1 ‘‘Paid Preparer’s Due Diligence (13 CFR 121.201) if their annual revenue
[REG–102952–16]
Checklist,’’ under control number 1545– is less than $20.5 million. The IRS
1629. estimates that approximately 75 to 85
RIN 1545–BN43 percent of the 505,000 persons who
Background and Explanation of
work at firms or are self-employed tax
Tax Return Preparer Due Diligence Provisions
return preparers are operating as or
Penalty Under Section 6695(g) Temporary regulations in the Rules employed by small entities. The IRS has
AGENCY: Internal Revenue Service (IRS), and Regulations section of this issue of therefore determined that these
Treasury. the Federal Register amend 26 CFR proposed rules will have an impact on
ACTION: Notice of proposed rulemaking 1.6695–2 by imposing due diligence a substantial number of small entities.
by cross-reference to temporary requirements on tax return preparers The IRS has further determined,
regulations. with respect to determining the however, that the economic impact on
eligibility for, or the amount of, the entities affected by the proposed rules
SUMMARY: In the Rules and Regulations CTC/ACTC or AOTC, in addition to the will not be significant. The current
section of this issue of the Federal EIC, on any return or claim for refund. regulations under section 6695(g)
Register, the IRS is issuing temporary The temporary regulations also amend already require tax return preparers to
sradovich on DSK3GMQ082PROD with PROPOSALS
regulations that will modify the existing section 1.6695–2 to reflect the changes complete the Form 8867 when a return
regulations related to the penalty under made by section 208(c), Div. B of the or claim for refund includes a claim of
section 6695(g) of the Internal Revenue Tax Increase Prevention Act of 2014, the EIC. Tax return preparers also must
Code (Code) relating to tax return Public Law 113–295 (128 Stat. 4010, currently maintain records of the
preparer due diligence. The temporary 4073 (2014)), requiring the IRS to index checklists and EIC computations, as
regulations implement recent law the penalty for inflation for returns and well as a record of how and when the
changes that expand the tax return claims for refund filed after December information used to compute the EIC
preparer due diligence penalty under 31, 2014. was obtained by the tax return preparer.
VerDate Sep<11>2014 17:33 Dec 02, 2016 Jkt 241001 PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 E:\FR\FM\05DEP1.SGM 05DEP1](https://thefederalregister.org/doc/81_FR_87735/page/1.svg)
![Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Proposed Rules 87503
The information needed to document Proposed Amendments to the (3) [The text of the proposed
eligibility for the CTC/ACTC and the Regulations amendment to § 1.6695–2T(c)(3) is the
AOTC largely duplicates the Accordingly, 26 CFR part 1 is same as the text of § 1.6695–2T(c)(3)
information needed to compute the EIC proposed to be amended as follows: published elsewhere in this issue of the
and complete other parts of the return Federal Register].
or claim for refund. Even if certain PART 1—INCOME TAXES * * * * *
preparers are required to maintain the (e) Applicability date. The rules of
checklists and complete Form 8867 for ■ Paragraph 1. The authority citation this section apply to tax returns and
the first time, the IRS estimates that the for part 1 continues to read in part as claims for refunds prepared on or after
total time required should be minimal follows: the date of publication of the Treasury
for these tax return preparers. Further, Authority: 26 U.S.C. 7805 * * * decision adopting these rules as final
the IRS does not expect that the regulations in the Federal Register with
■ Par. 2. Section 1.6695–2 is amended
requirements in these proposed respect to tax years beginning after
by revising the section heading and
regulations would necessitate the December 31, 2015.
paragraphs (a), (b)(1)(i) introductory
purchase of additional software or text, (b)(1)(ii), (b)(2), (b)(3)(i) and (ii), John M. Dalrymple,
equipment in order to meet the (b)(4)(i)(B) and (C), (c)(3), and (e) to read Deputy Commissioner for Services and
additional information retention as follows: Enforcement.
requirements. [FR Doc. 2016–28995 Filed 12–2–16; 8:45 am]
§ 1.6695–2 Tax return preparer due
Based on these facts, the IRS hereby diligence requirements for certain credits. BILLING CODE 4830–01–P
certifies that the collection of (a) [The text of the proposed
information contained in this notice of amendment to § 1.6695–2(a) is the same
proposed rulemaking will not have a as the text of § 1.6695–2T(a) published ENVIRONMENTAL PROTECTION
significant economic impact on a elsewhere in this issue of the Federal AGENCY
substantial number of small entities. Register]. 40 CFR Parts 52
Accordingly, a Regulatory Flexibility (b) * * *
Analysis is not required. (1) * * * [EPA–R04–OAR–2012–0689; FRL–9955–95–
(i) [The text of the proposed Region 4]
Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of amendment to § 1.6695–2(b)(1)(i) is the
same as the text of § 1.6695–2T(b)(1)(i) Air Plan Disapproval; AL; Prong 4
proposed rulemaking has been Visibility for the 2008 8-Hour Ozone
submitted to the Chief Counsel for published elsewhere in this issue of the
Federal Register]. Standard
Advocacy of the Small Business
Administration for comment on the * * * * * AGENCY: Environmental Protection
impact on small business. (ii) [The text of the proposed Agency (EPA).
amendment to § 1.6695–2(b)(1)(ii) is the ACTION: Proposed rule.
Comments and Requests for Public same as the text of § 1.6695–2T(b)(1)(ii)
Hearing published elsewhere in this issue of the SUMMARY: The Environmental Protection
Federal Register]. Agency (EPA) is proposing to
Before these proposed regulations are (2) [The text of the proposed disapprove the visibility transport
adopted as final regulations, amendment to § 1.6695–2(b)(2) is the (prong 4) portion of a revision to the
consideration will be given to any same as the text of § 1.6695–2T(b)(2) Alabama State Implementation Plan
written comments (a signed original and published elsewhere in this issue of the (SIP), submitted by the Alabama
eight (8) copies) or electronic comments Federal Register]. Department of Environmental
that are timely submitted to the IRS as (3) * * * Management (ADEM), addressing the
prescribed in this preamble under the (i) [The text of the proposed Clean Air Act (CAA or Act)
ADDRESSES heading. The IRS and amendment to § 1.6695–2(b)(3)(i) is the infrastructure SIP requirements for the
Treasury Department request comments same as the text of § 1.6695–2T(b)(3)(i) 2008 8-hour ozone National Ambient
on all aspects of the proposed rules. All published elsewhere in this issue of the Air Quality Standards (NAAQS). The
comments will be available at Federal Register]. CAA requires that each state adopt and
www.regulations.gov or upon request. A (ii) [The text of the proposed submit a SIP for the implementation,
public hearing will be scheduled if amendment to § 1.6695–2(b)(3)(ii) is the maintenance, and enforcement of each
requested in writing by any person that same as the text of § 1.6695–2T(b)(3)(ii) NAAQS promulgated by EPA,
timely submits written comments. If a published elsewhere in this issue of the commonly referred to as an
public hearing is scheduled, notice of Federal Register]. ‘‘infrastructure SIP.’’ Specifically, EPA
(4) * * * is proposing to disapprove the prong 4
the date, time, and place for the public
(i) * * * portion of Alabama’s August 20, 2012,
hearing will be published in the Federal
(B) [The text of the proposed 2008 8-hour ozone infrastructure SIP
Register.
amendment to § 1.6695–2(b)(4)(i)(B) is submission. All other applicable
Drafting Information the same as the text of § 1.6695– infrastructure requirements for this SIP
2T(b)(4)(i)(B) published elsewhere in submission have been addressed in
sradovich on DSK3GMQ082PROD with PROPOSALS
The principal author of this regulation this issue of the Federal Register]. separate rulemakings.
is Rachel L. Gregory, Office of the (C) [The text of the proposed DATES: Comments must be received on
Associate Chief Counsel (Procedure & amendment to § 1.6695–2T(b)(4)(i)(C) is or before December 27, 2016.
Administration). the same as the text of § 1.6695– ADDRESSES: Submit your comments,
List of Subjects in 26 CFR Part 1 2T(b)(4)(i)(C) published elsewhere in identified by Docket ID No EPA–R04–
this issue of the Federal Register]. OAR–2012–0689 at http://
Income taxes, Reporting and * * * * * www.regulations.gov. Follow the online
recordkeeping requirements. (c) * * * instructions for submitting comments.
VerDate Sep<11>2014 17:33 Dec 02, 2016 Jkt 241001 PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 E:\FR\FM\05DEP1.SGM 05DEP1](https://thefederalregister.org/doc/81_FR_87735/page/2.svg)
Document Created: 2016-12-03 00:25:56
Document Modified: 2016-12-03 00:25:56
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Notice of proposed rulemaking by cross-reference to temporary regulations. | |
| Dates | Written or electronic comments and requests for a public hearing must be received by March 6, 2017. | |
| Contact | Concerning the proposed regulations, Rachel L. Gregory, 202-317-6845; concerning submissions of comments and the hearing, Regina Johnson, 202-317-6901 (not toll-free numbers). | |
| FR Citation | 81 FR 87502 | |
| RIN Number | 1545-BN43 | |
| CFR Associated | Income Taxes and Reporting and Recordkeeping Requirements |
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR