ASPPA Asks IRS to Modify Circular 230

Melinda | September 20, 2010 | 0 Comments

Clarification Requested for Tax Return Preparers Filing Form 5500

ARLINGTON, VA (September 20, 2010) The following is a statement from Craig P. Hoffman, General Counsel and Director of Regulatory Affairs of The American Society of Pension Professionals & Actuaries (ASPPA), based on a comment letter filed with the Internal Revenue Service (IRS) on recommendations to modify Circular 230 (31 CFR part 10 REG-138637-07) which is the governing document for the rules of practice before the IRS. Read the full comment letter here.

“ASPPA supports the new IRS initiatives to register paid tax return preparers and improve their training, competency and ethics. In anticipation of these changes, we have alerted our membership to the new standards which take effect January 1, 2011. Since 2008, ASPPA has worked with the IRS to encourage professionalism of retirement plan agents through our partnership with American Institute for Retirement Education’s (AIRE) in support of the Enrolled Retirement Agent (ERPA) program.

However, we are concerned that the guidance released to date focuses primarily on individuals who prepare income tax returns (e.g., Form 1040, Form 1120, etc.). It is not clear how these rules will be applied to those who prepare IRS Form 5500, which is primarily an information return relating to a retirement or employee benefit plan. Most of the data collected for Form 5500 has little or no impact on an actual tax return. In many cases, the reported information is received electronically and then entered by support staff. It’s crucial that employees who only input data but exercise no discretion or independent judgment be excluded from the new registration and the Circular 230 process. Ultimately, overbroad and unnecessary registration will drive up the cost of retirement plan administration which, in most cases, will simply be passed on to participants, to the detriment of their retirement savings.

ASPPA asks the IRS to consider the following recommendations:

• Only one person should be required to register as a paid “tax return preparer” for Form 5500 returns. That should be the person primarily responsible for the substantive accuracy of the form; but only if the reported information actually affects a substantial portion of an actual tax return (or claim for refund) filed by the plan sponsor.

• IRS guidance should specifically identify which schedules or entries associated with Form 5500 potentially affect an actual tax return and therefore could subject the preparer to registration.

We urge the IRS to clarify and limit the manner in which the registration process and Circular 230 rules will be applied in the context of Form 5500.”


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